The ITO, International Taxation, GANDHIDHAM V. M/s. Gold Star Lines Ltd., RAJKOT-GUJARAT

ITA 26/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0189 (ITAT-RAJKOT)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-09-2012
• Assessment Year: 2010-2011
• Appeal Filed On: 24-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . .. . , , , , . .. . . .. . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAV A, AM ITA NO. 26/RJT/2012 / ASSESSMENT YEAR 2010-11 INCOME TAX OFFICER, (INTERNATIONAL TAXATION), GANDHIDHAM ( * / APPELLANT) VS. M/S STAR SHIPPING SERVICES (INDIA) PVT.LTD., 206, 2 ND FLOOR, MANI COMPLEX, PLOT NO.84, SECTOR-08, GANDHIDHAM AS AGENT FOR GOLD STAR LINES LTD, HONG KONG PAN: AAACG5389F +,* / RESPONDENT - / REVENUE BY SHRI YOGESH PANDEY /- / ASSESSEE BY SHRI JITENDRA JAIN - / DATE OF HEARING 25.9.2012 - / DATE OF PRONOUNCEMENT 28.09.2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 12.10.2011 OF CIT (A) FOR THE ASSESSMENT YEAR 2010-11. 2. THE FACTS IN BRIEF ARE THAT THE AGENT M/S STAR SHIPPING SERVICES (INDIA) PVT. LTD., GANDHIDHAM FILED VARIOUS VOVAGE FINAL RETURN U/S 172(3) OF THE INCOME TAX ACT 1961 ON VARIOUS DATES FROM THE FINANCIAL YEAR 2009- 2010 FOR THE FREIGHT BENEFICIARY OF M/S GOLD STAR LIN ES LTD, HONG KONG ITA NO. 26/RJT/2012 2 WITHOUT PAYING FREIGHT TAX. THE AO FOR THE SAKE OF C ONVENIENCE AND SINCE THE ISSUE INVOLVED IN THE MATTER PASSED COMMON ORDER U/S 172(4) OF THE ACT ON 17.12.2010 IN RESPECT OF ENTIRE VOVAGE RETUR N FILED DURING THE FINANCIAL YEAR 2009-10. IN THIS ORDER, THE AO HELD THAT M/S GOLD STAR LINE LTD, HONG KONG HAVING OCCASIONAL BUSINESS ON PORT AT MUNDRA AND NOT ENGAGED IN REGULAR BUSINESS OF SHIPPING AND HENCE, N OT ELIGIBLE FOR BENEFIT OF ARTICLE 8 OF INDO-ISRAEL TREATY. FURTHER IN THIS ORDER THE AO HELD THAT THE PRINCIPAL IS NOT OWNED OR CHARTERED NONE OF THE VESSEL, THEREFORE, THE AGENT/FREIGHT BENEFICIARY IS NOT ENTITLED TO CLAIM OF DTAA BENEFIT FOR THE SAID CHARTERED VESSEL FOR THE VARIOUS REASONS DISCUSSED IN PA RAGRAPH 13 OF THE IMPUGNED ORDER. TO SUM UP, THE AO WORKED OUT THE INCOME AND TAX PAYABLE THEREON AS UNDER : TOTAL AMOUNT OF FREIGHT EARNED IN INDIAN RUPEES WHICH IS INCLUDING THC : RS. 13 ,44,92,889/- TAXABLE INCOME I.E. 7.5% : RS. 1,00,86,966/- TAX PAYABLE ON TAXABLE INCOME : RS. 42,59,726/- INCOME TAX LESS : DOUBLE INCOME-TAX RELIEF : NIL TAX PAID ON FINAL RETURN DATED : NIL BALANCE TAX PAYABLE : RS. 4259,726/- 3. ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSEE CONT ENDED THAT PRINCIPAL M/S GOLD STAR LINE LTD, HONG KONG IS ENGAGE D IN REGULAR SHIPPING BUSINESS AND NOT OCCASIONAL BUSINESS. THEY ARE FI LING RETURN OF INCOME U/S 139(1) READ WITH SECTION 44B OF THE ACT FOR THE PAST 10-15 YEARS INCLUDING FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N. THE ACKNOWLEDGMENT OF COPY OF RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2010-11 WAS SUBMITTED BEFORE THE AO DURING SECTION 172 PROCEEDINGS. IT WAS FURTHER CLAIMED THAT THE APPELLANT WAS ASSESSED TO TAX U/S 44B OF THE ITA NO. 26/RJT/2012 3 ACT BEFORE THE ASSISTANT DIRECTOR OF INCOME-TAX-31, BOMB AY AND THAT IN THE ASSESSMENT YEAR 2007-08 THE CASE WAS SELECTED FOR SCRUTIN Y AND IT WAS HELD THAT THE ASSESSEE WAS LIABLE TO CLAIM THE BENE FIT OF TREATY. IT WAS ALSO ARGUED THAT ONCE THE PROVISIONS OF SECTION 44B AR E APPLICABLE THEN APPLICABILITY OF SECTION 172 NO MORE SURVIVE. T HIS IS BECAUSE THE HIGHER AMOUNT IS SUBJECT TO TAX U/S 44B AS IT CONSIDERED TOTAL INCOME OF THE ASSESSEE AS COMPARED TO TAX UNDER SECTION 172 WHICH CON SIDERED ONLY INCOME ON A PARTICULAR PORT OR A SHIPPING. AFTE R CONSIDERING THEIR ARGUMENTS, THE LD. CIT(A), IN THE IMPUGNED ORDER HEL D THAT THE ORDER PASSED U/S 172(4) IS NULL AND VOID BECAUSE THE ASSESSEE I S NOT ENGAGED IN OCCASIONAL BUSINESS IS BACKED BY ITS ACTING ALTERNATIVE CLAUSE PROVIDED UNDER SECTION 172 (7) OF THE ACT, 1961. THE RELEVANT PORTION OF THE DECISION OF THE LD. CIT(A) AS CONTAINED IN PARAGRA PH 5 OF THE IMPUGNED ORDER IS AS UNDER: 5FURTHER, THE APPELLANT HAS CLAIMED THAT IT HAD EXER CISED ITS RIGHT TO BE ASSESSED ON ITS TOTAL INCOME U/S 172(7). HO WEVER, THE LEARNED AO HAS NOT CONSIDERED THE PROVISIONS OF SECTION 172(7) AND PASSED THE ORDER U/S 172(4) AS IT WAS GETTING TIME BAR RED. THEREFORE, THE APPELLANT SUBMITS THAT THE ORDER PASSED U/S 172(4) OF THE ACT IS NULL AND VOID AS IT VIOLATES THE APPELLANTS RIGHT TO BE ASSESSED UNDER NORMAL PROVISIONS OF THE ACT. I HAVE PERUSED THE SUBMISSION MADE BY THE APPELLANT AND AM OF THE OPINION THAT THE APPELLANT IS IN REGULAR SHIPPI NG BUSINESS AND NOT IN OCCASIONAL SHIPPING BUSINESS. I HAVE CONSIDERED THE JUDGMENTS CITED. ONCE A PERSON CLAIMS THAT IT IS NOT E NGAGED IN OCCASIONAL SHIPPING BUSINESS AND WANTS TO GO OUT OF THE AMB IT OF SECTION 172, THE RECOURSE IS PROVIDED IN SECTION 172 (7) O NLY AND FOR THAT IT HAS TO OPT FOR FILLING RETURN U/S 139(1). SI NCE, THE APPELLANT HAS OPTED FOR THE OPTION TO BE ASSESSED U/S 172(7) BY FI LING RETURN OF INCOME U/S 139(1) AND ALSO THE FACT THAT THEY ARE FILIN G RETURN OF INCOME FOR THE PAST 10-12 YEARS IT IS ESTABLISHED THAT T HE APPELLANT IS IN REGULAR SHIPPING BUSINESS AND LIABLE TO BE ASSESSED UNDER OTHER PROVISIONS OF THE ACT INCLUDING 44B; AND NOT U/ S 172(4). THUS THE ORDER PASSED U/S 172(4) BY THE INCOME TAX OFF ICER IS NULL AND VOID AS ASSESSEES CLAIM THAT IT IS NOT ENGAGED IN OCCASI ONS SHIPPING BUSINESS IS BACKED BY ITS TAKING THE ALTERNATE RECOU RSE PROVIDED IN SECTION 172(7) ITSELF. ITA NO. 26/RJT/2012 4 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL BY TAKING FOLLOWING GROU NDS : 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N HOLDING THAT THE ORDER OF THE AO IS NULL AND VOID AND THAT THE A SSESSEE IS ASSESSABLE UNDER SECTION 172(7) OF THE ACT. 2. THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FA CTS IN HOLDING THAT THE BENEFIT OF DTAA BETWEEN INDIA AND ISRAEL IS AVAILABLE TO THE ASSESSEE IGNORING THE FACT THAT THE ASSE SSEE IS NOT ENGAGED IS THE OPERATION OF SHIPS AND IT HAS NEITHER OWNED NOR CHARTERED THE VESSELS IN WHICH THE GOODS HAVE BEEN TRANSPO RTED. 3. ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 4 IT IS THEREFORE, PRAYED THAT THE ORDER OF T HE CIT(A) MAY BE CANCELLED AND THAT OF THE AO MAY BE RESTORED TO THE AB OVE EXTENT. 5. ANY OTHER ROUND THAT MAY BE URGED AT THE TIME OF HEARING. 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE REVENUE SHRI YOGESH PANDEY APPEARED AND CONTENDED THAT PRINCIPAL H AS NOT OWNED OR CHARTERED ANY OF THE VESSEL, THEREFORE, PRINCIPAL HAD WRONGLY CLAIMED DTAA BENEFIT FOR THE SLOT CHARTERED VESSELS. HE ACCO RDINGLY RELYING ON THE REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER CO NTENDED THAT THE ASSESSEE THROUGH ITS LOCAL AGENT HAS WRONGLY CLAIMED DT AA BENEFIT, THEREFORE, THE AO RIGHTLY MADE THE ASSESSMENT U/S 172 (4) OF THE ACT AND LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THE SAME AS NU LL AND VOID ON THE GROUND M/S GOLD STAR LINES LTD, HONG KONG IS ASSESSABLE U/S 172(7) OF THE ACT. 6. IN REPLY, SHRI JITENDRA JAIN, THE LD. AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). HE CON TENDED THAT THE PRINCIPAL OF ASSESSEE AND THE FREIGHT BENEFICIARY NAM ELY M/S GOLD STAR ITA NO. 26/RJT/2012 5 LINES LTD., HONG KONG ARE ENGAGED IN THE REGULAR SHI PPING BUSINESS AND NOT IN OCCASIONAL SHIPPING BUSINESS AND THEREFORE, THE PROVISIONS OF SECTION 172 (4) OF THE ACT ARE INAPPLICABLE TO THEM. IN THIS REGARD, HE DREW OUR ATTENTION TO THE FINDING RECORDED BY THE L D. CIT(A) AT PAGES 7 AND 8 OF THE OF IMPUGNED ORDER (WHICH IS REPRODUCED BY US HEREINABOVE AT PAGE 3 OF THIS ORDER) AND SUBMITTED THAT THE DEPARTM ENT HAS PLACED NO MATERIAL TO REBUT THE FINDINGS OF THE LD. CIT(A) A ND MERELY RELIED ON THE FINDINGS OF THE ASSESSING OFFICER. HOWEVER, THE FREIGH T BENEFICIARY OF M/S GOLD STAR LINES LTD, HONG KONG WAS REGULARLY ENGA GED IN SHIPPING BUSINESS WAS APPARENT FROM THE FACT THAT THE PRINCIPAL IS REGULARLY ENGAGED IN THE BUSINESS OF SHIPPING, AS OBSERVED BY THE LD. CIT(A) THAT THE PRINCIPAL IS REGULARLY FILING ITS RETURN OF INCOME AT MUMBAI. IN SUPPORT OF THIS HE FILED A COPY OF THE ACKNOWLEDGMENT OF RETU RN OF INCOME FOR THE ASSESSMENT YEAR 20010-11 AT PAGES 2 OF THE ASSESSEES PAPER BOOK. FINALLY THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INCOME-TAX ACT DOES NOT STIPULATE MULTIPLE ASSESSMENT AGAINST THE SAME A SSESSEE, SIMULTANEOUSLY U/S 172(4) AND ALSO UNDER THE NORMAL P ROVISIONS OF ACT. UNDER THESE CIRCUMSTANCES, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) RIGHTLY QUASHED THE ORDER PASSED BY THE AO U/S 172(4) OF THE ACT. THE LD. COUNSEL OF THE ASSESSEE ALSO PLACED A COPY OF THE DECISION OF THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF I.T.O V/S M/S CMA CGM AGENCIES (INDIA) PVT. LTD. IN ITA NOS. 151 TO 190/RAJ/2012(AY-2010-2011) DATED 31.08.2012 WHEREIN ON IDENTICAL FACTS THE TRIBUNAL DISMISSED THE APPEAL OF THE ASSESSEE WITH CERTAIN OBSERVATIONS. ITA NO. 26/RJT/2012 6 7. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE RAJKOT B ENCH OF THE TRIBUNAL IN THE CASE OF I.T.O V/S M/S CMA CGM AGENCIES (INDIA) PV T. LTD. (SUPRA) ON IDENTICAL FACTS RELIED ON BY THE LD.COUNSEL O F THE ASSESSEE, QUASHED THE ORDER PASSED U/S 172(4) OF THE ACT WITH TH E OBSERVATION THAT THE JURISDICTIONAL AO MAY VERIFY THE POSITION AND TAKE SUCH ACTION AS MAY BE WARRANTED IN LAW IN TERMS OF SECTION 172(7) TO ENS URE THAT THE INCOME OF THE ASSESSEE FROM THE VARIOUS VOYAGES DOES NOT ESCAPE ASSESS MENT AS PER THE NORMAL PROVISIONS OF THE I-T ACT. THE FACTS OF THE ASSESSEES CASE ARE IDENTICAL TO THAT OF THE CASE RELIED ON BY THE A SSESSEE. THE PRINCIPAL M/S GOLD STAR LINES LTD, HONG KONG HAS FILED RETUR N OF INCOME FOR THE ASSESSMENT YEAR 2010-11 WITH ADDITIONAL COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) RANGE -3(1), MUMBAI ON 4.1 0.2010. THE SAID CASE HAS ALREADY BEEN UNDER SCRUTINY OF THE REGULAR ASSESSIN G OFFICER OF M/S GOLD STAR LINES LTD, HONG KONG . THIS CLEARLY IN DICATES THAT M/S GOLD STAR LINES LTD, HONG KONG HAS ACCEPTED THE LIABI LITY TO BE DEALT WITH THE PROVISIONS OF SECTION 172(7) OF THE ACT. THE JURISDI CTIONAL AO MAY, THEREFORE, VERIFY THE POSITION AND TAKE SUCH ACTION AS MAY BE WARRANTED IN LAW IN TERMS OF SECTION 172(7) TO ENSURE THAT THE IN COME OF THE ASSESSEE FROM THE 58 VOYAGES DOES NOT ESCAPE ASSESSMENT AS PER NOR MAL PROVISIONS OF THE ACT. 8. IN VIEW OF THE FOREGOING DISCUSSION, THE APPEAL OF THE REVENUE IS DISMISSED SUBJECT TO THE OBSERVATIONS MADE ABOVE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. ITA NO. 26/RJT/2012 7 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED HEREINABOVE. SD/- SD/- ( .. / D. K. SRIVASTAVA) ( .. / T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 3/ ORDER DATE 28-09-2012. /RAJKOT SRL - -- - +4 +4 +4 [phone] / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-, 2. +,* / RESPONDENT- 3. : / CONCERNED CIT. 4. :- / CIT (A). 5. 4 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.