The ITO, International Taxation, GANDHIDHAM V. M/s. Zim Integrated Shipping Services (india) Pvt. Ltd., GANDHIDHAM

ITA 27/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0190 (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. 27/RJT/2012 / ASSESSMENT YEAR 2010-11 INCOME TAX OFFICER, (INTERNATIONAL TAXATION), GANDHIDHAM ( * / APPELLANT) VS. M/S ZIM INTEGRATED SHIPPING SERVICES (INDIA) PVT.LTD., 206, 2 ND FLOOR, MANI COMPLEX, PLOT NO.84, SECTOR-08, GANDHIDHAM AS AGENT FOR M/S ZIM INTEGRATED SHIPPING SERVICES LTD, ISRAEL PAN: AAACZ0330P +,* / RESPONDENT - / REVENUE BY SHRI YOGESH PANDEY /- / ASSESSEE BY SHRI JITENDRA JAIN - / DATE OF HEARING 25.9.2012 - / DATE OF PRONOUNCEMENT .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 ZIM INT EGRATED SHIPPING SERVICES (INDIA) PVT.LTD.,., GANDHIDHAM FILED VARIOU S VOVAGE FINAL RETURN U/S 172(3) OF THE INCOME TAX ACT 1961 ON VARIOUS DATES FROM THE FINANCIAL ITA NO. 27/RJT/2012 2 YEAR 2009-2010 FOR THE FREIGHT BENEFICIARY OF M/S ZIM INTEGRATED SHIPPING SERVICES (INDIA) PVT.LTD., HAIFA, ISRAEL WITHOUT PAYIN G FREIGHT TAX. THE AO FOR THE SAKE OF CONVENIENCE AND SINCE THE ISSUE INVOLVED IN THE MATTER PASSED COMMON ORDER U/S 172(4) OF THE ACT ON 13.12.201 0 IN RESPECT OF ENTIRE VOVAGE RETURN FILED DURING THE FINANCIAL YEA R 2009-10. IN THIS ORDER, THE AO HELD THAT M/S ZIM INTEGRATED SHIPPING SERV ICES (INDIA) PVT.LTD., HAIFA, ISRAEL HAVING OCCASIONAL BUSINESS ON PORT AT MUND RA AND NOT ENGAGED IN REGULAR BUSINESS OF SHIPPING AND HENCE, NOT E LIGIBLE FOR BENEFIT OF ARTICLE 8 OF INDO-ISRAEL TREATY. FURTHER IN THIS O RDER THE AO HELD THAT THE PRINCIPAL IS NOT OWNED OR CHARTERED NONE OF THE V ESSEL, 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. 4 ,14,88,645/- TAXABLE INCOME I.E. 7.5% : RS. 31,11,648/- TAX PAYABLE ON TAXABLE INCOME : RS. 1 3,14,049/- 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 ZIM INTEGRATED SHIPPING SERVICES (INDIA) PVT.LTD., HAIFA, ISRAEL IS ENGAGED IN REGULAR SHIPPING BUSINESS AND NOT OCC ASIONAL BUSINESS. THEY ARE FILING RETURN OF INCOME U/S 139(1 ) READ WITH SECTION 44B OF THE ACT FOR THE PAST 10-12 YEARS INCLUDING FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ACKNOWLEDGMENT OF COPY OF RET URN OF INCOME FOR ITA NO. 27/RJT/2012 3 THE ASSESSMENT YEAR 2010-11 WAS SUBMITTED BEFORE THE AO DURING SECTION 172 PROCEEDINGS. IT WAS FURTHER CLAIMED THAT TH E APPELLANT WAS ASSESSED TO TAX U/S 44B OF THE ACT BEFORE THE ASSISTANT DIR ECTOR OF INCOME-TAX-2(2), MUMBAI AND THAT IN THE ASSESSMENT YEAR 2006-07 THE CASE WAS SELECTED FOR SCRUTINY AND IT WAS HELD THAT THE A SSESSEE WAS LIABLE TO CLAIM THE BENEFIT OF TREATY. IT WAS ALSO A RGUED THAT ONCE THE PROVISIONS OF SECTION 44B ARE APPLICABLE THEN APPLICABILI TY OF SECTION 172 NO MORE SURVIVE. THIS IS BECAUSE THE HIGHER AMOUNT IS SUBJECT TO TAX U/S 44B AS IT CONSIDERED TOTAL INCOME OF THE ASSESSEE AS COMPARE D TO TAX UNDER SECTION 172 WHICH CONSIDERED ONLY INCOME ON A PARTI CULAR PORT OR A SHIPPING. AFTER CONSIDERING THEIR ARGUMENTS, THE LD. C IT(A), IN THE IMPUGNED ORDER HELD THAT THE ORDER PASSED U/S 172(4) IS NULL AND VOID BECAUSE THE ASSESSEE IS NOT ENGAGED IN OCCASIONAL BUSINESS IS BA CKED BY ITS ACTING ALTERNATIVE CLAUSE PROVIDED UNDER SECTIO N 172 (7) OF THE ACT, 1961. THE RELEVANT PORTION OF THE DECISION OF TH E LD. CIT(A) AS CONTAINED IN PARAGRAPH 4 AT PAGES 7 AND 8 OF THE I MPUGNED ORDER IS AS UNDER: 4 I HAVE PERUSED THE SUBMISSION MADE BY THE APPELLANT AN D AM OF THE OPINION THAT THE APPELLANT IS IN REGULAR SHIPPING 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 AMBIT OF SECTION 172, THE RECOURSE IS PROVIDED IN SECTION 172(7) ONLY 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 THE 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 OF FICER IS NULL AND VOID AS ASSESSEES CLAIM THAT IT IS NOT ENGAGED IN OCCASI ONAL SHIPPING BUSINESS IS BACKED BY ITS TAKING THE ALTERNATIVE RE COURSE PROVIDED IN SECTION 172(7) ITSELF. ITA NO. 27/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 ZIM INTEGRATED SHIPPING SERVICES (INDIA) PVT.LTD., HAIFA, ISRAEL 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 ZIM ITA NO. 27/RJT/2012 5 INTEGRATED SHIPPING SERVICES (INDIA) PVT.LTD., HAIFA , ISRAEL ARE ENGAGED IN THE REGULAR SHIPPING BUSINESS AND NOT IN OCCASIONAL SHIPP ING BUSINESS AND THEREFORE, THE PROVISIONS OF SECTION 172 (4) OF T HE ACT ARE INAPPLICABLE TO THEM. IN THIS REGARD, HE DREW OUR ATTENTION TO THE FINDING RECORDED BY THE LD. CIT(A) AT PAGES 7 AND 8 OF THE OF IMPUGNED ORDER (WHICH IS REPRODUCED BY US HEREINABOVE AT PAGE 3 OF TH IS ORDER) AND SUBMITTED THAT THE DEPARTMENT HAS PLACED NO MATERIAL TO REBUT THE FINDINGS OF THE LD. CIT(A) AND MERELY RELIED ON THE FINDINGS OF THE ASSESSING OFFICER. HOWEVER, THE FREIGHT BENEFICIARY OF M/S GOLD STAR LINES LTD, HONG KONG WAS REGULARLY ENGAGED IN SHIP PING BUSINESS WAS APPARENT FROM THE FACT THAT THE PRINCIPAL IS REGULA RLY 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 RETURN OF INCOME FOR T HE ASSESSMENT YEAR 2010-11 AT PAGES 2 OF THE ASSESSEES PAPER BOOK. FINALLY THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INCOME-TAX ACT DOES NOT ST IPULATE MULTIPLE ASSESSMENT AGAINST THE SAME ASSESSEE, SIMULTANEOUSLY U/S 172(4) AND ALSO UNDER THE NORMAL PROVISIONS OF ACT. U NDER THESE CIRCUMSTANCES, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT 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 TH E 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 TH E TRIBUNAL DISMISSED THE APPEAL OF THE ASSESSEE WITH CERTAIN OBSERVATIONS. ITA NO. 27/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 ZIM INTEGRATED SHIPPING SERVICES LTD, ISRAEL HAS F ILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 WITH ADDITIONA L COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) RANGE -2(2), MUMBAI ON 30.9.2010. THE SAID CASE HAS ALREADY BEEN UNDER SCRUTI NY OF THE REGULAR ASSESSING OFFICER OF M/S ZIM INTEGRATED SHIPPING SERV ICES LTD, ISRAEL. THIS CLEARLY INDICATES THAT M/S ZIM INTEGRATED SHIPPIN G SERVICES LTD, ISRAEL HAS ACCEPTED THE LIABILITY TO BE DEALT WITH THE PROVISIONS OF SECTION 172(7) OF THE ACT. THE JURISDICTIONAL AO MAY, THEREFO RE, VERIFY THE POSITION AND TAKE SUCH ACTION AS MAY BE WARRANTED IN LAW IN TERMS OF SECTION 172(7) TO ENSURE THAT THE INCOME OF THE ASSESSEE FROM THE 43 VOYAGES DOES NOT ESCAPE ASSESSMENT AS PER NORMAL PROVISIONS O F 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. 27/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 , SENIOR PRIVATE SECRETARY , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.