DCIT, CHENNAI V. M/s. East Coast Terminal Operations & Port Services Ltd., CHENNAI

ITA 2900/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7364 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Rule 8D
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 14A; 201

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 2 900 /MDS/201 6 / ASSESSMENT YEAR :20 12 - 1 3 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1) , CHENNAI 600 034 . VS. M/S. EAST COAST TERMINAL OPERATIONS & PORT SERVICES LIMITED, NO.4, M OORES ROAD, BUHARI TOWERS, SIXTH FLOOR, CHENNAI 600 006. [PAN: AA A C E4812D ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S HIVA SRINIVAS , J CIT / RESPONDENT BY : SHRI G. BASKAR , A DV OCATE / DATE OF HEARING : 0 2 . 0 1 .201 7 / DATE OF P RONOUNCEMENT : 30 . 0 3 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) 6 , CHENNAI DATED 2 9 . 0 7 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 12 - 1 3 . THE REVENUE HAS RAISED TWO EFFECTIVE GROUNDS VIZ., (I) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHE ME AND (II) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR TONNAGE TAX SCHEME AND DISALLOWANCE UNDER SECTION 14A CANNOT BE MADE . I.T.A. NO . 2 900 /M/ 16 2 2. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE BOTH THE ISSUES RAIS ED IN THE APPEAL OF THE REVENUE ARE SQUARELY COVERED AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V. WEST ASIA MARITIME LTD. IN I.T.A. NO. 935/MDS/2013 VIDE ORDER DATED 13.06.2014 FOR THE ASSESSMENT YEAR 2008 - 09 AND PRAYED THAT T HE SAME SHOULD BE FOLLOWED FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. 3. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V. WEST ASIA MARITIME LTD. (SUPRA) HAS BEEN DISPUTED BEFORE THE HON BLE HIGH CO URT OF MADRAS, WHICH IS PENDING IN TCA NO. 997 OF 2014 AND THEREFORE, HE HAS PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED. 4. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BE LOW. WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT V. WEST ASIA MARITIME LTD. (SUPRA) FOR THE ASSESSMENT YEAR 2008 - 09 (SUPRA), WHEREIN, IT WAS HELD AS UNDER: 2. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN HOLDING THAT ASSESSEE IS ENTITLED FOR BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER CHAPTER XII C OF THE ACT. 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ASSE SSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 IN ITA NO.1195/MDS/2010 DATED 1.7.2011 WHEREIN THIRD MEMBER AGREED WITH THE VIEW OF THE ACCOUNTANT MEMBER AND HELD THAT SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNORE TRANSPORTING THERMAL COAL FROM ONE LOCAT ION TO ANOTHER LOCATION WITHIN THE COUNTRY IS A QUALIFYING SHIP UNDER SECTION 115VD OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER SECTION XII C OF THE ACT. I.T.A. NO . 2 900 /M/ 16 3 4. WE HAVE PERUSED THE ABOVE ORDER OF THE THIRD MEMBER AND FIND THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE HOLDING THAT SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNORE TRANSPORTING THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY IS A QUALIFYING SHIP UNDER SEC TION 115VD OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER SECTION XII C OF THE ACT. RESPECTFULLY FOLLOWING THE ORDER OF THE THIRD MEMBER, WE REJECT THE GROUNDS RAISED BY THE REVENUE ON THIS ISS UE. 5. THE NEXT GROUND OF APPEAL RAISED BY THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT MADE DISALLOWANCE UNDER SECTION 14A OF THE ACT. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT HOLDING THAT ONCE ASSESSEE S INCOME IS COMPUTED AS PER TONNAGE TAX SCHEME THEN FURTHER DISALLOWANCE UNDER SECTION 14A CANNOT BE MADE FOLLOWING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VARUN SHIPPING CO. LTD. VS. ADDL.CIT (134 ITD 339). THE REVENUE IS IN APPEAL BEFORE US. 6. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE COUNSEL FOR THE ASSESSEE RELIES ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF VARUN SHIPPING CO.LTD. (SUPRA). 7. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHORITIES AND THE DECISI ON OF THIS TRIBUNAL RELIED ON. THE MUMBAI BENCH OF THIS TRIBUNAL CONSIDERED THIS ISSUE IN THE IN THE CASE OF VARUN SHIPPING CO. LTD. (SUPRA) AND DELETED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT OBSERVING AS UNDER: - 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE IS MAINLY ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS AND ITS INCOME FROM THE SAID BUSINESS WAS DECLARED AND ASSESSED AS PER THE SPECIAL PROVISIONS CONTAINED I N CHAPTER XIIG WHICH LAY DOWN TONNAGE TAX SCHEME. AS PER THE PROVISIONS OF SECTION 115VA CONTAINED IN CHAPTER XIIG, THE INCOME FROM THE BUSINESS OF OPERATING QUALIFYING SHIPS CAN BE COMPUTED AT THE OPTION OF THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS O F CHAPTER XIIG AND ONCE THIS OPTION IS EXERCISED BY THE ASSESSEE, THE INCOME SO COMPUTED SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 28 TO 43C. IT, THEREFORE, FOLLOWS THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS I.T.A. NO . 2 900 /M/ 16 4 IS COMPUTED AS PER THE SPECIAL PROVISIONS CONTAINED IN CHAPTER XIIG, ONLY THE EXPENSES INCURRED BY THE ASSESSEE F OR EARNING INCOME OF THE SAID BUSINESS ARE DEEMED TO BE ALLOWED AND NOTHING ELSE. IT, THEREFORE, CANNOT BE SAID THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS IS COMPUTED AS PER THE SPECIAL PROVISIONS OF CHAPTER XIIG, ANY EXPEND ITURE OTHER THAN THE EXPENDITURE INCURRED FOR THE PURPOSE OF THE SAID BUSINESS HAS BEEN ALLOWED AND CONSEQUENTLY NO ADDITION TO INCOME SO COMPUTED CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A ON ACCOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXEMPT DIVIDEND INCOME. WE, THEREFORE, FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS HAVING BEEN COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XI IG, ONLY THE EXPENSES INCURRED FOR THE SAID BUSINESS ARE DEEMED TO HAVE BEEN ALLOWED AND NO ADDITION TO SUCH INCOME CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A ON ACCOUNT OF ANY EXPENDITURE INCURRED IN RELATION TO EARNING OF EXEMPT DIVIDEND INCOME. IN OUR O PINION, IF AT ALL THE ASSESSEE HAS CLAIMED ANY SUCH EXPENDITURE IN COMPUTATION OF PROFIT OF BUSINESS OF SHIPPING, THE SAME ARE TO BE TAKEN AS DISALLOWED WHEN THE INCOME OF THE SAID BUSINESS IS FINALLY COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER X IIG AND NO SEPARATE DISALLOWANCE ON ACCOUNT OF SUCH EXPENDITURE U/S 14A CAN BE MADE. WE, THEREFORE, DELETE THE DISALLOWANCE MADE BY THE AO U/S 14A AND CONFIRMED BY THE LEARNED CIT(APPEALS) AND ALLOW GROUND NO.1 OF THE ASSESSEE S APPEAL. 8. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND REJECT THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 5. AS CONTENDED BY THE LD. DR THAT AGAINST THE ORDER OF THE TRIBUNAL, THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE HON BLE MADRAS, CANNOT BE A GROUND TO TAKE A DIFFERENT VIEW. THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL, WE SUSTAIN THE ORDER OF THE LD. CIT(A), HOLDING THAT THE ASSESSEE IS ENTITLED FOR T HE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER CHAPTER XII C OF THE ACT. 6. FURTHER, WITH REGARD TO ISSUE OF DISALLOWANCE UNDER SECTION 14A READ I.T.A. NO . 2 900 /M/ 16 5 WITH RULE 8D, THE LD. CIT(A) FOLLOWED THE DECISION OF THE MUMBAI BENCHES OF THE TRIBUNAL IN THE CASE OF VAR UN SHIPPING CORPORATION LTD. V. ACIT (SUPRA) AND DELETED THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT AS THE ASSESSEE IS ELIGIBLE FOR TONNAGE TAX . UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO REASON TO INTERFERE WITH THE ORDERS OF THE LD. CIT(A) AND BOTH THE GROUNDS RAISED IN THE APPEAL OF THE REVENUE ARE DISMISSED. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PR ONOUNCED ON THE 30 TH MARCH, 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 30 . 0 3 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.