FIVE STARS BULK CARRIERS P.LTD, MUMBAI V. DCIT CIR 5(1), MUMBAI

ITA 342/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0347 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 22-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Presumptive income; Business income; Business expenditure
• Section: 142(1); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 342 / MUM/ 20 1 6 ( / ASSESSMENT YEAR: 2011 - 12 ) FIVE STARS BULK CARRIERS P. LTD. UNIT NO. 3, BRADY GLADYS PLAZA, SENAPATI BAPAT ROAD, LOWER PAREL, MUMBAI - 400013 / VS. DCIT CIRCLE - 5(1) AAYAKAR BHAVAN, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAACF 7393 J ( / APPELLANT ) .. ( / RES PONDENT ) / DATE OF HEARING : 08 .1 1 .2017 / DATE OF PRONOUNCEMENT : 05. 02 .2018 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 21 . 10 .201 5 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 10 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2011 - 12 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS: - 1 .1 THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE INTEREST ON ESCROW ACCOUNTS OF RS.56,09,640/ - WAS NOT CHARGEABLE TO TAX AS NON - TONNAGE INCOME BECAUSE THE INTEREST ON ESCROW ACCOUNTS WAS INEXTRICABLY LINKED TO THE LOANS TAKEN FROM BANKS FOR ASSESSEE BY : NONE REVENUE BY: MS. POOJA SWAROOP ITA. NO.342 /M/201 6 A.Y. 20 1 1 - 12 2 S HIPPING ACTIVITY AND HENCE WAS PART OF SHIPPING INCOME OF A TONNAGE TAX COMPANY. 1.2 THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE INTEREST OF RS.56,09,640/ - IS NOT ERRED ON PARKING OF SURPLUS FUNDS BUT IS INCOME FROM CORE ACTIVITY OF TONNAGE TAX COMP ANY. HE ERRED IN NOT FOLLOWING THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF THE SHIPPING CORPORATION OF INDIA LTD. V ADDL. CIT (2011) 133 ITD 0290 (MUM). 1.3 WITHOUT PREJUDICE TO ABOVE, THE ABOVE INTEREST INCOME HAD TO BE NETTED OUT AGAINST INTEREST PAID ON SHIPPING LOANS. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME TO THE TUNE OF RS. 1,20,88,361 / - ON 29.09.2011 . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 10.01.2012. THE CASE WAS SELECTED FOR SCRUTINY. THEREFORE, NOTICE U/S 143(2) OF THE ACT DATED 07.08.2012 WAS ISSUED AND SERVED UPON THE ASSESSEE. FURTHER, NOTICE U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED ON 25.07.2013 AND SERVED UPON THE ASSESSEE ON 27.07.2013. THE ASSESSEE COMPANY IS ENGAGED IN THE ACTIVITY OF OWNING AND OPERATING DRY BULK - CARRIERS. THE VESSELS OWNED BY THE COMPANY ARE ENGAGED EITHER ON TIME CHARTER OR ON SPOT. THE ASSESSEE COMPANY HAS OPTED FOR PRESUMPTIVE TAXATION UNDER CHAPTER XII - G, BEING THE SPECIAL PR OVISIONS RELATING TO INCOME OF SHIPPING COMPANIES NAMELY TONNAGE TAX SCHEME AS PER THE PROVISIONS OF SECTION 115VP OF THE ACT. THE COPY OF ORDER U/S 115VP DATED 20.01.2006 GRANTING APPROVAL TO BE ASSESSED UNDER TONNAGE TAX SCHEME HAS BEEN PLACED ON RECORD. THE ASSESSEE RECEIVED THE INTEREST INCOME FROM NON TONNAGE ACTIVITY. THE SAID INCOME WAS NOT FROM THE BUSINESS ACTIVITY, THEREFORE, THE NOTICE WAS GIVEN AND AFTER GETTING ITA. NO.342 /M/201 6 A.Y. 20 1 1 - 12 3 THE REPLY , THE SAID INTEREST INCOME WAS TREATED AS INCOME FROM OTHER SOURCES. THE BU SINESS INCOME U/S 115JB OF THE ACT WAS ASSESSED TO THE TUNE OF RS. 1,20,36,739/ - . THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.1,76,98,000/ - . THE ASSESSEE WAS NOT SATISFIED. THEREAFTER THE ASSESSEE FILED A N A PPEAL BEFORE THE CIT(A) WHO CO NFIRM ED THE ORDER OF THE AO , THEREFORE, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. ISSUE NO. 1 TO 3: - 4. WE HAVE HEARD THE ARGUMENT ADVANCED BY THE L D. REPRESENTATIVE OF THE DEPARTMENT AND HAS GONE THROUGH THE CASE ON FILE. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE LD. AR. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE LD. AR. THE ARGUMENT OF THE APPELLANT IS THA T WHEN THE APPELLANT IS IN THE SHIPPING BUSINESS AND HE DEPOSITS KEPT WITH THE BANKS ARE OUT OF THE BUSINESS CONTINGENCY THE INTEREST EARNED OUT OF SUCH DEPOSITS SHOULD NOT BE TAKEN AS INCOME OF THE APPELLANT. SIMILAR ISSUE HAS COME UP BEFORE MY LD. PREDEC ESSOR FOR A.Y. 2010 - 11 WHEREIN HE HAS DISMISSED THE GROUND OF THE APPELLANT BY MAKING THE FOLLOWING OBSERVATIONS - APPELLANT SUBMITTED THAT THE INTEREST OF RS.6,12,860/ - RECEIVED BY IT WAS ON ESCROW ACCOUNT WHICH WAS COMPULSORILY REQUIRED TO BE MAINTAINED AND HENCE IT WAS BUSINESS INCOME AND REQUIRED TO BE NETTED OFF AGAINST INTEREST PAID. HOWEVER I DO NOT AGREE WITH THIS CONTENTION OF THE APPELLANT SINCE IN THE CASE OF SOUTH INDIA SHIPPING CORPORATION VS. CIT 240 ITR024, IT WAS HELD BY HONBLE MADRAS HIGH COURT THAT INTEREST INCOME EARNED FROM ITA. NO.342 /M/201 6 A.Y. 20 1 1 - 12 4 DEPOSITS WERE MADE BY HONBLE SUPREME COURT IN THE CASE OF TUTICORING ALKALI CHEMICAL AND FERTIZER 227 ITR AND PANDIAN CHDEMICALS 183 CTR 99. FURTHER NO NETTING OF INTEREST CAN BE ALLOWED SINCE THE INTEREST INCOME IS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES WHILE INTEREST PAID IS ADMITTEDLY A BUSINESS EXPENDITURE. ACCORDINGLY , THIS CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE. THIS GROUND OF APPELLANT IS THEREFORE DISMISSED. 5 . ON APPRAISAL OF THE ABOVE SAID FINDING, WE NOTICED THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF FINDING OF THE CIT(A) FOR THE A.Y. 2010 - 11. THE SAID FINDING WAS GIVEN ON THE BASIS OF DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEM ICAL AND FERTILIZER 227 ITR 172 AND PANDIAN CHEMICALS 183 CTR 99. THE ASSESSEE DID NOT APPEAR BEFORE US DESPITE SERVICE. NO DISTINGUISHABLE MATERIAL HAS BEEN PLACED ON RECORD. THE FACTS ARE NOT DISTINGUISHABLE AT THIS STAGE ALSO. IN VIEW OF THE SAID CIRCUM STANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS PASSED THE ORDER JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THESE ISSUES ARE DECIDED IN FAVOUR OF THE REVENUE AGAINST ASSESSEE . 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 05. 02 . 201 8 SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ITA. NO.342 /M/201 6 A.Y. 20 1 1 - 12 5 MUMBAI; DATED : 05. 02 . 201 8 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI