The ITO, (International Taxation), GANDHIDHAM V. M/s. Tristar Logistics India Pvt. Ltd. as agent of M/s. Ben Ocean Shipping & Trading PTE Ltd., Singapore, GANDHIDHAM

ITA 352/RJT/2011

• Counselvise Citation: 35224914 RSA 2011
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 14-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Double taxation relief
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH SMC, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) I.T.A. NO.352/RJT/2011 (ASSESSMENT YEAR 2006-07) ITO, INTERNATIONAL TAXATION VS M/S TRISTAR LOGIST ICS INDIA PVT LTD GANDHIDHAM GANDHIDHAM AGENT OF M/S BEN OCEAN SHIPPING & TRADING PTE LTD; SINGAPOE OF M.V. POWER PLOT NO.193, SECTOR NO.1/A GANDHIDHAM PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) DATE OF HEARING : 25-10-2011 DATE OF PRONOUNCEMENT : 25-10-2011 APPELLANT BY : WRITTEN SUBMISSION RESPONDENT BY: SHRI KALPESH DOSHI O R D E R THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A), GANDHINAGAR, AHMEDABAD DATED 28-06-2011 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE FOLLOWING EFFECTIVE GROUNDS ARE TAKEN BY THE REVENUE: 1. THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE JOU RNEY PERFORMED BY THE VESSEL M.V. POWER BETWEEN KANDLA A ND KAKINADA WAS IN THE NATURE OF INTERNATIONAL TRAFFIC . 2. THE LD.CIT(A) HAS ERRED IN NOT HOLDING THAT THE VOYAGE BETWEEN KANDLA AND KAKINADA WAS IN PURSUANCE OF THE VOYAGE CHARTER PARTY AGREEMENT DATED 24.02.2006 AND HENCE THE VOYAGE WAS A SEPARATE ONE AND NOT A PART OF A LARGER VOYAGE AND HENCE NOT INTERNATIONAL TRAFFIC. ITA NO.352/RJT/2011 2 3. NONE WAS PRESENT ON BEHALF OF THE REVENUE; HOWEV ER, A WRITTEN SUBMISSION HAS BEEN FILED. THE APPEAL IS THEREFORE DISPOSED OF AFTER HEARING THE LD.AR OF THE ASSESSEE, SHRI KALPESH DOSHI AND ON CO NSIDERATION OF THE WRITTEN SUBMISSIONS FILED BY THE REVENUE. 4. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS AGENT OF THE FOREIGN SHIPPING COMPANY, M/S BEN OCEAN SHIPPING & TRADING PVT LTD, SINGAPORE. IN THE ORIGINAL ORDER PASSED U/S 172(4) DATED 25-09-20 08 DTAA BENEFIT FOR THE FREIGHT BENEFICIARY OF M/S BEN OCEAN SHIPPING & TRA DING PVT LTD, SINGAPORE WAS GRANTED. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUE D NOTICE U/S 154 ON 05-02- 2010 STATING THAT VESSEL HAD TRANSPORTED SALT FROM PORT OF KANDLA TO KAKINADA I.E. WITHIN INDIAN TERRITORY AND NOT RUN IN THE INTERNAT IONAL TRAFFIC, AND THEREFORE, IN THE CASE OF THE ASSESSEE, BENEFIT UNDER ARTICLE 8 OF TH E DTAA IS NOT ALLOWABLE. ACCORDINGLY THE ORDER PASSED U/S 172(4) DATED 25-09 -2008 WAS RECTIFIED AND THE FREIGHT INCOME OF THE VESSEL IN CARRYING THE SALT F ROM KANDLA TO KAKINADA WAS BROUGHT TO TAX VIDE ORDER DATED 02-04-2010 PASSED U /S 154 OF THE ACT. 5. THE ASSESSEE CHALLENGED THE ORDER U/S 154 BEFORE THE CIT(A) WHICH FOUND FAVOUR WITH THE ASSESSEE. THE ASSESSEE ARGUED BEFO RE THE CIT(A) THAT THE RECTIFICATION ORDER IS NOT SUSTAINABLE INASMUCH AS THAT THE SHIP HAD TRAVELLED TO MANY INTERNATIONAL DESTINATIONS AND COVERED THE TWO INDIAN PORTS AS PART OF ITS INTERNATIONAL OPERATIONS AND THEREFORE, IS COVERED BY ARTICLE 3 OF THE INDIA SINGAPORE DTAA WHICH DEFINES INTERNATIONAL TRAFFIC AND IF THE ASSESSING OFFICER NURTURES A DIFFERENT VIEW, IT BECOMES A DEBATABLE I SSUE AND THEREFORE, CANNOT BE THE SUBJECT MATTER OF ORDER U/S 154 OF THE ACT. TH E CIT(A), ON FINDING FAVOUR WITH ITA NO.352/RJT/2011 3 THE ARGUMENT OF THE ASSESSEE THAT A DEBATABLE ISSUE CANNOT BE AN APPARENT MISTAKE AND THEREFORE, CANNOT FALL WITHIN THE AMBIT OF PROVISIONS OF SECTION 154 OF THE ACT, ALLOWED THE APPEAL OF THE ASSESSE. AGGRIE VED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. IN THE WRITTEN SUBMISSION THE REVENUE ARGUES THA T THE VOYAGE BETWEEN KANDLA AND KAKINADA CARRYING SALT WAS UNDERTAKEN BY THE ASSESSEE UNDER A VOYAGE CHARTER AGREEMENT DATED 24-02-2006 WHICH WAS A SEPARATE AGREEMENT AND NOT A PART OF A LARGER VOYAGE AND HENCE NOT THE INTERNATIONAL TRAFFIC AND THEREFORE, BENEFIT OF ARTICLE 8 OF THE DTAA IS NOT OPEN TO THE ASSESSEE FOR THE VOYAGE UNDERTAKEN BY THE ASSESSEE FOR CARRYING SALT FROM KANDLA TO KAKINADA. THE LD.AR OF THE ASSESSEE, ON THE OTHER HAND, REITE RATED ITS CONTENTIONS BEFORE THE CIT(A) THAT THE SHIP HAD TRAVELLED TO MANY INTE RNATIONAL DESTINATIONS AND COVERED THE TWO INDIAN PORTS IN BETWEEN WHICH IS AL SO PART AND PARCEL OF ITS INTERNATIONAL TRAFFIC OPERATIONS AS DEFINED IN ARTI CLE 3 OF THE DTAA BETWEEN INDIA AND SINGAPORE. HE FURTHER SUBMITTED THAT IF AT ALL THE ASSESSING OFFICER HAD A DIFFERENT VIEW, THE ISSUE BEING A DEBATABLE ONE CAN NOT BE A MISTAKE APPARENT ON RECORD. HE THEREFORE ARGUED THAT THE ORDER U/S 154 PASSED BY THE ASSESSING OFFICER IS VOID AB INITIO AND CIT(A) HAS RIGHTLY HE LD THAT THE ADDITION OF INCOME SOUGHT TO BE TAXED BY THE AO U/S 154 IS NOT ALLOWAB LE UNDER THE LAW. 7. I HAVE CONSIDERED THE SUBMISSIONS FROM EITHER SI DE AND HAVE ALSO PERUSED THE RECORD. THE ASSESSEES VESSEL AMIDST ITS INTER NATIONAL OPERATIONS, HAS UNDERTAKEN A VOYAGE BETWEEN KANDLA AND KAKINADA FOR TRANSPORTATION SALT. THE CASE OF THE REVENUE IS THAT THE VOYAGE WAS UNDERTA KEN UNDER A DIFFERENT VOYAGE ITA NO.352/RJT/2011 4 CHARTER AGREEMENT AND NOT A PART OF A LARGER VOYAGE AND THEREFORE IS NOT AN INTERNATIONAL TRAFFIC. THEREFORE, BENEFIT OF ARTIC LE 8 OF DTAA BETWEEN INDIA AND SINGAPORE CANNOT BE EXTENDED TO THE ASSESSEE. THIS VIEW OF THE REVENUE WAS INCORPORATED IN THE ORDER PASSED U/S 172(4) DATED 2 5-09-2008 BY PASSING A RECTIFICATION ORDER U/S 154 OF THE ACT DATED 02-03- 2010. THE CASE OF THE ASSESSEE IS THAT THE VOYAGE UNDERTAKEN BY ASSESSEE S SHIP TRANSPORTING SALT FROM KANDLA TO KAKINADA, THOUGH UNDER A DIFFERENT VOYAGE CHARTER AGREEMENT, WAS VERY MUCH PART AND PARCEL OF THE INTERNATIONAL TRAF FIC AS HAS BEEN DEFINED IN ARTICLE 3 OF THE DTAA BETWEEN INDIA AND SINGAPORE. AND, THEREFORE, THE ISSUE BEING A DEBATABLE ISSUE CANNOT BE AN APPARENT MISTA KE WHICH COULD BE RECTIFIED IN AN ORDER U/S 154 OF THE ACT. THE TERM INTERNAT IONAL TRAFFIC AS DEFINED IN ARTICLE 3(1)(E), HAS BEEN EXPLAINED BY KLAUS VOGEL ON DOUBLE TAXATION CONVENTIONS AS UNLESS THE CONTEXT OTHERWISE REQ UIRES, THE TERM INTERNATIONAL TRAFFIC MEANS ANY TRANSPORT BY A SHIP OR AIRCRAFT OPERATED BY AN ENTERPRISE THAT HAS ITS PLACE OF EFFECTIVE MANAGEMENT IN A CONTRACT ING STATE, EXCEPT WHEN THE SHIP OR AIRCRAFT IS OPERATED SOLELY BETWEEN PLACES IN THE OTHER CONTRACTING STATE. FURTHER IT IS EXPLAINED THAT IT IS UNNECESSARY FOR A BORDER TO BE CROSSED AFTER EVERY TAKE-OFF OF SAILING. EVEN IF PLACES WITHIN ONE STA TE ARE STOPPAGE POINTS ONE AFTER THE OTHER, SUCH TRANSPORTATION CONTINUE TO FALL WIT HIN THE SCOPE OF OPERATING SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC UNLESS THE SHI PS OR AIRCRAFT HAD TO REMAIN IN THAT STATE FOR GOOD. I ALSO FIND THAT IN THE CASE OF ES SAR OIL LTD 5 SOT 669 (MUM), THE MUMBAI BENCH OF THE TRIBUNAL HAS HELD THAT WHEN TRA NSPORT WITHIN THE COUNTRY IS PART OF INTERNATIONAL VOYAGE THEN IT WILL BE CONSID ERED AS INTERNATIONAL TRAFFIC AND ITA NO.352/RJT/2011 5 THAT IT IS NOT NECESSARY TO CROSS BORDER EVERY TIME FOR BEING CONSIDERED AS INTERNATIONAL TRAFFIC. THE APEX COURT IN THE CASE OF CIT VS HERO CYCLES (P) LTD 228 ITR 463 HAS HELD THAT RECTIFICATION UNDER SECTI ON 154 CAN ONLY BE MADE WHEN GLARING MISTAKE OF FACT OR LAW HAS BEEN COMMITTED B Y THE OFFICER PASSING THE ORDER BECOMES APPARENT FROM THE RECORD AND THAT RECTIFICA TION IS NOT POSSIBLE IF THE QUESTION IS DEBATABLE. FURTHER, THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS SHEEL PETROLEUM CO LTD 164 ITR 357 (CAL) HAS HELD T HAT WHEN TWO CONCEIVABLE VIEWS ARE POSSIBLE ON THE CONTROVERSY AND THE ISSUE BEING DEBATABLE, THE ITO WAS NOT ENTITLED TO RECTIFY THE SAME UNDER SECTION 154 OF THE ACT. APPLYING THESE AUTHORITIES, I AM OF THE VIEW THAT TWO CONCEIVABLE VIEWS WERE POSSIBLE ON THE ISSUE AND THEREFORE, THE ASSESSING OFFICER WAS NOT RIGHT IN TAXING THE FREIGHT INCOME OF TRANSPORTING SALT FROM KANDLA TO KAKINADA BY AN ORDER PASSED U/S 154 OF THE ACT. THEREFORE, I UPHOLD THE ORDER OF CIT(A ). THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-10-2011. SD/- (A.L. G EHLOT) ACCOUNTANT MEMBER RAJKOT, DT : 25 TH OCTOBER, 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A), GANDHINAGAR 4. THE CITI, GANDHINAGAR 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER SENIOR PRIVATE SECRETARY, ITAT, RAJKOT