THE ADIT (I.T) 3(1), MUMBAI V. M/S. MANGALORE REFINERY PETROCHEMICALS LTD.,

ITA 3557/MUM/2004

• Counselvise Citation: 355719914 RSA 2004
• Duration Of Justice: 7 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-06-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 07-05-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Assessee Lawyers: J EHANGIR D MISTRY
• Keywords: Reopening of assessment; Period of limitation
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI J. SUDHAKAR R EDDY (AM) I.T.A. NOS.3557 & 3558/MUM/2004 ASSTT. DIRECTOR OF INCOME-TAX (IT)- 3(1), SCINDIA HOUSE, R.NO.136, 1 ST FLOOR, N.K. ROAD, MUMBAI-38. VS. M/S. MANGALORE REFINERY & PETROCHEMICALS LTD., ARCADIA, 7 TH FLOOR, 195, NCPA, NARIMAN POINT,MUMBAI-400021. APPELLANT RESPONDENT APPELLANT BY SHRI B. JAYA KUMAR. RESPONDENT BY SHRI J EHANGIR D. MISTRY. O R D E R PER D.K. AGARWAL, JM: THESE TWO APPEALS PREFERRED BY THE REVENUE ARISE A S A RESULT OF ORDER PASSED BY THE TRIBUNAL IN M.A. NO. 212/MUM/09 DATED 06-11-2009 WHEREBY THE TRIBUNAL HAS RECALLED ITS EARLIER ORDER DATED 17-01 -2007 DISMISSING THE APPEALS OF THE REVENUE FOR NOT OBTAINING PERMISSION OF COD FO R FILING OF THE APPEALS BEFORE THE TRIBUNAL. 2. THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINS T THE SEPARATE ORDERS DATED 27-2-2004 PASSED BY THE LD. CIT(A) ON THE AP PEALS FILED BY THE ASSESSEE CHALLENGING THE ORDERS PASSED BY THE AO UNDER SEC. 201 AND 201(1A) OF THE INCOME-TAX ACT, 1961 (THE ACT). BOTH THESE APPEAL S ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE UNDISPUTED BRIEF FACTS AS MENTIONED IN THE T RIBUNAL ORDER IN MANGALORE REFINERY & PETROCHEMICALS LTD. VS. DY. DI RECTOR OF INCOME-TAX (IT) IN ITA NOS.1826 & 1827/MUM/04 DATED 17-1-2007 ARE AS UNDER : ITA NOS.3557-3558/M/04 MANGALOARE REFINERY & PETROCHEMICALS LTD.. 2 4. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE M /S. MANGALORE REFINERIES & PETROCHEMICALS LTD., HEREIN AFTER REFERRED TO AS M/S. MRPL IS A COMPANY REGISTERED UN DER THE COMPANIES ACT 1956. IT IS ENGAGED, INTER ALIA, IN T HE BUSINESS OF REFINING CRUDE OIL. THE COMPANY WAS INCORPORATED IN 1988 AS INDIAS FIRST JOINT SECTOR COMPANY TO CARRY OUT A GROSS ROOT REFINERY PROJECT. A SURVE Y UNDER SECTION 133A OF THE INCOME-TAX ACT WAS CARRIED OUT ON 28/8/02 AT THE PREMISES OF M/S.MRPL, ARCADIA, 7 TH FLOOR, 195, NCPA MARG, NARIMAN POINT, MUMBAI. DURING THE C OURSE OF SURVEY, THE STATEMENT OF SHRI D.C. JAIN, TAX CON SULTANT OF M/S. MRPL WAS RECORDED. DURING THE COURSE OF SUR VEY PROCEEDINGS, IT WAS FOUND THAT M/S. MPRL HAS MADE PAYMENTS TO M/S. TOYO ENGINEERING CORPORATION, JAPA N FOR OFF SHORE DESIGNS AND DRAWINGS WITHOUT DEDUCTION OF TAX AT SOURCE. FROM THE ORDER OF THE LD. DDIT PASSED UNDER SECTION 201 AND U/S.201(1A) IT EMERGES OUT THAT M/S.MRPL HA D ENTERED INTO FOUR CONTRACTS WITH CONSORTIUM TOYO ENGINEERING CORPORATION, JAPAN, MATSUI & CO. LTD., JAPAN AND MITSUBUSHI CORPORATION, JAPAN FOR SUPPLY OF OFF SHORE DESIGNS AND DRAWINGS CONCERNING PHASE-I AND PHASE-I I FOR SETTING UP AN OIL REFINERY. THE LD. DDIT HAS NOTED THE DETAILS OF THE CONTRACT AND THE DETAILS OF PAYMENTS REMITTE D BY ASSESSEE FROM 1993 TO 1999 AT PAGES NO.5, 6 & 7 OF THE IMPUGNED ORDER. IT EMERGES OUT THAT ASSESSEE HAD RE MITTED A SUM OF RS.2,86,49,23,645/- TOWARDS CONSIDERATION FOR SUPPLY OF DRAWINGS AND DESIGNS. THE LD. DDIT FURTHE R APPENDED THE DETAILS OF SUCH PAYMENT AS ANNEXURE C AT PAGE-32 OF THE IMPUGNED ORDER. THE DETAILS OF THESE PAYMENTS DEPICT THAT THESE WERE MADE FOR SUPPLY OF DRAWINGS AND DESIGNS CONTRACT FOR PHASE-I & PHASE I I TO THE TOYO ENGINEERING CORPORATION. APART FROM THESE PAYM ENTS CERTAIN OTHER REMITTANCE AGGREGATING TO RS.5,57,62, 342/- HAVE ALSO BEEN MADE TO NON-RESIDENTS. THESE HAVE AL SO BEEN NOTICED BY THE DDIT IN ANNEXURE D & E AT PAG E 33 & 34. IN VIEW OF THIS A SHOW CAUSE NOTICE U/S.201 OF THE INCOME-TAX ACT WAS ISSUED ON 11/9/02 ASKING THE ASS ESSEE AS TO WHY THE PAYMENTS ON ACCOUNT OF OFF SHORE DESI GNS AND DRAWINGS SHOULD NOT BE TAXED AS ROYALTY. IT EMERGES OUT THAT THIS NOTICE WAS CHALLENGED IN A WRIT PETITION BEFORE THE HONBLE HIGH COURT AND SUBSEQUENTLY ONE MORE SHOW C AUSE NOTICE WAS ISSUED ON 11/10/02 WHICH WAS SERVED ON 14/10/02. VIDE THIS SHOW CAUSE NOTICE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF PAYMENT MADE TO NON-RESIDE NTS FROM 1993 ONWARDS ON WHICH NO TDS WAS DEDUCTED ALON G WITH THE REASONS FOR NON DEDUCTION. ITA NOS.3557-3558/M/04 MANGALOARE REFINERY & PETROCHEMICALS LTD.. 3 IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE OBJECTED TO THE VERY JURISDICTION OF THE NOTICE AND ALSO ON THE GROUND O F LIMITATION. HOWEVER, THE AO OBSERVED AS UNDER : 8. THE LD. A.O. REJECTED THE CONTENTION OF THE ASSE SSEE ON THE GROUND THAT SEC. 195(1) CASTS A DUTY UPON TH E PAYER OF ANY INCOME SPECIFIED THEREIN TO A NON-RES IDENT TO DEDUCT THEREFROM THE TAX AT SOURCE AT THE PRESCRIBE D RATE. SECTION 201 PROVIDES THAT IF SUCH PERSON FAILS TO D EDUCT SUCH TAX, HE SHALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF THE DEDUCTIBLE AMOUNT OF TAX. AN ORDE R UNDER SECTION 201 SO HOLDING THE DEFAULTING PAYER AS LIAB LE IS NOT AN ORDER OF ASSESSMENT WITHIN THE MEANING OF SECTIO N 153 BECAUSE AN ASSESSMENT ORDER UNDER THE ACT AND LIABI LITY TO DEDUCT TAX ARE NOT ONE AND THE SAME THING. THE ACTU AL ASSESSMENT MAY TAKE PLACE AFTER THE LIABILITY TO DE DUCT TAX HAS ARISEN. THE PERIOD OF LIMITATION PRESCRIBED IN THE SECTION 153 FOR COMPLETION OF ASSESSMENT DOES NOT A PPLY TO THE LIABILITY UNDER SECTION 195 OR 201. 9. DISSATISFIED WITH THE ACTION OF AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) ON T HIS ISSUE. THE LD. CIT(A) PARTLY ACCEPTED THE ARGUMENTS OF THE ASSESSEE BASED ON THE DECISION OF ITAT. THE LD. CIT (A) HAS OBSERVED THAT WHEN THE TRIBUNAL HAS PASSED THE ORDE R IN THE CASE OF RAYMOND WOOLLEN MILLS, THE LIMITATION F OR PASSING AN ASSESSMENT IN THOSE ASSESSMENT WAS FOUR YEARS. HOWEVER, UNDER THE PRESENT PROVISIONS OF ACT , SIX YEARS PERIOD IS PROVIDED FOR RE-OPENING OF ANY ASSE SSMENT. ON THE BASIS OF THIS, THE LD. CIT(A) CONCLUDED THAT THE DDIT HAS PASSED THE ORDER UNDER SEC. 201/201A ON 30/12/02. SHE DIRECTED THE DDIT THAT THE ASSESSEE SHOULD NOT BE HELD IN DEFAULT IN RESPECT OF ANY REMITTANCE MADE BY IT PRIOR TO 31 ST MARCH, 1996. 4. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE AND REVENUE BOTH HAVE PREFERRED APPEALS BEFORE THE TRIBUNAL. 5. THE TRIBUNAL VIDE ORDER DATED 17-1-2007 (SUPRA), WHILE DISMISSING THE REVENUES APPEALS ON THE GROUND FOR NOT OBTAINING COD PERMISSION, HAS DECIDED THE APPEALS FILED BY THE ASSESSEE AND PARTL Y ALLOWED THE SAME. 6. THE COMMON GROUND NO. 1 TAKEN BY THE REVENUE RE ADS AS UNDER : 1. IN THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING T HE A.O. TO DELETE THE DEMAND RAISED U/S.201(1) AND 201(1A) IN ITA NOS.3557-3558/M/04 MANGALOARE REFINERY & PETROCHEMICALS LTD.. 4 RESPECT OF THE AMOUNTS ON WHICH MRPL WAS REQUIRED T O DEDUCT TAX AT SOURCE PRIOR TO 31 ST MARCH, 1996. THE CIT(A) RELIED ON THE PROVISIONS OF SEC. 149 OF THE IT ACT, 1961, WHICH DEAL WITH THE TIME LIMIT FOR REOPENING OF ASSESSMENTS, WHEREAS NO SUCH LIMIT OF SIX YEARS HAS BEEN PROVIDED IN RESPECT OF PROCEEDINGS U/S.201(1) AND 2 01(1A) OF THE I.T. ACT. 7. AT THE TIME OF HEARING, THE LD. D.R., WHILE FAIR LY ADMITTING THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NOS.1826 & 1827/MUM/04 DATED 17-01-2007 AND BY THE SPECIAL BENCH OF THE TRIBUNAL IN MAHINDRA & MAH INDRA LTD. V. DCIT IN ITA NOS.2606, 2607, 2613 AND 2614/MUM/2000 FOR ASSTT. Y EAR 1998-99 DATED 09-04- 2009, SUBMITS THAT IN VIEW OF THE RATIO OF DECISI ON IN THE CASE OF HINDUSTAN TIMES LTD. VS. UNION OF INDIA (1998) (SC 2)-GJX-000 5-SC, IN THE ABSENCE OF ANY TIME LIMIT PROVIDED UNDER THE ACT NO TIME LIMIT CA N BE PRESCRIBED FOR TAKING ACTION U/S.201(1) AND 201(1A) OF THE ACT, THEREFO RE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO DELETE THE DEMAND RAISED U/S .201(1) AND U/S.201(1A) IN RESPECT OF THE AMOUNTS ON WHICH THE ASSESSEE WAS RE QUIRED TO DEDUCT TAX AT SOURCE PRIOR TO 31-3-1996. HE, THEREFORE, SUBMITS T HAT THE ORDER PASSED BY THE AO BE RESTORED.. 8. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE, AT THE OUTSET, SUBMITS THAT THE TRIBUNAL HAS DISMISSED THE REVENUES APPEA LS FOR WANT OF COD APPROVAL. HE FURTHER SUBMITS THAT SIMILAR ISSUE AROSE IN THE CASE OF THE ASSESSEE WHEREIN THE TRIBUNAL ON THE ISSUE OF LIMITATION, I.E. WHETH ER AN ORDER U/S.201 AND U/S.201(1A) CAN BE PASSED WITHIN A PERIOD OF 6 YEAR S FROM THE END OF THE RELEVANT PREVIOUS YEAR AS HELD BY THE CIT(A) OR IT SHOULD HAVE BEEN RESTRICTED TO 4 YEARS ON THE BASIS OF THE TRIBUNALS DECISION PAS SED IN RAYMOND WOOLLEN MILLS, HAS HELD THAT THE ACTION OF THE AO TREATING THE ASS ESSEE IN DEFAULT FOR THE REMITTANCE MADE PRIOR TO 31-3-1998 IS BARRED BY LIM ITATION AND DIRECTED THE AO ITA NOS.3557-3558/M/04 MANGALOARE REFINERY & PETROCHEMICALS LTD.. 5 NOT TO TREAT THE ASSESSEE IN DEFAULT FOR THE PAYMEN TS MADE PRIOR TO 31-3-1998. HE FURTHER SUBMITS THAT SINCE THE TRIBUNAL HAS ALRE ADY DECIDED THE ISSUE IN THE ASSESSEES OWN CASE, THEREFORE, THE TRIBUNAL IN THE REVENUES APPEALS ON THE SAME ISSUE CANNOT TAKE A DIFFERENT VIEW AND, THEREF ORE, THE GROUND RAISED BY THE REVENUE IS LIABLE TO BE DISMISSED. 9. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT ON SIMILAR ISSUE EMANATING FROM T HE SAME ORDER OF THE LD. CIT(A), THE TRIBUNAL, IN THE ASSESSEES APPEALS, AF TER FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF RAYMOND WOOLLEN MILLS VS. I TO REPORTED IN 57 ITD 536, HAS HELD THAT THE ACTION OF THE AO TREATING THE AS SESSEE IN DEFAULT FOR THE REMITTANCES MADE PRIOR TO 31-3-1998 IS BARRED BY LI MITATION AND DIRECTED THE AO NOT TO TREAT THE ASSESSEE IN DEFAULT FOR THE PAYMEN TS MADE PRIOR TO 31-3-1998. WE FURTHER FIND THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN MA HINDRA & MAHINDRA LTD. (SUPRA) SINCE REPORTED IN (2009) 313 ITR (AT) 263 (MUMBAI) (SB) WHEREIN THE TRIBUNAL, AFTER CONSIDERING ALL THE PLEAS OF THE PARTIES INCL UDING THE DECISION IN THE CASE OF HINDUSTAN TIMES LTD. (SUPRA), HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 10. THAT BEING SO, AND IN THE ABSENCE OF ANY OTHER CONTRARY DECISION PLACED ON RECORD BY THE REVENUE, WE, RESPECTFULLY FOLLOWING T HE CONSISTENT VIEW OF THE TRIBUNAL (SUPRA), HOLD THAT THE ACTION OF THE AO TR EATING THE ASSESSEE IN DEFAULT FOR THE REMITTANCES MADE PRIOR TO 31-3-1998 IS BARR ED BY LIMITATION AND ACCORDINGLY THE AO IS DIRECTED NOT TO TREAT THE ASS ESSEE IN DEFAULT FOR THE PAYMENTS MADE PRIOR TO 31-3-1998. THE COMMON GROUND TAKEN BY THE REVENUE IN BOTH THE APPEALS IS, THEREFORE, REJECTED. 11. THE COMMON GROUND NO. 2 TAKEN BY THE REVENUE RE ADS AS UNDER : ITA NOS.3557-3558/M/04 MANGALOARE REFINERY & PETROCHEMICALS LTD.. 6 2. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THA T THE REIMBURSEMENT AND DEMURRAGE CHARGES OF RS.99,45,714 /- WAS NOT TAXABLE IN INDIA AND HENCE NO TAX WAS REQUI RED TO BE DEDUCTED FROM SOURCE FROM SUCH PAYMENT, WHEREAS THE SAME IS SPECIFICALLY PROVIDED IN THE EXPLANATION TO SECTION 44B OF THE I.T. ACT, 1961. 12. BRIEFLY STATED FACTS OF THE CASE ARE THAT IT WA S , INTER ALIA, OBSERVED BY THE AO THAT MRPL VIDE LETTER DATED 25-11-2002 SUBMITTED DETAILS OF DEMURRAGE PAID TO VARIOUS NON-RESIDENTS WITHOUT DEDUCTION OF TAX ON THE BASIS OF CHARTERED ACCOUNTANTS CERTIFICATE. MRPL SUBMITTED THAT BEING REIMBURSEMENT OF ACTUAL COST INCURRED IN CONNECTION WITH THE IMPORT OF CRUDE OIL , NO TDS WAS MADE. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION. AC CORDING TO THE AO, SEC. 44AB OF THE ACT CLEARLY PROVIDES THAT ANY FREIGHT INCLUD ING DEMURRAGE, IF PAID OR PAYABLE TO A NON-RESIDENT ENGAGED IN THE BUSINESS O F OPERATION OF SHIPS OR TO ANY OTHER PERSON ON HIS BEHALF, SHALL BE TAXABLE IN IND IA ON A SUM EQUAL TO 7.5% OF THE GROSS FREIGHT INCLUDING DEMURRAGE. THE AO, AF TER PLACING RELIANCE IN THE CASE OF CHEMINOR DRUGS LTD. V. ITO (2001) 70 TTJ 936 (HY D), WHEREIN IT HAS BEEN HELD THAT A PERSON CANNOT UNILATERALLY DECIDE THAT THE PAYMENTS MADE BY HIM TO A NON-RESIDENT ARE NOT CHARGEABLE TO TAX FOR THE PUR POSE OF SEC. 195, HELD THAT MRPL HAS FAILED TO DEDUCT TAX ON THE ABOVE MENTIONE D DEMURRAGE PAYMENTS AND HENCE HE TREATED THE ASSESSEE IN DEFAULT IN RESPEC T OF TAXES COMPUTED AS PER ANNEXURE D AND ALSO HELD THAT THE ASSESSEE IS LIA BLE TO PAY SIMPLE INTEREST AT THE RATE U/S.201(1A) AS PER LIABILITY WORKED AS PER ANNEXURE D. THUS, THE TOTAL LIABILITY TOWARDS TAX HE WORKED OUT AT RS.3,58,046 /- AND TOWARDS INTEREST AT RS.75,679/-. ON APPEAL, THE LD. CIT(A) OBSERVED THA T THE PAYMENT OF DEMURRAGE REIMBURSED TO THE SUPPLIER OF CRUDE OIL IS CLEARLY IN THE NATURE OF REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF THE ASSESSEE AND SUCH REIMBURSEMENT CANNOT BE TREATED AS INCOME IN THE HANDS OF NON-RESIDENT S UPPLIER. HE FURTHER OBSERVED ITA NOS.3557-3558/M/04 MANGALOARE REFINERY & PETROCHEMICALS LTD.. 7 THAT THE CONDITIONS PROVIDED U/S.44B ARE NOT APPLIC ABLE TO THE PRESENT CASE. THEREFORE, THE PROVISIONS OF SEC. 44B DO NOT APPLY AND ACCORDINGLY HE HELD THAT THE REIMBURSEMENT OF DEMURRAGE CHARGES OF RS.99,45, 714/- WAS NOT TAXABLE IN INDIA AND HENCE NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE FROM SUCH PAYMENTS. 13. AT THE TIME OF HEARING, THE LD. D.R. SUBMITS TH AT IN VIEW OF THE EXPLANATION OF SEC. 44B, WHICH PROVIDES THAT FOR THE PURPOSE O F THIS SUB-SECTION, THE AMOUNT REFERRED TO IN CLAUSE (I) OR (II) SHALL INCLUDE THE AMOUNT PAID OR PAYABLE OR RECEIVED OR DEEMED TO BE RECEIVED, AS THE CASE MAY BE, BY WAY OF DEMURRAGE CHARGES OR HANDLING CHARGES OR ANY OTHER AMOUNT OF SIMILAR NATURE, THEREFORE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE REIMBU RSEMENT OF DEMURRAGE CHARGES OF RS.99,45,714/- WAS NOT TAXABLE IN INDIA AND THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM SUCH PAYMENTS AND, THEREF ORE, THE ORDER PASSED BY THE AO BE RESTORED. 14. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE, WHILE RELYING ON THE ORDER OF THE LD. CIT(A), FURTHER SUBMITS THAT SEC. 44B IS A SPECIAL PROVISION WHICH SAYS THAT AN ASSESSEE, BEING A NON-RESIDENT, ENGAGE D IN THE BUSINESS OF OPERATION OF SHIPS, A SUM EQUAL TO 7.5% OF THE AGGR EGATE AMOUNT AS SPECIFIED IN SUB-SECTION (2) SHALL BE DEEMED TO BE THE PROFITS A ND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. SINCE THE PRESENT ASSESSEE IS NEITHER NON-RESIDENT NOR ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS, THEREFORE, THE PROVISIONS OF SE C. 44B ARE NOT APPLICABLE AND SINCE THE MAIN PROVISION IS NOT APPLICABLE, THEREFO RE, THE EXPLANATION IS ALSO NOT APPLICABLE AND HENCE THE ORDER PASSED BY THE LD. CI T(A) BE UPHELD. THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS :- 1. CIT VS. INDUSTRIAL ENGINEERING PRODUCTS PVT. LT D. (202 ITR 1014)(DEL). 2. COCA-COLA INDIA INC. VS. ACIT (7 SOT 224) (DEL) ITA NOS.3557-3558/M/04 MANGALOARE REFINERY & PETROCHEMICALS LTD.. 8 3. ITO VS. DR. WILLMAR SCHWABE INDIA (P) LTD. (3 S OT 71) (DEL) 4. ACIT VS. MODICON NETWORK (P) LTD. (14 SOT 204) (DEL) 5. BANGALORE INTERNATIONAL AIRPORT LTD. (116 ITD 4 46) (BANG) 15. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AD PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FIND THAT SECTION 44B PROVIDES THAT IN THE CASE OF A NON-RESIDENT SHIPPING ENTERPRISE, THE PROFITS AND GAINS FROM THE BUSINESS OF OPERATION OF SHIPS IS TO BE TAKEN AT AN AMOUNT EQUAL TO 7.5 PER CENT. OF THE AM OUNT PAID OR PAYABLE TO THE TAXPAYER OR TO ANY OTHER PERSON ON HIS BEHALF, ON A CCOUNT OF CARRIAGE OF PASSENGERS, LIVE-STOCK, MAIL OR GOODS SHIPPED AT AN Y INDIAN PORT, AS ALSO OF THE AMOUNT RECEIVED, OR DEEMED TO BE RECEIVED, IN INDIA ON ACCOUNT OF THE CARRIAGE OF PASSENGERS, ETC., SHIPPED AT ANY PORT OUTSIDE I NDIA. IT IS PERTINENT TO NOTE THAT A NEW EXPLANATION HAS BEEN INSERTED WITH RETROSPECT IVE EFFECT FROM 1 ST APRIL, 1976, AFTER SECTION 44B(2) BY THE FINANCE ACT,1997, WHEREIN IT HAS PROVIDED THAT DEMURRAGE CHARGES OR HANDLING CHARGES ARE TO BE TAX ED IN THE SAME WAY AS FREIGHT TAXABLE UNDER CLAUSE (I) OR (II) OF SEC. 44 B(2). 16. IN VIEW OF THE ABOVE PROVISION, WE FIND THAT IT IS NOT IN DISPUTE THAT THE STATUS OF THE ASSESSEE IS RESIDENT AND ENGAGED IN T HE BUSINESS OF REFINING CRUDE OIL AND NOT ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS. THEREFORE, THE PROVISIONS OF SEC. 44B READ WITH ITS EXPLANATION AR E NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE REIMBURSEMENT OF DEMURRAGE CHARGES OF RS.99,45,714/ - PAID BY THE ASSESSEE WAS NOT TAXABLE IN INDIA AND HENCE THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM SUCH PAYMENTS AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF LD. CIT(A) IN HOLDING THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM SUCH PAYMENTS. THE COMMON GROUNDS TA KEN BY THE REVENUE ARE, THEREFORE, REJECTED. ITA NOS.3557-3558/M/04 MANGALOARE REFINERY & PETROCHEMICALS LTD.. 9 17. IN THE RESULT, THE REVENUES APPEALS STAND DISM ISSED. ORDER PRONOUNCED ON THE DAY OF JUNE, 2 011. (J. SUDHAKAR REDDY) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: JUNE , 2011. NG: COPY TO : 1. DEPARTMENT. 2. ASSESSEE. 3 CIT(A)-XXXIII,,MUMBAI. 4 DDIT (INTL. TAX)-2(1),MUMBAI. 5.DR,E BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 22-06-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 27-06-11 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER