THE GREAT EASTERN SHIPPING COMPANY LTD, MUMBAI V. ADDL CIT RG 5(3), MUMBAI

ITA 4507/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8990 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 10-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Bad and doubtful debts
• Section: 43B; 143(3); 14A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER. I.T.A. NO. 4507/MUM/2011 ASSESS MENT YEAR :2006-07 THE GREAT EASTERN SHIPPING CO.LTD., ADDL. COMMISSIONER C/O KALYANIWALLA & MISTRY, VS. OF INCOME-TAX, ARMY & NAVY BUILDING, 148 M.G. ROAD, RANGE-5(3), FORT, MUMBAI 400 001. MUMBAI. PAN AAACT 1565C APPELLANT RESPONDENT. I.T.A. NO. 4992/MUM/2011 AS SESSMENT YEAR : 2006-07. ASSTT. COMMISSIONER OF INCOME-TAX, THE GREAT EASTERN CIRCLE-5(3), MUMBAI. VS . SHIPPING CO.LTD. MUMBAI. APPELLANT. RESPONDENT ASSESSEE BY : SHRI JITENDRA JAIN. SHRI F.H. BILLIMORIA. DEPARTMENT BY : SHR I PAVAN VED. DATE OF HEARING : 10-09-2012. DATE OF PRONOUNCEMENT : 14-09-2012. O R D E R PER P.M. JAGTAP, A.M. THESE TWO APPEALS BEING ITA NO. 4507/MUM/2011 AND ITA NO. 4992/MUM.2011 ARE CROSS APPEALS WHICH ARE DIRECT ED AGAINST THE ORDER OF 2 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 LEARNED CIT(APPEALS)-9, MUMBAI DATED 15-03-2011. FI RST WE SHALL TAKE UP THE APPEAL OF THE REVENUE BEING ITA NO. 4992/MUM/2011. 2. IN THE SOLITARY GROUND AS ORIGINALLY RAISED IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(APPEAL S) IN DIRECTING THE AO TO ALLOW THE INTEREST EXPENSES OF RS.4,52,82,241/-. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF SHIPPING, PROPERTY DEVELOPMENT AND FINA NCE. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 21-11-2006 DECLARING TOTAL INCOME OF RS.71,06,56,632/- AND BOOK PROFIT OF RS.3 03,33,26,270/- U/S 115J. IN THE SAID RETURN, INTEREST EXPENDITURE TO THE EXTENT OF RS.11,32,79,905/- WAS CLAIMED BY THE ASSESSEE AS DEDUCTION AGAINST INCOME FROM NON-TONNAGE ACTIVITIES. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSEE WAS CALLED UPON BY THE AO TO FURNISH A FUND FLOW STATEMENT, DE TAILS OF THE LOANS TAKEN AND THE INTEREST EXPENDITURE INCURRED ON SUCH LOANS. TH E ASSESSEE VIDE ITS LETTER DATED 05-12-2008 FURNISHED THE DETAILS REQUIRED BY THE AO INCLUDING PARTICULARS OF LOAN-WISE INTEREST EXPENDITURE INCURRED, THE PUR POSE FOR WHICH THE LOAN WAS AVAILED, THE RATE AND AMOUNT OF INTEREST PAID AND THE REASONS FOR TREATING SUCH INTEREST EXPENDITURE AS PART OF THE NON-TONNAGE ACT IVITIES. ON VERIFICATION OF THESE DETAILS FURNISHED BY THE ASSESSEE, THE AO WAS OF THE OPINION THAT OUT OF INTEREST EXPENDITURE OF RS.11,32,79,905/- CLAIMED B Y THE ASSESSEE AS DEDUCTION AGAINST THE INCOME FROM NON-TONNAGE ACTIVITIES, AN AMOUNT OF RS.4,52,88,241/- WAS ATTRIBUTABLE TO TONNAGE TAX ACTIVITIES I.E. SHI PPING OF THE ASSESSEE COMPANY. THE REASONS GIVEN BY HIM FOR COMING TO THIS CONCLU SION ARE EXTRACTED BELOW FROM PAGE NO. 3 AND 4 OF THE ASSESSMENT ORDER : 3 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 LOAN AMOUNT AS ON 31/3/2006 INTEREST (IN RS.) OBSERVATIONS. RS.14,60,90,350/- (PART OF YEAR) 25,06,178 THE LOAN WAS INITIALLY UTILIZED FOR ACQUISITION OF VESSEL JAG PRAKASH WHICH IS QUALIFYING SHIP. THE SAID VESSEL WAS SOLD DURING THE YEAR ON 09/11/2005, AND IT IS THE ASSESSEES CONTENTION THAT THE SALE PROCEEDS REALIZED WERE UTILIZED FOR NON- TONNAGE ACTIVITIES. HOWEVER, THERE IS NOTHING ON RECORD TO SUBSTANTIATE SUCH ASSERTION. RS.23,33,33,333 (PART OF YEAR) 1,28,20,998 THE LOAN WAS INITIALLY UTILIZED FOR ACQUISITION OF VESSEL JAG LAILA. THE THE SAID VESSEL WAS SOLD DURING THE YEAR ON 27/08/2005, AND IT IS THE ASSESSEES CONTENTION THAT THE SALE PROCEEDS REALIZED WERE UTILIZED FOR NON-TONNAGE ACTIVITIES. THERE IS, HOWEVER, NOTHING ON RECORD TO SUBSTANTIATE SUCH CONTENTION. EARLIER PERIOD LOAN 84,61,557 THE LOAN FUND WAS UTI LIZED FOR ACQUISITION OF SHIPS. THE ASSESSEES CONTENTION THAT BEFORE SUCH ACQUISITION, THE LOAN WAS KEPT IN BANK IS NOT BORNE OUT BY ANYTHING ON RECORD. OTHERWISE ALSO, IT IS DIFFICULT TO BELIEVE THAT INTEREST- BEARING LOAN WOULD BE TAKEN FOR IMMEDIATE TRANSFER TO BANK AS DEPOSIT. EARLIER PERIOD LOAN 17,98,528 THE LOAN FUND WAS UTI LIZED FOR ACQUISITION OF SHIPS. THE ASSESSEES CONTENTION THAT BEFORE SUCH ACQUISITION, THE LOAN WAS KEPT IN BANK IS NOT BORNE OUT BY ANYTHING ON RECORD. OTHERWISE ALSO, IT IS DIFFICULT TO BELIEVE THAT INTEREST- 4 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 BEARING LOAN WOULD BE TAKEN FOR IMMEDIATE TRANSFER TO BANK AS DEPOSIT. RS.1,29,20,000/- (PART OF YEAR) 1,06,10,781 THE LOAN WAS INITIALLY UTILIZED FOR ACQUISITION OF VESSEL JAG RADHA AND JAG RUPALI. THE SAID VESSELS WERE SOLD DURING THE YEAR ON 22/11/2005 AND IT IS THE ASSESSEES CONTENTION THAT THE SALES PROCEEDS REALIZED WERE THEREAFTER UTILIZED FOR NON- TONNAGE ACTIVITIES. SUCH CONTENTION, HOWEVER, IS NOT BACKED BY ANY OTHER INDEPENDENT EVIDENCE. EARLIER YEARS LOAN 90,24,209 THE LOAN WAS INITIALLY UTILIZED FOR ACQUISITION OF VESSEL JAG PRAKASH. THE SAID VESSEL WAS SOLD DURING THE YEAR ON 09/11/2005 AND IT IS THE ASSESSEES ARGUMENT THAT THE SALE PROCEEDS REALIZED WERE SUBSEQUENTLY UTILIZED FOR NON- TONNAGE ACTIVITIES. HOWEVER, NOTHING BY WAY OF FUND FLOW STATEMENT OR OTHERWISE HAS BEEN FURNISHED TO SUPPORT SUCH CONTENTION. TOTAL 4,52,82,241 FOR THE REASONS GIVEN ABOVE, THE AO CAME TO THE CON CLUSION THAT INTEREST ATTRIBUTABLE TO THE VARIOUS NON-TONNAGE ACTIVITIES OF THE ASSESSEE COMPANY WAS ONLY TO THE EXTENT OF RS.6,79,97,654/- AND NOT RS.11,32, 79,905/- AS CLAIMED BY THE ASSESSEE. ACCORDINGLY, HE HELD THAT THE ASSESSEE WA S ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE AGAINST THE INCOME FROM NON-TONNAGE ACTIVITIES ONLY TO THE EXTENT OF RS.6,79,97,654/- AND DISALLOW ED THE BALANCE AMOUNT OF 5 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 RS.4,52,84,241/- CLAIMED BY THE ASSESSEE ON THIS IS SUE IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 31-12-2008. 4. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), A N APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) AND VA RIOUS SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE IN SUPPORT OF ITS CASE ON THIS ISSUE BEFORE THE LEARNED CIT(APPEALS) WHICH AS SUMMARIZED BY THE LATTER IN H IS IMPUGNED ORDER, ARE EXTRACTED BELOW : A) THE STATEMENT GIVING THE COMPLETE DETAILS OF T HE LOANS UTILIZED FOR NON-TONNAGE TAX ACTIVITIES, GIVING THE DETAILS OF E ACH INDIVIDUAL LOAN AMOUNT OUTSTANDING, THE PURPOSE FOR WHICH THE LOAN WAS AVAILED, THE RATE OF INTEREST, THE AMOUNT OF INTEREST PAID AND T HE REASONS FOR TREATING SUCH INTEREST EXPENDITURE AS PART OF THE NON-TONNAG E TAX ACTIVITIES OF THE APPELLANT, WERE FURNISHED. B) FURTHER THERETO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE COMPLETE UTILIZATION OF EACH AND EVERY SUCH LOAN TO WARDS THE NON- TONNAGE TAX ACTIVITIES WAS ALSO EXPLAINED AND THE A NNUAL LOAN UTILIZATION STATEMENTS FOR EACH SUCH LOAN WERE EXPL AINED TO THE ASSESSING OFFICER. THE DAY-WISE LOAN UTILIZATION ST ATEMENTS FOR INVESTMENTS WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER AND IT WAS EXPLAINED THAT THE INTEREST CLAIMED AGAINST THE NON-TONNAGE TAX ACTIVITIES, WAS ON THE BASIS OF THE ACTUAL LOAN UTI LIZATION TOWARDS SUCH ACTIVITIES. THE AFORESAID STATEMENTS WERE ALSO FURN ISHED DURING THE COURSE OF THE APPELLATE PROCEEDINGS AND THE UTILIZA TION OF SUCH LOANS BY WAY OF INVESTMENTS IN MUTUAL FUNDS AND BANK DEPO SITS WAS DULY EXPLAINED. IT WAS ALSO EXPLAINED THAT SUCH INTEREST EXPENDITURE WAS THEREFORE ALSO CONSIDERED FOR THE PURPOSES OF COMPU TING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. C) IT WAS EXPLAINED THAT THERE ARE INSTANCES WHERE A LOAN TRANSACTION IS FINALIZED AND THE LOAN IS DISBURSED, BUT SUCH FUNDS ARE NOT IMMEDIATELY REQUIRED FOR TONNAGE ACTIVITIES. THUS, SUCH FUNDS A RE UTILIZED FOR NON- TONNAGE TAX ACTIVITIES AND CONSEQUENT THERETO, THE INTEREST EXPENDITURE FOR SUCH FUNDS, FORMS PART OF THE NON-TONNAGE TAX A CTIVITIES OF THE APPELLANT. 6 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 D) IT WAS FURTHER EXPLAINED THAT THERE WERE ALSO CA SES WHERE LOANS WERE AVAILED AND INVESTED IN SHIPS IN EARLIER YEARS. SUC H SHIPS WERE SOLD DURING THE YEAR OR PRECEDING YEAR. THE FUNDS SO REA LIZED ON SALE OF SHIPS WERE INVESTED INTO DEPOSITS AND MUTUAL FUNDS. THE LOANS AGAINST SUCH SHIPS HAD REMAINED PARTLY UNPAID AND WERE DUE FOR REPAYMENT OVER THE LOAN REPAYMENT PERIOD. CONSEQUENT THERETO, THE INTEREST EXPENDITURE ON SUCH LOANS FROM THE DATE ON WHICH TH E SALE PROCEEDS WERE INVESTED INTO DEPOSITS AND MUTUAL FUNDS HAS BE EN CONSIDERED AS PART OF THE NON-TONNAGE TAX BUSINESS OF THE APPELL ANT COMPANY, SINCE THE LOAN FUNDS WERE USED FOR NON-TONNAGE ACTIVITIES . IN FACT, THE COMPANY COULD HAVE USED SUCH SALE PROCEEDS AND REPA ID THE LOAN IMMEDIATELY INCURRING PREPAYMENT CHARGES AND OTHER FINANCE COSTS, CAUSING A LOSS TO THE COMPANY. IT HAS ON THE OTHER HAND USED THESE FUNDS TO GENERATE ADDITIONAL INCOME AND HAS CLAIMED THE INTEREST EXPENSES ATTRIBUTABLE TO EARNING SUCH INCOME ACCORD INGLY. E) IF THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE DETAILS FURNISHED, SHE SHOULD HAVE INFORMED THE APPELLANT ACCORDINGLY AND ANY FURTHER DETAILS TO SUBSTANTIATE THE CLAIM OF THE APPELLANT WOULD HAVE BEEN FURNISHED. ON THE BASIS OF ABOVE SUBMISSIONS, IT WAS CONTENDE D ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) THAT INTEREST EXPEN DITURE AGAINST INCOME FROM NON-TONNAGE ACTIVITIES WAS CLAIMED ON ACTUAL BASIS AND IT WAS NOT A CASE OF ALLOCATION OF INTEREST EXPENDITURE BETWEEN TONNAGE AND NON-TONNAGE ACTIVITIES. IT WAS CONTENDED THAT ACTUAL UTILIZATION OF BORROWED F UNDS WAS TAKEN INTO ACCOUNT WHILE CLAIMING SUCH INTEREST EXPENDITURE AND THERE WAS NO JUSTIFICATION IN THE DISALLOWANCE MADE BY THE AO OUT OF SUCH INTEREST EX PENDITURE. 5. THE LEARNED CIT(APPEALS) FOUND MERIT IN THE SUBM ISSIONS MADE ON BEHALF OF THE ASSESSEE ON THIS ISSUE AND DELETED THE DISALLOW ANCE MADE BY THE AO OUT OF INTEREST EXPENDITURE FOR THE FOLLOWING REASONS GIVE N IN PARAGRAPH NO. 2.8 OF HIS IMPUGNED ORDER : 7 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE . THE APPELLANT HAS FURNISHED COMPLETE DETAILS OF THE LOANS UTILIZED F OR NON-TONNAGE TAX ACTIVITIES, THE LOAN AMOUNT OUTSTANDING, THE PURPOS E FOR WHICH THE LOAN WAS AVAILED, THE RATE OF INTEREST, THE AMOUNT OF INTERE ST PAID AND THE REASONS FOR TREATING SUCH INTEREST EXPENDITURE AS PART OF THE N ON-TONNAGE TAX ACTIVITIES. THE COMPLETE UTILIZATION OF EACH AND EVERY SUCH LOA N TOWARDS THE NON- TONNAGE TAX ACTIVITIES WAS ALSO EXPLAINED AND THE A NNUAL LOAN UTILIZATION STATEMENTS FOR INVESTMENTS HAVE ALSO BEEN FURNISHED AND IT WAS EXPLAINED THAT THE INTEREST CLAIMED AGAINST THE NON-TONNAGE T AX ACTIVITIES, WAS ON THE BASIS OF THE ACTUAL LOAN UTILIZATION TOWARDS SUCH ACTIVITIES. IT IS APPARENT THAT THE LOAN FUNDS HAVE BEEN UTILIZED FOR INVESTMENTS I N BANK DEPOSITS AND OTHER INVESTMENTS. SUCH FUNDS HAVE NOT BEEN UTILIZED FOR TONNAGE TAX ACTIVITIES. THE COMMERCIAL RATIONALE FOR TREATING SUCH FUNDS AS PART OF THE NON-TONNAGE TAX BUSINESS WAS ALSO EXPLAINED. THE ASSESSING OFFI CER HAS ALSO STATED THAT THE LOANS WHICH WERE AVAILED FOR SHIP RELATED ACTIV ITIES HAVE BEEN DIVERTED TO NON-TONNAGE TAX ACTIVITIES. IF THAT IS SO, THE INTE REST EXPENDITURE ON SUCH LOANS WOULD HAVE TO BE TREATED AS NON-TONNAGE TAX E XPENDITURE AND CANNOT BE ATTRIBUTED TO THE TONNAGE TAX BUSINESS OF THE APPE LLANT COMPANY. THE EXPENDITURE INCURRED FOR EARNING SUCH INCOME HAS TO BE ALLOWED AGAINST SUCH INCOME. IN VIEW OF THE ABOVE, THE ASSESSING OFFICE RS ACTION OF ATTRIBUTING INTEREST EXPENDITURE TO THE TONNAGE INCOME OF THE A PPELLANT IS ERRONEOUS AND CONTRARY TO THE FACTS ON RECORD AND SUCH INTEREST E XPENDITURE AGGREGATING TO RS.4.53 CRORES IS TO BE TREATED AS PART OF THE NON- TONNAGE TAX BUSINESS OF THE APPELLANT COMPANY. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT COMPLETE DE TAILS OF THE LOANS UTILIZED FOR NON- TONNAGE TAX ACTIVITIES WERE FURNISHED BY THE ASSESS EE BEFORE THE LEARNED CIT(APPEALS) AND ON EXAMINATION OF THESE DETAILS, I T WAS FOUND BY THE LEARNED CIT(APPEALS) THAT INTEREST EXPENDITURE TO THE EXTEN T OF RS.11,32,79,905/- WAS INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS NON-TONNAGE TAX ACTIVITIES. AT THE TIME OF HEARING BEFORE US, T HE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO TAKEN US THROUGH THE RELEVANT DETAILS FURN ISHED ON RECORD BY THE ASSESSEE TO SHOW THAT THE FINDING RECORDED BY THE LEARNED CIT(A PPEALS) IN THIS REGARD ON 8 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 VERIFICATION OF ACTUAL UTILIZATION OF LOAN IS FACTU ALLY CORRECT. THE LEARNED DR, ON THE OTHER HAND, HAS NOT BEEN ABLE TO RAISE ANY CONTENTI ON TO DISPUTE OR CONTROVERT THE SAID FINDING OF FACT RECORDED BY THE LEARNED CIT(AP PEALS) AND HAS SIMPLY RELIED ON THE ORDER OF THE AO IN SUPPORT OF THE REVENUES CA SE ON THIS ISSUE. FURTHER, AS NOTED BY THE LEARNED CIT(APPEALS) IN HIS IMPUGNED O RDER, THE AO HIMSELF HAS STATED IN THE ASSESSMENT ORDER THAT THE LOANS AVAIL ED BY THE ASSESSEE FOR SHIPPING ACTIVITIES HAD BEEN DIVERTED TO NON-TONNAGE TAX ACT IVITIES. AS RIGHTLY HELD BY THE LEARNED CIT(APPEALS), IF THIS WAS THE POSITION AS A DMITTED BY THE AO HIMSELF, INTEREST EXPENDITURE INCURRED ON SUCH LOANS SHOULD BE TREATED AS INCURRED FOR THE PURPOSE OF NON-TONNAGE TAX ACTIVITIES AS CLAIMED BY THE ASSESSEE. AS SUCH, CONSIDERING ALL THE FACTS OF THE CASE, WE FIND NO I NFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) DELETING THE DISALLOWANCE OF RS.4.35 CRORES MADE BY THE AO OUT OF INTEREST EXPENDITURE AFTER HAVING FOUND ON VERIFICATION OF THE RELEVANT DETAILS THAT THE SAID INTEREST EXPENDITURE WAS INCU RRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF NON-TONNAGE TAX ACTIVITIES. THE IMPU GNED ORDER OF THE LEARNED CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY UPHELD AND THE GROUND AS RAISED ORIGINALLY BY THE REVENUE IN T HIS APPEAL IS DISMISSED. 7. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E THE TRIBUNAL, THE REVENUE HAS RAISED THE FOLLOWING ADDITIONAL GROUND : WHETHER ON THE FACTS, CIRCUMSTANCES AND IN THE LA W, THE LD. CIT(A) ERRED IN COMPUTING THE DISALLOWANCE U/S 144/8D AT RS.5,98 ,139/- AS AGAINST RS.1,30,41,628/- COMPUTED BY THE A.O. AND FURTHER H OLDING THAT RULE 8D PROVISIONS ARE NOT APPLICABLE FOR THE YEAR FOR THE PURPOSE TO COMPUTE DISALLOWANCE U/S 14A OF THE I.T. ACT, 1961. 9 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 8. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E COMPANY HAD EARNED TOTAL DIVIDEND INCOME OF RS.8,58,27,056/- OUT OF WHICH A SUM OF RS.8,42,59,363/- WAS CLAIMED AS EXEMPT U/S 10(34) OF THE ACT. IN THE COM PUTATION OF TOTAL INCOME, A DISALLOWANCE OF RS.1,42,35,303/- WAS SUO MOTU MADE BY THE ASSESSEE U/S 14A BEING THE EXPENDITURE INCURRED IN RELATION TO EARN ING OF EXEMPT DIVIDEND INCOME. THE WORKING FURNISHED BY THE ASSESSEE TO ARRIVE AT THE SAID FIGURE OF RS.1,42,35,303/- WAS NOT ACCORDING TO RULE 8D OF TH E INCOME TAX RULES WHICH, ACCORDING TO THE AO, WAS APPLICABLE TO THE YEAR UND ER CONSIDERATION. HE, THEREFORE, RECOMPUTED THE DISALLOWANCE OF EXPENSES TO BE MADE U/S 14A BY APPLYING THE SAID RULE 8D AT RS.1,48,33,441/- WHICH RESULTED IN ADDI TIONAL DISALLOWANCE OF RS.5,98,139/- U/S 14A. 9. THE ADDITIONAL DISALLOWANCE OF RS.5,98,139/- MAD E BY THE AO U/S 14A WAS DISPUTED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LEARNED CIT(APPEALS) AND THE FOLLOWING SUBMISSIONS WERE MADE ON BEHALF OF TH E ASSESSEE BEFORE THE LEARNED CIT(APPEALS) IN SUPPORT OF ITS CASE ON THIS ISSUE : (A) THE AGGREGATIVE ADMINISTRATIVE AND OTHER EXPEND ITURE INCURRED BY THE TREASURY DEPARTMENT OF THE APPELLANT, WHICH WAS MAN AGING THE INVESTMENT ACTIVITIES OF THE COMPANY, WAS RS.69.58 LAKHS. SUCH EXPENSES CONSISTED OF STAFF COSTS OF RS.45.56 LAKHS AND OTHER ADMINISTRATIVE COSTS OF RS.24.02 LAKHS, WHICH AMOUN TS WERE ALSO DULY RECONCILED WITH THE DIVISION-WISE PROFIT AND LOSS A CCOUNT. (B) SUCH AGGREGATE ADMINISTRATIVE COSTS WERE APPORT IONED IN THE RATIO OF TAX FREE TO TAXABLE INVESTMENT INCOME EARNED BY THE COMPANY. AS PER THE EXTRACT OF THE TAX AUDIT REPORT FURNISHED, THE TAXABLE INTEREST AND DIVIDEND INCOME EARNED AMOUNTED TO RS.6274.37 LAKHS AND THE TAX FREE DIVIDEND INCOME AMOUNTED TO RS.842.59 LAKHS, B OTH AGGREGATING TO RS.7116.96 LAKHS. BASED THEREON, THE PROPORTION AS COMPUTED BY THE APPELLANT WAS THAT 11.84% OF THE TREASURY RECEI PTS PERTAINED TO TAX FREE RECEIPTS AND 88.16% PERTAINED TO TAXABLE RECEI PTS OF THE APPELLANT. CONSEQUENT THERETO, THE ADMINISTRATIVE A ND INTEREST 10 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 EXPENSES WERE ATTRIBUTED IN SUCH PROPORTION WHILE C OMPUTING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. (C) THE ASSESSING OFFICER HAS, WHILE DETERMINING TH E AMOUNT LIABLE FOR DISALLOWANCE UNDER CLAUSE 2(I) OF RULE 8D, CONSIDER ED THE AGGREGATE EXPENDITURE INCURRED BY THE TREASURY DEPARTMENT AT RS.69.58 LAKHS AND HAS DISALLOWED THE SAME AS INCURRED ONLY FOR EA RNING TAX FREE DIVIDEND INCOME. (D) THIS IMPLIES THAT THE SAID TREASURY DIVISION HA S CARRIED OUT ACTIVITIES ONLY FOR EARNING DIVIDEND INCOME (TAX FREE INCOME) AND THERE IS NO EXPENDITURE INCURRED FOR EARNING ANY TAXABLE INCOME . (E) THEREAFTER, THE ASSESSING OFFICER HAS ONCE AGA IN DISALLOWED A FURTHER AMOUNT UNDER CLAUSE 2(III) OF RULE 8D, BEING THE AM OUNT COMPUTED @ 0.5% OF THE AVERAGE INVESTMENTS HELD BY THE APPELLA NT. HENCE, A FURTHER ADHOC AMOUNT OF RS.60.83 LAKHS HAS BEEN DIS ALLOWED BY THE ASSESSING OFFICER UNDER THE SAID SUB-CLAUSE. CONSEQUENTLY, AS AGAINST THE ACTUAL AGGREGATE ADMI NISTRATIVE AND OTHER EXPENDITURE OF RS.69.58 LAKHS INCURRED BY THE TREAS URY DIVISION OF THE APPELLANT COMPANY, THE ASSESSING OFFICER HAS DI SALLOWED EXPENDITURE AGGREGATING TO RS.130.41 LAKHS UNDER CL AUSE 2(I) AND CLAUSE 2(III) OF RULE 8D. KEEPING IN VIEW THE ABOVE SUBMISSIONS AND RELYING O N THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. 328 ITR 81 WHEREIN IT WAS HELD THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE ONLY FROM ASSESSMENT YEAR 2008-09, THE ASSESSEE SUBMITTED BEF ORE THE LEARNED CIT(APPEALS) THAT THE ADDITIONAL DISALLOWANCE MADE BY THE AO U/S 14A IS NOT SUSTAINABLE. 10. THE LEARNED CIT(APPEALS) FOUND MERIT IN THE SUB MISSIONS MADE ON BEHALF OF THE ASSESSEE ON THIS ISSUE AND DELETED THE ADDITION AL DISALLOWANCE OF RS. 5,98,139/- MADE BY THE AO FOR THE FOLLOWING REASONS GIVEN IN P ARAGRAPH NO. 4.7 AND 4.8 OF HIS IMPUGNED ORDER : 11 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 4.7 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE. BASED ON THE FACTUAL MATRIX OF THE CASE, THE ISSUE IN DISPUTE IS REGARDI NG THE ATTRIBUTION OF ADMINISTRATIVE EXPENDITURE TO THE EARNING OF DIVIDE ND INCOME. THE POINT TO BE NOTED IS THAT THE APPELLANT COMPANY HAD DISALLOW ED AN AMOUNT OF RS. 142.35 LAKHS WHILE FILING THE RETURN OF INCOME. THI S CONSISTED OF INTEREST EXPENDITURE OF RS.134.11 LAKHS AND ADMINISTRATIVE E XPENDITURE OF RS.8.24 LAKHS. THE ASSESSING OFFICER HAS WHILE RELYING ON T HE PROVISIONS OF RULE 8D DISALLOWED INTEREST EXPENSES OF RS.17.91 LAKHS AND ADMINISTRATIVE EXPENSES OF RS.130.42 LAKHS, BOTH AGGREGATING TO RS.148.33 L AKHS. HENCE, THE ASSESSING OFFICER HAS REDUCED THE DISALLOWANCE ON A CCOUNT OF INTEREST EXPENDITURE BY RELYING ON THE PROVISIONS OF RULE 8 D AND THE APPELLANT HAS NOT FILED ANY APPEAL AGAINST THIS DISALLOWANCE. HOW EVER, AS AGAINST AN AMOUNT OF RS.8.24 LAKHS DISALLOWED BY THE APPELLANT ON ACCOUNT OF ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO EARNING EXE MPT INCOME, THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS.13 0.42 LAKHS. BASED ON THE SUBMISSIONS OF THE APPELLANT, THE TOTAL ADMINIS TRATIVE EXPENSES INCURRED BY THE TREASURY DEPARTMENT DURING THE YEAR ARE ONLY RS.69.58 LAKHS. HENCE, THE QUESTION OF DISALLOWING EXPENDITURE IN EXCESS OF THAT INCURRED CANNOT ARISE. THUS, THE TOTAL ADMINISTRATIVE EXPENDITURE T HAT COULD POSSIBLY BE DISALLOWED CANNOT EXCEED RS.69.58 LAKHS. FURTHER, T HE INTEREST EXPENDITURE DISALLOWED BY THE ASSESSING OFFICER IS ONLY RS.17.9 1 LAKHS. HENCE, EVEN IF THE PROVISIONS OF RULE 8D WERE RELIED UPON, THE TOT AL DISALLOWANCE COMPUTED UNDER THE SAID RULE8D WORKS OUT TO RS.87.49 LAKHS. 4.8 HOWEVER, AS HELD BY THE BOMBAY HIGH COURT IN TH E CASE OF GODREJ & BOYCE MFG. CO. LTD. REFERRED ABOVE, THE PROVISIONS OF RULE 8D ARE APPLICABLE FROM ASSESSMENT YEAR 2008-09 AND CANNOT BE APPLIED RETROSPECTIVELY AND ARE NOT APPLICABLE TO THE CURRE NT ASSESSMENT YEAR. HENCE, THE METHOD OF COMPUTING THE DISALLOWANCE UND ER RULE 8D AS ADOPTED BY THE ASSESSING OFFICER CANNOT BE SUSTAINED AND TH E DISALLOWANCE COMPUTED BY THE ASSESSING OFFICER ON THIS BASIS IS THEREFORE DELETED. THE APPELLANT COMPANY HAS ADOPTED A REASONABLE BASIS BY COMPUTING THE DISALLOWANCE UNDER SECTION 14A BY CONSIDERING THE ADMINISTRATIVE AND INTEREST EXPENDITURE AND ALLOCATING THE AGGREGATE EXPENDITURE IN THE PRO PORTION OF EXEMPT RECEIPTS TO THE TOTAL RECEIPTS EARNED BY THE COMPANY ON THE INVESTMENT ACTIVITIES. IN THIS MANNER, ALL THE EXPENSES ARE ALLOCATED TO BOTH STREAMS OF INCOME IN AN EQUITABLE MANNER BASED ON THE GROSS RECEIPTS OF THE SAID INVESTMENT ACTIVITIES FOR THE YEAR UNDER CONSIDERATION. BASED ON THIS MET HOD, THE DISALLOWANCE UNDER SECTION 14A HAS BEEN COMPUTED BY THE APPELLAN T, WHEREBY INTEREST EXPENDITURE OF RS.134.12 LAKHS HAS BEEN DISALLOWED AND THE TOTAL 12 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 DISALLOWANCE IS COMPUTED AT RS.142.36 LAKHS. THE IN TEREST EXPENDITURE DISALLOWED BY THE APPELLANT IS THEREFORE RESTORED A ND THE ADMINISTRATIVE EXPENSES DISALLOWED BY THE APPELLANT ARE UPHELD. TH E SAID DISALLOWANCE COMPUTED BY THE APPELLANT COMPANY UNDER SECION 14A, WHILE FILING THE RETURN OF INCOME IS THEREFORE UPHELD AND THESE GROU NDS OF APPEAL ARE THEREFORE DISPOSED OF ACCORDINGLY AND PARTLY ALLOWE D. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS RIGHTLY SUBMITTED BY THE LEA RNED COUNSEL FOR THE ASSESSEE, THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) IS W ELL REASONED AND WELL DISCUSSED ON THIS ISSUE AND THE SAME IS SELF EXPLAN ATORY AS REGARDS THE REASONS GIVEN BY HIM FOR DELETING THE ADDITIONAL DISALLOWAN CE OF RS. 5,98,139/- MADE BY THE AO U/S 14A. AS HELD BY HIM RELYING ON THE DECIS ION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO.LTD. (S UPRA), RULE 8D APPLIED BY THE AO TO WORK OUT THE DISALLOWANCE U/S 14A WAS NOT AP PLICABLE TO THE YEAR UNDER CONSIDERATION. THE SAID DISALLOWANCE FOR THE YEAR U NDER CONSIDERATION, THEREFORE, WAS REQUIRED TO BE WORKED OUT ON SOME REASONABLE BA SIS AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. (SUPRA) AND SINCE THE WORKING FURNISHED BY THE ASSESSEE FOR MA KING THE DISALLOWANCE U/S 14A WAS FAIR AND REASONABLE AS FOUND BY THE LEARNED CIT (APPEALS), WE ARE OF THE VIEW THAT THE ADDITIONAL DISALLOWANCE MADE BY THE AO U/S 14A BY APPLYING RULE 8D IS RIGHTLY DELETED BY THE LEARNED CIT(APPEALS). AT THE TIME OF HEARING BEFORE US, THE LEARNED DR HAS NOT BEEN ABLE TO CONTROVERT OR REBUT THE FINDING GIVEN BY THE LEARNED CIT(APPEALS) WHILE DECIDING THIS ISSUE IN F AVOUR OF THE ASSESSEE AND HAS SIMPLY RELIED ON THE ORDER OF THE AO IN SUPPORT OF THE REVENUES CASE ON THIS ISSUE. WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED OR DER OF THE LEARNED CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND UPH OLDING THE SAME, WE DISMISS THE ADDITIONAL GROUND RAISED BY THE REVENUE. 13 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 12. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE WHEREIN THE FOLLOWING GROUNDS ARE RAISED. : 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN PARTLY CONFORMITY THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING THE CONTRIBUTION PAID BY THE APPELLANT COMPANY TOWARDS THE MAJOR REPAIR FUND AGGREGATING TO RS.1,89,975/-. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS TH AT THE DISALLOWANCE IS UNWARRANTED AND REQUIRES TO BE DELETED. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFORMITY THE ACTION OF THE ASSESSING OFFICER IN E XCLUDING THE BAD DEBTS RECOVERED OF RS.1,30,116/- AND CRUDE OIL REFU ND OF R.4,80,262/- FROM THE TONNAGE INCOME OF THE APPELLANT. HAVING RE GARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMIT S THAT SAID ITEMS ARE TO BE TREATED AS FORMING PART OF THE TONNAGE IN COME AS CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME. 3) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFORMITY THE ACTION OF THE ASSESSING OFFICER IN EXCLUDING GENERAL AVERAGE CLAIMS RECEIVED AGGREGATING TO RS.1,43,58,7 96/- FROM THE TONNAGE INCOME OF THE APPELLANT. HAVING REGARD TO T HE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS TH AT THE SAID ITEMS ARE TO BE TREATED AS FORMING PART OF THE TONNAGE IN COME AS CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME. 4) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFORMITY THE ACTION OF THE ASSESSING OFFICER IN E XCLUDING LIABILITIES OF PRIOR PERIODS WRITTEN BACK AGGREGATING TO RS.1,8 4,22,235/- FROM THE TONNAGE INCOME OF THE APPELLANT. HAVING REGARD TO T HE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS TH AT THE SAID ITEMS ARE TO BE TREATED AS FORMING PART OF THE TONNAGE IN COME AS CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME. 13. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO.1. THE SAME IS ACCORDINGLY DISMIS SED AS NOT PRESSED. 14 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 14. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASS ESSEE AND REMAINED UNCONTROVERTED/UNREBUTTED BY THE BY THE LEARNED DR WHO HAS SIMPLY RELIED ON THE ORDER OF THE AO IN SUPPORT OF THE REVENUES CASE, T HE ISSUES RAISED IN GROUND NOS. 2, 3 AND 4 OF THE ASSESSEES APPEAL ARE SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNA L IN THE CASE OF SHIPPING CORPORATION OF INDIA LTD. RENDERED VIDE ITS ORDER D ATED 29 TH JULY, 2911 PASSED IN ITA NO. 145/MUM/2011. A COPY OF THE SAID ORDER IS P LACED ON RECORD BEFORE US AND PERUSAL OF THE SAME SHOWS THAT SIMILAR ISSUES I NVOLVED IN THE CASE OF SHIPPING CORPORATION OF INDIA LTD. HAVE BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE WHEREIN AFTER IDENTIFYING THE ISSUES AND R EFERRING TO THE RELEVANT PROVISIONS OF THE ACT LAYING DOWN THE TONNAGE TAX SCHEME, THE TRIBUNAL HAS GIVEN ITS FINDINGS/DECISION IN PARAGRAPH NO. 29 AND 30 WH ICH READ AS UNDER : 29. PROVISIONS OF SECTION 115VA PROVIDES THAT THE INCOME FROM BUSINESS OF OPERATING QUALIFYING SHIPS MAY BE COMPU TED IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XII-G, AN D THAT THE INCOME SO COMPUTED SHALL BE DEEMED TO BE THE PR OFITS AND INCOME FROM QUALIFYING SHIPS ARE DEFINED IN SECTION 115VC, AND THERE IS NO DISPUTE ON THIS ASPECT. SECTION 115 VE MANDATES THAT PROFITS FROM BUSINESS OF A COMPANY EN GAGED IN THE BUSINESS OF OPERATING QUALIFYING SHIPS SHALL BE COM PUTED UNDER THE TONNAGE TAX SCHEME. IT ALSO SPECIFIES THA T SUCH BUSINESS OF OPERATING QUALIFYING SHIPS SHALL BE CON SIDERED AS A SEPARATE BUSINESS DISTINCT FROM ALL OTHER ACTIVITIE S OR BUSINESS CARRIED ON BY THE COMPANY. THE MODE OF COMPUTATION OF TONNAGE INCOME IS GIVEN UNDER SECTION 115VG. THE TE RM 'RELEVANT SHIPPING INCOME' HAS BEEN DEFINED IN SECTION 115V1. IT IS BASICALLY CLASSIFIED INTO TWO CATEGORI ES I.E., PROFITS FROM CORE ACTIVITIES REFERRED TO IN SUB-SEC TION 2 AND PROFITS FROM INCIDENTAL ACTIVITY REFERRED TO IN SUB -SECTION 5. THE ISSUE IS, WHETHER THE INCOME BY WAY OF RIGHT BA CK OF PROVISIONS OF SUNDRY CREDIT BALANCES AND PRIOR PERI OD EXPENSES 15 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 CAN BE CONSIDERED AS INCOME FROM CORE ACTIVITIES OF A TONNAGE TAX COMPANY. IN OUR OPINION, WRITE BACK OF THESE IT EMS IS TO BE CONSIDERED AS INCOME FROM CORE ACTIVITY. IN A GO ING CONCERN, SUCH WRITE BACKS AND MAKING OF SUPPLEMENTARY PROVIS IONS TAKES PLACE. THE ASSESSING OFFICER AS WELL AS THE COMMISS IONER (APPEALS) HAVE TREATED THE VERY SAME INCOME WHICH I S TAXABLE UNDER SECTION 41(1) DIFFERENTLY. THE FIRST BEING EX PENDITURE CLAIMED IN PRE-TONNAGE TAX SCHEME ASSESSMENT YEARS AND THE SECOND BEING EXPENDITURE CLAIMED IN POST TONNAGE TA X SCHEME ASSESSMENT YEARS. SUCH A SEGREGATION IS NOT PERMISSIBLE UNDER THE ACT. BOTH THE INCOMES ARE INCOMES FROM CO RE ACTIVITY AND JUST BECAUSE TAX RATES DIFFERENT, THEY CANNOT BE TREATED AS NON-BUSINESS INCOME. THE ASSESSING OFFIC ER AS WELL AS THE COMMISSIONER (APPEALS) SEEM TO HAVE BEEN INF LUENCED BY THE FACT THAT THE ASSESSEE HAS AN INCOME OF Z 800 C RORES IN ITS PROFIT & LOSS ACCOUNT AND WHEREAS HE HAS OFFERED ON LY Z 18 CRORES TO TAX UNDER THE TONNAGE TAX SCHEME. THE DEC ISION WHETHER A PARTICULAR INCOME HAS TO BE BROUGHT TO TA X OR NOT, CANNOT BE BASED ON SUCH A VIEW OF THE MATTER. THE L EGISLATURE IN ITS WISDOM PROVIDED THE MANNER OF COMPUTATION OF INCOME UNDER THE TONNAGE TAX SCHEME. IN SECTION 115VA, IT IS CLEARLY PROVIDED THAT SECTIONS 28 TO 43C WOULD NOT OVER RID E THE COMPUTATION OF PROFITS AND GAINS UNDER SECTION 115V A. AS SECTION 41(1) FALLS WITHIN SECTIONS 28 TO 43C, NO S EPARATE ADDITION UNDER THAT SECTION CAN BE MADE. AS SECTION 41(1) SEEKS TO BRING TO TAX CERTAIN SPECIFIED ITEMS OF RECEIPTS UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS'' THE SCHEME SHOUL DNOT BE INVOKED WHILE COMPUTING PROFITS AND GAINS OF BUSINE SS UNDER CHAPTER-XII-G. HENCE, WE ARE OF THE OPINION THAT TH E ARGUMENT OF THE ASSESSEE SHOULD SUCCEED. 30. WITH THE INTRODUCTION OF CHAPTER-XII-G, THE ENT IRE METHODOLOGY OF TAXING INCOME FROM THE BUSINESS OF O PERATING QUALIFYING SHIPS HAS CHANGED AND RECOURSE TO THE NO RMAL PROVISIONS OF THE ACT IN A PEACE-MEAL MANNER IS NOT AUTHORISED BY LAW. THOUGH THE ASSESSEE HAS COMPUTED OTHER INCO ME WHILE FILING ITS RETURN OF INCOME, IN OUR OPINION, THE IN COME ARISING 16 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 FROM SECTION 41(1), CANNOT BE CLASSIFIED AS, EITHER INCOME FROM OTHER SOURCES OR INCOME FROM INCIDENTAL ACTIVITIES. WHEN ALL THE SHIPS OF THE ASSESSEE ARE QUALIFYING SHIPS AND WHEN THERE IS NO OTHER ACTIVITY OTHER THAN CORE ACTIVITIES AND INCID ENTAL ACTIVITIES, IN OUR OPINION, A THIRD CATEGORY OF OTHER BUSINESS INCOME CANNOT BE CREATED. AS POINTED OUT BY THE LEARNED SR. COUNS EL, IF SUCH INTRODUCTION IS ALLOWED THEN, A CLAIM OF THE ASSESS EE OF DEDUCTION UNDER SECTION 43B I.E., DEDUCTION ONLY ON ACTUAL PAYMENT WOULD BE REQUIRED THRUOGH THE EXPENDITURE A CTUALL YBELONGS TO PRE-TONNAGE PERIOD, TO BE ALLOWED. THE ASSESSING OFFICER CANNOT TAKE RECOURSE TO SECTIONS 28 TO 43C, WHEN THERE IS NO OTHER ACTIVITY OR BUSINESS CARRIED ON BY THE COM PANY, OTHER THAN BUSINESS OF OPERATING QUALIFYING SHIPS. IN VIE W OF THE ABOVE DISCUSSION, WE ALLOW GROUND NO.1 OF THE ASSESSEE. 15. AS THE RATIO OF THE DECISION RENDERED BY THE TR IBUNAL IN THE CASE OF SHIPPING CORPORATION OF INDIA LTD. (SUPRA) IS DIRECTLY APPLI CABLE TO THE ISSUES RAISED IN GROUND NOS. 2, 3 AND 4 OF THE ASSESSEES APPEAL FIL ED IN THE PRESENT CASE, WE RESPECTFULLY FOLLOW THE SAID DECISION OF THE COORDI NATE BENCH OF THIS TRIBUNAL AND ALLOW GROUND NOS. 2, 3 AND 4 OF THE ASSESSEES APPE AL. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED WHEREAS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 14 TH DAY OF SEPT., 2012. SD/- (VIVEK VARMA) JUDICIAL MEMBER SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED : 14 TH SEPT., 2012 17 ITA NO.4507/MUM/2011 & ITA NO. 4992/MUM/2011 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI WAKODE