HANJIN SHIPPING COMPANY LTD, MUMBAI V. DDIT (IT) 3(1),

ITA 5277/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3630 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 20-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRIYANKA GADA
• Keywords: Presumptive income; Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5277/M/2014 ASSESSMENT YEAR: 2010-11 M/S. HANJIN SHIPPING COMPANY LTD., C/O. HANJIN SHIPPING INDIA PVT. LTD. (AGENT OF HANJIN SHIPPING CO. LTD.), 402, VEDANTA, 779, MAKWANA ROAD, OFF. ANDHERI KURLA ROAD, MAROL VILLAGE, ANDHERI (EAST), MUMBAI 400 059 PAN: AAACH 3759G VS. DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) 3(1), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PARAS SAVLA, A.R. & MS. PRIYAN KA GADA, A.R. REVENUE BY : SHRI RAHUL RAMAN, D.R. DATE OF HEARING : 23.03.2016 DATE OF PRONOUNCEMENT : 13.05.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 24.06.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2010-11. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 10 ( 'CIT(A)-10') HAS GROSSLY ERRED IN CONFIRMING THE ACTIONS OF THE ASSESSING OF FICER OF MAKING ADDITION OF RS.11,34,14,190/- BEING THE AMOUNT OF SERVICE TAX T O THE TOTAL REVENUE FOR THE COMPUTATION OF PROFIT UNDER SECTION 44B OF THE INCO ME-TAX ACT, 1961 ('THE ACT'). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) - 10 HAS LEGALLY ERRED IN NOT FOLLOWING THE ORDER OF INC OME TAX APPELLATE TRIBUNAL (ITAT) IN APPELLANTS OWN CASE FOR A.Y.2008-09 AND A .Y.2007-08. ITA NO.5277/M/2014 M/S. HANJIN SHIPPING COMPANY LTD. 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) - 10 HAS LEGALLY ERRED IN NOT GRANTING REASONABLE AND ADEQUATE OPPORTUNITY TO THE APPELLANT TO PRESENT ITS CASE BEFORE PASSING TH E ORDER AND THE SAID ORDER IS BEING PASSED IN VIOLATION OF PRINCIPLE OF NATURAL J USTICE IS LIABLE TO BE QUASHED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF PA HEREIN AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS A FOREIGN COMPANY INCORPORATED UNDER THE LAW OF KOREA. THE ASSESSEE HAS OPTED THAT ITS INCOME FROM OPERATION OF SHIPPING BE TAXED UNDER SECTION 4 4B OF THE INCOME TAX ACT ON PRESUMPTIVE BASIS AT THE RATE OF 7.5% OF THE AGG REGATE AMOUNT AS PER THE PROVISIONS OF SECTION 44B OF THE ACT READ WITH ARTI CLE 9 OF THE DTAA BETWEEN INDIA AND KOREA. THE CONTROVERSY INVOLVED IN THIS APPEAL IS AS TO WHETHER THE SERVICE TAX COLLECTED DURING THE YEAR SHOULD BE A P ART OF THE GROSS RECEIPTS FOR THE PURPOSE OF THE COMPUTATION OF INCOME OR THE GRO SS RECEIPTS ARE TO BE TAKEN EXCLUSIVE OF SALES TAX RECEIPTS. THE ASSESSING OFF ICER (HEREINAFTER REFERRED TO AS THE AO) WHILE RELYING UPON THE AUTHORITY OF ADVA NCE RULING (AAR) IN THE CASE OF SIEM OFFSHORE INC REPORTED IN (2011) 337 ITR 027 OBSERVED THAT THE GROSS RECEIPTS SHOULD BE TAKEN INCLUSIVE OF THE SER VICE TAX FOR THE PURPOSE OF COMPUTATION OF INCOME OF THE ASSESSEE UNDER SECTION 44B OF THE ACT. WHILE HOLDING SO, THE AO ALSO RELIED UPON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DDIT (INTERNATIONAL TAXATI ON) VS. TECHNIP OFFSHORE CONTRACTING BE ITA NO.4613/DEL/2007 VIDE ORDER DAT ED 16.01.09 WHEREIN THE DELHI TRIBUNAL HAS HELD THAT SINCE THE SERVICE TAX COLLECTED BY THE ASSESSEE WAS DIRECTLY IN CONNECTION WITH THE SERVICES AND FACILI TIES AS SPELT OUT IN SECTION 44BB(2), HENCE, THE AMOUNT OF SERVICE TAX COLLECTED BY THE ASSESSEE IS TO BE INCLUDED IN THE TOTAL RECEIPTS FOR DETERMINING THE PRESUMPTIVE PROFIT UNDER SECTION 44BB. 4. BEING AGGRIEVED BY THE ABOVE ACTION OF THE AO, T HE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A), RELYING UPO N THE DECISION OF THE CO- ITA NO.5277/M/2014 M/S. HANJIN SHIPPING COMPANY LTD. 3 ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. CHINA SHIP CONTAINER LINES (HONG KONG) COMPANY LTD. IN ITA NO.8516/M/10 DATED 23.08.13, UPHELD THE ACTION OF THE AO IN INCLUDING THE SERVICE TAX RECEI PT IN THE GROSS RECEIPTS TAKEN FOR COMPUTING THE PRESUMPTIVE PROFITS OF THE ASSESS EE. BEING AGGRIEVED, THE ASSESSEE HAS COME IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS STATED THAT THE VERY ISSUE HAS ALREADY BEEN DEALT WITH AND DECIDED BY THE TRIB UNAL IN THE EARLIER ASSESSMENT YEARS IN THE OWN CASE OF THE ASSESSEE. HE, IN THIS RESPECT, HAS RELIED UPON THE DECISIONS OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR A.Y. 2007-08 AND 2008-09 AND FURTHER UPON THE ASSESSMENT ORDER FOR A.Y. 2012-13 WHEREIN THE AO, WHILE GIVING EFFECT TO THE DIRECTIO NS OF THE DRP, HAS NOT INCLUDED THE SERVICE TAX IN THE GROSS INCOME OF THE ASSESSEE FOR THE PURPOSE OF CALCULATION OF PRESUMPTIVE PROFITS UNDER SECTION 44 B OF THE ACT. THE COPY OF THE DRP DIRECTIONS DATED 24.11.15 FOR A.Y. 2012-13 HAVE ALSO BEEN PLACED ON FILE. THE ASSESSEE HAS ALSO RELIED UPON THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. MITCHELL DRILLING INT ERNATIONAL PVT. LTD. (2015) 62 TAXMAN.COM 24 (DELHI). ON THE OTHER HAND, THE LD. D.R. HAS RELIED UPON TH E FINDING OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN EARLIER ASSESSMENT YEAR A.Y. 2007-0 8 VIDE ORDER DATED 31.10.12 HAS OBSERVED THAT THE DECISION OF THE DELHI BENCH O F THE ITAT IN THE CASE OF TECHNIP OFFSHORE CONTRACTING BE (SUPRA) HAS ALREA DY BEEN CONSIDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ISLAMI C REPUBLIC OF IRAN SHIPPING LINES VS. DY. DIRECTOR OF INCOME TAX 11 T AXMAN.COM 349 WHEREIN IT HAS BEEN HELD THAT THE SERVICE TAX SINCE HAS BEEN C OLLECTED BY THE ASSESSEE ON BEHALF OF THE GOVERNMENT WHICH IS A STATUTORY LIABI LITY AND DOES NOT INVOLVE ANY ITA NO.5277/M/2014 M/S. HANJIN SHIPPING COMPANY LTD. 4 ELEMENT OF PROFITS AND ACCORDINGLY THE SAME CANNOT BE INCLUDED IN THE TOTAL RECEIPTS FOR DETERMINING THE PRESUMPTIVE INCOME. T HE CO-ORDINATE BENCH OF THE TRIBUNAL, THUS, IN THE OWN CASE OF THE ASSESSEE HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. FOLLOWING THE SAID DECISION, THE CO-ORDINATE BENCH OF THE TRIBUNAL, IN THE OWN CASE OF THE ASSESSEE FOR A.Y. 2008-09, HAS AGAIN OBSERVED THAT THE ISSUE IS COVERED IN THE ASSESSEES OWN CAS E FOR A.Y. 2007-08 AND THUS HAS UPHELD THE ORDER OF THE LD. CIT(A) HOLDING THAT THE SERVICE TAX SINCE IS A STATUTORY LIABILITY AND DOES NOT INVOLVE AN ELEMENT OF PROFIT AND THE SAME BEING COLLECTED BY THE SERVICE PROVIDER FROM HIS CUSTOMER S ON BEHALF OF THE GOVERNMENT, ACCORDINGLY CANNOT BE INCLUDED IN THE T OTAL RECEIPTS FOR DETERMINING THE PRESUMPTIVE INCOME UNDER SECTION 44 B OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN BY THE DRP IN THE OWN CASE OF T HE ASSESSEE FOR A.Y. 2012- 13. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE C ASE OF ISLAMIC REPUBLIC OF IRAN SHIPPING LINES VS. DY.DIT ITA NO.4877/M/2014 FOR A.Y. 2010-11 VIDE ORDER DATED 17.02.16 HAS OBSERVED THAT THOUGH THE C O-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. CHINA SHIP CONTAINER L INES (HONG KONG) COMPANY LTD. (SUPRA) HAS DECIDED THE ISSUE IN FAVO UR OF THE REVENUE, HOWEVER, THE HONBLE DELHI HIGH COURT, WHICH IS A H IGHER AUTHORITY, IN THE CASE OF DIT VS. MITCHELL DRILLING INTERNATIONAL PV T. LTD. (SUPRA) HAS DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. THE CO-ORDINA TE BENCH OF THE TRIBUNAL HAS FURTHER OBSERVED THAT SINCE THE ISSUE UNDER CONSIDE RATION HAS ALREADY BEEN DECIDED IN THE OWN CASE OF THE ASSESSEE AND FURTHER THAT THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MARUBENI CORPORATION V S. DCIT (2014) 44 TAXMAN.COM 22 (MUM.) HAS HELD THAT AS A MATTER OF P RECEDENT THE TRIBUNAL IS BOUND TO FOLLOW THE DECISION RENDERED BY THE TRIBUN AL IN THE OWN CASE OF THE ASSESSEE IN EARLIER YEAR, UNLESS, THERE IS A CHANGE IN LAW, CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE OR THE SAME IS CONTRARY T O THE DECISION RENDERED BY A JURISDICTIONAL HIGH COURT OR APEX COURT. IN THE AB SENCE OF ANY OF SUCH CIRCUMSTANCES, THE EARLIER DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE HAS TO BE APPLIED. IN VIEW OF THE RATIO OF LAW LAID DO WN BY THE CO-ORDINATE BENCH ITA NO.5277/M/2014 M/S. HANJIN SHIPPING COMPANY LTD. 5 OF THE TRIBUNAL IN THE CASE OF MARUBENI CORPORATIO N VS. DCIT (SUPRA) WHICH HAS BEEN FURTHER FOLLOWED BY THE TRIBUNAL IN THE CA SE OF ISLAMIC REPUBLIC OF IRAN SHIPPING LINES FOR A.Y. 2010-11 (SUPRA) AND I N THE LIGHT OF DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS . MITCHELL DRILLING INTERNATIONAL PVT. LTD. (SUPRA), WE HOLD THAT SERV ICE TAX COLLECTED BY THE ASSESSEE AND PAID TO THE GOVERNMENT ACCOUNT HAVING NO PROFIT ELEMENT, CANNOT BE INCLUDED IN THE GROSS RECEIPTS FOR COMPUTATION O F INCOME UNDER SECTION 44B OF THE ACT. THIS ISSUE IS ACCORDINGLY DECIDED IN F AVOUR OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.05.2016. SD/- SD/- (RAJESH KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13.05. 2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.