THE ACIT RG 5(3), MUMBAI V. M/S. SHIPPING CORPORATION OF INDIAD, MUMBAI

ITA 5666/MUM/2008

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71645 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-11-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 08-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: DINESH VYAS; M G TRIVEDI
• Keywords: Competent authority
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 5666/M/2008 ASSESSMENT YEAR: 2004 - 05 ASSISTANT COMMISSIONER OF INCOME TAX, RG.5(3), R.NO.573, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 02 0 VS. M/S. SHIPPING CORPORATION OF INDIA, SHIPPING HOUSE, 245, MADAME CAMA ROAD, MUMBAI 400 021 PAN: AAACT1542F (APPELLANT) (RESPONDENT) CO NO. 7 4/M/09 ( ITA NO. 5666/M/2008) ASSESSMENT YEAR: 2004 - 05 M/S. SHIPPING CORPORATION OF INDIA, SHIPPING HOUSE, 245, MADAME CAMA ROAD, MUMBAI 400 021 PAN: AAACT1542F VS. ASSISTANT COMMISSIONER OF INCOME TAX, RG.5(3), R.NO.573, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI 400 02 0 (APPELLANT) (RESPONDENT) ASSESSEE BY : S/ SHRI DINESH VYAS & M.G. TRIVEDI REVENUE BY : SHRI GIRIJA DAYAL DATE OF HEARING : 18.11.13 DATE OF PRONOUNCEMENT : 18.11. 13 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: WITH THIS COMMON ORDER WE WILL DISPOSE OFF APPEAL FILED BY THE REVENUE AS WELL AS CROSS OBJECTIONS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) DATED 21 .0 7 .0 8 RELEVANT TO ASSESSMENT YEAR 2004 - 05. ITA NO. 5666/MUM/08 & CO/74/M/09 M/S. SHIPPING CORPORATION OF INDIA 2 ITA NO.5666/M/2008 REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL. 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), ERRED IN HOLDING THAT FOREIGN TAX PAYMENT AS ALLOWABLE EXPENSES AND IN DELETING THE DISALLOWANC E MADE. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), ERRED IN HOLDING THAT THE INTENTION OF THE ASSESSEE WAS TO EARN PROFIT ON SALE OF VESSELS, THE EXPENDITURE INCURRED FOR VESSELS LAID UP FOR SCRAPPING IS ALLOWABLE EXPE NDITURE WITHOUT APPRECIATING THE FACT BROUGHT ON RECORD THAT THE SAID VESSELS WERE NOT USED FOR THE PURPOSE OF BUSINESS. 2. THE GROUNDS OF APPEAL ARE DISCUSSED SEPARATELY AS HEREUNDER: GROUND NO.1: THE REVENUE THROUGH GROUND NO.1 HAS CHALLENGED THE AC TION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCES MADE BY THE AO BY HOLDING THAT FOREIGN TAX PAYMENT AS ALLOWABLE EXPENDITURE. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICED FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 1,09,89,202/ - AS FOREIGN TAX PAID DURING THE YEAR UNDER CONSIDERATION. ASSESSEE CLAIMED THE SAME TO BE EXEMPT UNDER SECTION 37 OF THE INCOME TAX ACT CLAIMING THAT THE SAID EXPENDITURE/TAX WAS PAID IN THE COURSE OF BUSINESS OF THE ASSESSEE. THE AO HOWE VER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND THUS DISALLOWED THE SAID EXPENDITURE. 3. THE LD. CIT(A), HOWEVER, WHILE RELYING UPON THE OBSERVATIONS MADE BY HIS PREDECESSOR IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2003 - 04 OB SERVED THAT THE FOREIGN TAXES HAD BEEN PAID BY THE ASSESSEE TO EARN INCOME AND THE SAME WERE ALLOWABLE EXPENSES AND HENCE DELETED THE ADDITION SO MADE BY THE AO. ITA NO. 5666/MUM/08 & CO/74/M/09 M/S. SHIPPING CORPORATION OF INDIA 3 4. AGGRIEVED FROM THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE THE REVENUE IS I N APPEAL BEFORE US ON THIS ISSUE. 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORDS. AT THE OUTSET THE LD. A.R. HAS BROUGHT TO OUR NOTICE THE FACT THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE AS SESSEE VIDE ORDER OF THE TRIBUNAL DATED 23.1 2 .10 IN THE OWN CASE OF THE ASSESSEE RELEVANT TO ASSESSMENT YEAR 2003 - 04 IN ITA NO.5556 /MUM/2007 . THE RELEVANT PORTION OF THE ORDER IS REPRODUCED AS UNDER: 11. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH TH E MATERIAL AVAILABLE ON RECORD AND ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS PAID TAXES IN FOREIGN PORTS IN THE OTHER COUNTRIES AND CLAIMED SOME OF THE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. THE ITAT IN ASSESSEES OWN CASE FOR THE A.Y S 1981 - 82 AND 1982 - 83 ALLOWED THE CLAIM OF THE ASSESSEE AND EVEN SIMILAR ISSUE TRAVELED TO THE BOMBAY HIGH COURT IN THE CASE OF TATA SONS (SUPRA). THE HON'BLE MUMBAI HIGH COURT DISMISSED THE APPEAL OF THE REVENUE, AND DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT VIDE INCOME TAX APPEAL NO.209 OF 2001 FOR A.Y. 1985 - 86, DT.2.4.2004 AND TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR A.YS 1981 - 82 AND 1982 - 83 IN ITA NOS.3846 & 3847/MUM /84, WE DISMISS THIS GROUND OF APPEAL RAISED BY THE REVENUE. 6. FROM THE PERUSAL OF THE ABOVE , IT IS CLEARLY REVEALED THAT THE ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 1981 - 82, 1982 - 83 AND THEN FOR AS SESSMENT YEAR 2003 - 04 AND THE SAME , HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. A.R. HAS FURTHER SUBMITTED THAT DISALLOWANCE ON THIS ISSUE WAS NOT MADE BY THE REVENUE FROM ASSESSMENT YEAR 1983 - 84 TO ASSESSMENT YEAR 2002 - 03. SINCE THE ISSUE HAS AL READY BEEN CONSIDERED AND DECIDED IN FAVOUR OF THE ASSESSEE FOR EARLIER ASSESSMENT YEARS , HENCE RESPECTFULLY FOLLOWING THE PROPOSITION OF LAW LAID DOWN EARLIER IN THE CASE OF THE ASSESSEE BY THE CO - ORDINATE BENCH ES OF THE TRIBUNAL , THIS ISSUE IS ACCORDINGL Y DECIDED IN FAVOUR OF THE ASSESSEE. ITA NO. 5666/MUM/08 & CO/74/M/09 M/S. SHIPPING CORPORATION OF INDIA 4 GROUND NO.2 : VIDE GROUND NO.2 THE REVENUE HAS CHALLENGED THE DELETION OF THE DISALLOWANCE OF EXPENDITURE INCURRED BY THE ASSESSEE FOR SCRAPPING OF THE VESSEL. AT THE OUTSET THE A.R. HAS BROUGHT OUR ATTENTION TO THE FACT THAT THIS GROUND DOES NOT SURVIVE AS ON TODAY , SO FAR THE APPEAL OF THE REVENUE IS CONCERNED. HE HAS BROUGHT OUR ATTENTION TO THE FACT THAT EARLIER THE COMMITTEE ON DISPUTES ( COD) HAD NOT GIVEN ANY CLEARANCE TO INSTITUTE THE APPEAL BEFORE THIS TRIBU NAL AGAINST THE ORDER OF THE LD. CIT(A) IN THE CASE OF THE ASSESSEE AND AS SUCH THE APPEAL OF THE REVENUE WAS DISMISSED VIDE ORDER DATED 08.09.09 PASSED BY ITAT E BENCH MUMBAI. HOWEVER, LATER ON THE REVENUE SOUGHT PERMISSION FROM THE COD AND THE PERMISS ION WAS GRANTED BY THE COD TO CONTE ST THE APPEAL RELATING TO ISSUE/GROUND NO.1 AS DISCUSSED HEREINABOVE. HOWEVER, THE PERMISSION TO AGITATE THE ISSUE RELATING TO GROUND NO.2 WAS DECLINED BY THE COD. HE HAS ALSO PRODUCED ON THE FILE THE COPY OF THE MINUTE S OF MEETING OF THE COD BEARING NO.COD/40/2010 DATED 11.11.10. THEREAFTER THE REVENUE MOVED AN APPLICATION VIDE MA NO.424/M/2012 FOR RESTORATION OF APPEAL ON GROUND NO.1 ONLY. THE SAID APPLICATION WAS ALLOWED BY THE TRIBUNAL VIDE ORDER DATED 20.09.13. T HE LD. A.R. HAS PLACED ON THE FILE A COPY OF THE APPLICATION DATED 25.06.12 AS WELL AS COPY OF THE ORDER DATED 20.09.13. A PERUSAL OF THE APPLICATION REVEALS BEYOND DOUBT THAT THE REVENUE HAS CLAIMED THE RESTORATION OF THE APPEAL ON GROUND NO.1 ONLY. GRO UND NO.2 HAS BEEN SPECIFICALLY DROPPE D WHILE MAKING REQUEST FOR THE RESTORATION OF THE APPEAL BY THE REVENUE IN ITS APPLICATION. THE LD. A.R. HAS FURTHER RELIED UPON A LETTER OF THE GOVERNMENT DATED 0 4.02.13 VIDE WHICH IT HAS BEEN CONVEYED THAT NO MINISTR Y/DEPARTMENT OR PUBLIC SECT O R UNDERTAKING MAY REOPEN THOSE CASES IN WHICH CLEAR DECISION HAS BEEN ISSUED BY THE COD DECLINING PERMISSION FOR THE SAME PRIOR TO 17.02.11. THE CONTENTS OF THE SAID LETTER FOR THE SAKE OF THE CONVENIENCE IS REPRODUCED AS UNDER : ITA NO. 5666/MUM/08 & CO/74/M/09 M/S. SHIPPING CORPORATION OF INDIA 5 MOST IMMEDIATE NO. A - 12034/01/2011 - AD.I GOVERNMENT OF INDIA CABINET SECRETARIAT RASHTRAPATI BHAVAN NEW DELHI, THE 4TH FEBRUARY, 2013 OFFICE MEMORANDUM SUB: SETTLEMENT OF DISPUTES BETWEEN ONE CENTRAL GOVERNMENT DEPARTMENT AND ANOTHER / ONE CENTRAL GO VT. DEPARTMENT AND A CENTRAL GOVT. PUBLIC ENTERPRISE / ONE CENTRAL GOVT. PUBLIC ENTERPRISE AND ANOTHER - REG. THE UNDERSIGNED IS DIRECTED TO REFER TO CABINET SECRETARIAT'S OFFICE MEMORANDA OF EVEN NUMBER DATED 1.9.2011 AND 20.12.2011 ON THE ABOVE SUBJECT VIDE WHICH ALL MINISTRIES/DEPARTMENTS WERE INTIMATED INTER ALIA THAT THE COMMITTEE ON DISPUTES (COD) THAT HAD BEEN FUNCTIONING IN CABINET SECRETARIAT FOR PURSUING LITIGATION BY PSUS/GOVT. DEPARTMENTS, STOOD WOUND UP IN ACCORDANCE WITH THE ORDER DATED 17.2. 2011 OF THE HON'BLE SUPREME COURT. 2. INSTANCES HAVE COME TO NOTICE WHEREIN A FEW PSUS/DEPARTMENTS HAVE APPROACHED TRIBUNALS/COURTS TO RE - OPEN THE CASES IN WHICH PERMISSION TO LITIGATE WAS DENIED BY COD. IN A FEW CASES, PUBLIC SECTOR UNDERTAKINGS/DEPARTME NTS HAVE FILED PETITIONS IN THE HIGH COURTS. IN AN ISOLATED CASE, A SPECIAL LEAVE PETITION (SLP) HAS ALSO BEEN FILED IN THE HON'BLE SUPREME COURT BY AN ORGANISATION AGAINST THE HIGH COURT DECISION SEEKING CLARIFICATION OF THE ORDER DATED 17.2.2011 OF THE H ON'BLE SUPREME COURT, ALTHOUGH THE HIGH COURT HAD DECLINED TO RE - OPEN THE CASE. 3. SINCE THE MATTER HAS BEEN AGITATED BEFORE THE HON'BLE SUPREME COURT IN ONE CASE AND DECISION ON THE SAME IS PENDING, FOLLOWING INTERIM DIRECTIONS ARE ISSUED, WITH THE APPRO VAL OF THE COMPETENT AUTHORITY, FOR STRICT COMPLIANCE: (I) NO MINISTRY/DEPARTMENT OR PUBLIC SECTOR UNDERTAKING UNDER THEM MAY RE - OPEN THOSE CASES IN WHICH CLEAR DECISIONS HA BEEN ISSUED BY THE COD PRIOR TO 17.2.2011, AND (II) MINISTRIES/DEPARTMENTS MAY CIRCULATE THE INSTRUCTIONS TO ALL CONCERNED OFFICES/PSUS UNDER THEIR ADMINISTRATIVE CONTROL INDICATING THAT ANY VIOLATION MAY BE VIEWED SERIOUSLY AND MAY INVITE ADMINISTRATIVE/DISCIPLINARY ACTION. 4. THIS ISSUES WITH THE CONCURRENCE OF MINISTRY OF LAW, DE PARTMENT OF LEGAL AFFAIRS VIDE DY NO.246 ADV (B) DATED 18.2.2013. RECEIPT OF THIS O.M. MAY KINDLY BE ACKNOWLEDGED. (V. K. GAUBA) DIRECTOR TEL: [phone] TO: 1. SECRETARIES TO THE GOVERNMENT OF INDIA (BY NAME) 2. SECRETARY, D/O PUBLIC ENTERPRISES, M/O HEA VY INDUSTRIES & PUBLIC ENTERPRISES WITH THE REQUEST THAT IMMEDIATE INSTRUCTIONS ON THE ABOVE LINES MAY BE ISSUED TO ALL PUBLIC SECTOR ENTERPRISES. 7. SO A PERUSAL OF ABOVE STATED DOCUMENT REVEALS THAT NOT ONLY THE REVENUE HAS DROPPED THE ISSUE RELATING TO GROUND NO.2 WHILE MAKING APPLICATION FOR RESTORATION OF THE CASE BUT ALSO IT IS NOT OPEN TO THE REVENUE TO AGITATE THIS ISSUE ITA NO. 5666/MUM/08 & CO/74/M/09 M/S. SHIPPING CORPORATION OF INDIA 6 NOW , IN THE LIGHT OF LETTER DATED 04.02.13 OF THE GOVERNMENT. HENCE, THIS ISSUE DOES NOT SURVIVE AND AS SUCH THE SAME IS HEREBY DISMISSED. CROSS OBJECTION NO.74/M/09 8. THE ASSESSEE IN HIS CROSS OBJECTION HAS NOT CHALLENGE D ANY FINDING OF THE LD. CIT(A) RATHER HAS TRIED TO JUSTIFY THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCES MADE BY THE AO . HENCE THE CROSS OBJECTI ON S FILED BY THE ASSESSEE IN FACT DO NOT FALL IN THE DEFINITION OF THE CROSS OBJECTION S . MOREOVER, THE ISSUES RAISED IN THE SAID CROSS OBJECTION S HAVE ALREADY BEEN DECIDED AS ABOVE AND AS SUCH THE CROSS OBJECTION S FILED BY THE ASSESSEE ARE RENDERED ACADEM IC AND DO NOT NEED ANY SEPARATE FINDING S . 9. IN THE RESULT THE APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.11. 2013. SD/ - SD/ - (D. KARUNAKARA RAO) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18.11. 2013. * KISHORE COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.