DOLPHIN OFFSHORE SHIPPING LTD, BELAPUR V. ASST CIT 5(1), MUMBAI

ITA 6323/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1090 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 16-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Depreciation; Opportunity of being heard; Onus to prove
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6323/MUM/2012 ASSESSMENT YEAR: 2009-10 M/S DOLPHIN OFFSHORE SHIPPING LTD., VS. THE ACIT, 5 (1), LIC BLDG, PLOT N. 54, MUMBAI SECTOR II, BELAPUR-400614 PAN NO. AAACP2682G (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. M. SUBRAMANIAN, AR REVENUE BY: MR. M.C. OMI NINGSHEN, DR DATE OF HEARING : 24/0 3/2017 DATE OF PRONOUNCEMENT: 28/04/2017 ORDER PER N.K. PRADHAN, A.M THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2009-10. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS)-9, MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (T HE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ S AS UNDER:- I. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE MADE BY THE A.O. OF DEPRECIATION OF RS. 4,22,197/- TO THE OPERATING EXPENSES OF RS. 59,16,245/- AND ADDING AN AMOUNT OF RS. 4,17,212/- TO THE INCOME ON ACCOUNT O F INTEREST ON FD OF RS. 4,17,212/-. II. YOUR PETITIONER HUMBLY SUBMITS THAT THE EXPENSES DISALLOWED ARE IN THE NATURE OF REVENUE EXPENSES AN D HENCE THE DISALLOWANCE SHOULD BE SET ASIDE. ITA NO. 6323/MUM/2012 2 III. YOUR PETITIONER PRAYERS THAT THE DISALLOWANCE DEPRECIATION OF RS. 4,22,197/-, OPERATING EXPENSES OF RS. 59,16,245/- AND ADDING AN AMOUNT OF RS. 4,17,212/- TO THE INCOME ON ACCOUNT OF INTEREST ON FD OF RS. 4,17,212 /- BE SET ASIDE. 3 . THE LEARNED COUNSEL OF THE ASSESSEE SUBMITS BEFOR E US THAT THE ASSESSEE WOULD NOT PRESS THE GROUND OF APPEAL IN RE SPECT OF INTEREST ON FD AMOUNTING TO RS. 4,17,212/- TREATED BY THE AS SESSING OFFICER(A.O.) AS INCOME FROM OTHER SOURCES. ACCORDI NGLY THE GROUND OF APPEAL IN RESPECT OF THE ABOVE ITEM IS DISMISSED AS NOT BEING PRESSED. 4. NOW WE COME TO THE OTHER GROUND OF APPEAL RELATI NG TO THE DISALLOWANCE MADE BY THE A.O. OF (I) DEPRECIATION O F RS. 4,22,197/- AND (II) OPERATING EXPENSES OF RS. 59,16,245/-. BRI EFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPANY IS ENGAGE D IN THE BUSINESS OF OPERATION OF SHIPS, CHARTER HIRE SERVICES, SHIP MANAGEMENT SERVICES AND HAS OPTED UNDER TONNAGE TAX SCHEME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. OBSERVED FROM THE DETAILS FILED BY THE ASSESSEE THAT THE ASSESSEE HAD A TUG WHICH WAS IN THE NATURE OF NON-QUALIFYING SHIP. THE INCOME FROM THE SAME WAS S HOWN UNDER NON-TONNAGE INCOME BY THE ASSESSEE. AGAINST SUCH NO N-TONNAGE INCOME, THE ASSESSEE HAD CLAIMED LOSS TO THE TUNE O F RS. 59,07,586/-. THE A.O. OBSERVED THAT THE TUG EVERPOWER HAD CHARTE R HIRE INCOME OF RS. 25,000/- AND AS PER THE DETAILS FILED BY THE AS SESSEE, IT WAS IDLE FOR 99.72% DURING THE F.Y. 2008-09 RELEVANT TO THE A.Y. 2009-10. AS THE TUG EVERPOWER WAS NOT IN FULL OPERATION DURING THE F.Y. 2008-09, THE A.O. DISALLOWED THE CLAIM OF EXPENSES OF RS. 59,16, 245/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4.1 THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 4, 46,332/- IN ITS COMPUTATION. OUT OF THIS, DEPRECIATION OF RS. 1,09, 044/- RELATED TO ITA NO. 6323/MUM/2012 3 NON-TONNAGE TUG I.E. EVERPOWER. THE A.O. DISALLOW ED RS. 1,09,044/- AS THE SAME WAS NOT CONSIDERED TO BE USED IN THE F. Y. 2008-09. AS REGARDS THE BALANCE DEPRECIATION OF RS. 3,37,288/- WHICH RELATED TO THE COMMON ASSETS, THE A.O. APPORTIONED IT BETWEEN TONNAGE INCOME AND OTHER INCOME ON THE BASIS OF TURNOVER OF TONNAG E ACTIVITY AND INCOME RECEIVED ON ACCOUNT OF OTHER INCOME. IN TH E PROCESS, THE A.O. DISALLOWED DEPRECIATION AMOUNTING TO RS. 3,13,153/- RELATING TO TONNAGE ACTIVITY. THUS THE TOTAL DISALLOWANCE OF DE PRECIATION MADE BY THE A.O. WAS RS. 4,22,197/- (RS. 1,09,044/- PLUS RS . 3,13,153/-). 5. AGGRIEVED BY THE ORDER OF THE A.O. THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) NOTED THE OBSERVATION OF THE A.O. THAT THE ASSESSEE DID NOT FILE BEFORE H IM ANY DETAILS IN RESPECT OF THE CHARTERING SERVICE PROVIDED BY EVERP OWER LIKE THE SERVICES PROVIDED, THE NATURE OF CHARTER INCOME, ON WHAT ACCOUNT WAS THE SAME RECEIVED, NAME OF THE PARTY FROM WHOM THE INCOME WAS RECEIVED, DOCUMENTARY EVIDENCE IN SUPPORT OF THE SA ME. THE LEARNED CIT(A), DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE HIM ASKED THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 22.05.201 2 TO PRODUCE THE ORIGINAL VOUCHERS IN SUPPORT OF GROSS RECEIPTS AND EXPENDITURE. HOWEVER, VIDE LETTER DATED 06.07.2012 THE ASSESSEE INFORMED THE LEARNED CIT(A) THAT THE RELEVANT APPEAL FILE WAS MI SPLACED. THE ASSESSEE COULD NOT PRODUCE BEFORE THE LEARNED CIT(A ), THE ORIGINAL VOUCHERS FOR GROSS RECEIPTS. THE LEARNED CIT(A) FUR THER OBSERVED THAT NEITHER THE NAME NOR COMPLETE ADDRESS NOR IDENTITY OF THE PERSON FOR WHOM THE TUG EVERPOWER WAS OPERATED IN F.Y. 2008- 09 WAS FURNISHED. IN VIEW OF THE ABOVE, THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE OF OPERATING EXPENSES OF RS. 59,16,245 /- AND DEPRECIATION OF RS. 4,22,197/-. ITA NO. 6323/MUM/2012 4 6. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE F ILED A PAPER BOOK CONTAINING (I) COPY OF LETTER DATED 22.05.12 ADDRES SED TO THE CIT(A), (II) COPY OF LETTER DATED 16.12.11 ADDRESSED TO A.O . ALONG WITH ENCLOSURES, (III) COPY OF PURCHASES INVOICE DATED 1 5.11.99 OF TUG, EVERPOWER ALONG WITH COPY OF MEMORANDUM OF AGREEM ENT AND (IV) COPY OF INCOME INVOICE DATED 24.12.08 OF TUG, EVER POWER ALONG WITH ENCLOSURES. RELIANCE WAS PLACED BY HIM ON THE DECIS ION IN THE CASE OF CIT VS. OIL & NATURAL GAS CORPORATION LTD . (2016) 387 ITR 710 (UTTARAKHAND), ACIT VS. NATIONAL PEROXIDE LTD. (2003) SOT 321 (MUM). THE LEARNED COUNSEL SUBMITS THAT THE LAST MAJOR CHA RTER HIGHER CONTRACT EXECUTED BY THE TUG WAS FOR MARINE ENGINEE R KARWAR, GOVT. OF KARNATAKA FROM 24.02.2002 TO 05.02.2008. AFTER T HE EXPIRY OF THE CONTRACT THE TUG BEING AGED 33 YEARS (YEAR BUILT: 1 977) AND HAVING A BOLLARD PULL OF 7 TONNE NOT SUITABLE FOR HARBOUR OP ERATIONS / INLAND OPERATIONS, WAS IDLE FOR 99.72% AND 82% IN 2008-09 AND 2009-10 RESPECTIVELY. DURING THE YEAR 2008-09, THE OPERATIN G EXPENSES INCURRED ON THE TUG INCLUDED MANDATORY INTERMEDIATE DRY DOCK FOR THE PERIOD 04.02.2009 TO 11.05.2009 AMOUNTING TO RS. 19 .15 LACS IN 2008- 09 AND RS. 8.37 LACS IN 2009-10. 7. PER CONTRA THE LEARNED DR RELIES ON THE ORDER OF THE LEARNED CIT(A). HE SUBMITS THAT THE ASSESSEE FAILED TO SUBM IT BEFORE THE A.O. AND THE LEARNED CIT(A) THE MATERIAL OR EVIDENCE TO PROVE THAT THE TUG EVERPOWER WAS OPERATED OR USED FOR EARNING GROSS RE CEIPTS OF RS. 25,000/- DURING THE F.Y. 2008-09. NEITHER THE NAME NOR COMPLETE ADDRESS NOR IDENTITY OF THE PERSON FOR WHOM THE TUG EVERPOWER WAS OPERATED DURING THE F.Y. 2008-09 WAS FURNISHED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. A COMPANY MAY NOT OBTAIN, OR BE ABLE TO EXECUTE, ITA NO. 6323/MUM/2012 5 A SINGLE BUSINESS CONTRACT FOR MONTHS AND YET IT MA Y BE DEEMED TO CARRY ON ITS BUSINESS, IF DURING THE PERIOD OF LULL AND INACTIVITY, IT IS KEPT ALIVE. IT IS NOT NECESSARY THAT A BUSINESS TO BE IN EXISTENCE SHOULD HAVE WORK ALL THE TIME. THERE MAY BE LONG INTERVALS OF INACTIVITY AND A CONCERN MAY STILL BE A GOING CONCERN, THOUGH IT MAY , FOR SOME TIME, BE QUIET AND DORMANT. WE MAY FRUITFULLY REFER TO THE D ECISION IN THE CASE OF L. VE. VAIRAVAN CHETTAIR VS. CIT (1969) 72 ITR 114, 119 (MAD); GENERAL CORPORATION LTD. VS. CIT (1935)3 ITR 350, 355 (MAD); CIT VS. BHARAT NIDHI LTD. (1966) 60 ITR 520 (PUNJ); INDERCHAND HARI RAM VS. CIT (1953) 23 ITR 437, 442-3 (ALL); KARSONDAS RANCHHODDAS VS. CIT (1972) 83 ITR 1, 20 (BOM); MRS. SAROJINI RAJAH VS. CIT (1969) 71 ITR 504 (MAD). 8.1 HOWEVER IT IS FOUND THAT THE ASSESSEE FAILED TO FILE BEFORE THE A.O. AND THE LEARNED CIT(A) THE MATERIAL OR EVIDENC E IN RESPECT OF THE RECEIPT OF RS. 25,000/- AS NARRATED AT PARA 5 HERE- IN-ABOVE. THEREFORE, THE CASE OF THE ASSESSEE IS DISTINGUISHABLE FROM TH E DECISION RELIED ON BY THE LEARNED COUNSEL OF THE ASSESSEE. IN CIT VS. CALCUTTA AGENCY LTD. (1951) 19 ITR 191 (SC), IT HAS BEEN HELD THAT THE BURDEN OF PROVING THE NECESSARY FACT IN ORDER TO ENTITLE THE ASSESSEE TO MAKE A CLAIM IS ON THE ASSE SSEE. THE SAME RATIO HAS BEEN REITERATED IN NUND & SAMONT CO. (P) LTD. VS. CIT (1970) 78 ITR 268 (SC). THE BURDEN OF PROOF IS LIMITED TO PRI MARY OR INITIAL ONUS. ONE SUCH PRIMARY ONUS IS DISCHARGED, SUCH BURDEN SH IFTS TO REVENUE. WE FIND THAT IN THE INSTANCE CASE THE ASSESSEE HAS NOT DISCHARGED THE PRIMARY ONUS. IN VIEW OF THE ABOVE, THE ORDER OF TH E LEARNED CIT(A) IS SET ASIDE AND THE CASE IS RESTORED TO THE FILE OF T HE A.O. WITH A DIRECTION TO MAKE AN ORDER AFRESH AS PER THE PROVISIONS OF TH E ACT AND THE OBSERVATIONS MADE AT PARA 8 HERE-IN-ABOVE, AFTER GI VING A REASONABLE ITA NO. 6323/MUM/2012 6 OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASS ESSEE IS DIRECTED TO FILE BEFORE THE A.O. THE DETAILS MENTIONED AT PARA 5 HERE-IN-ABOVE. THUS THE ABOVE GROUND IS ALLOWED FOR STATISTICAL PU RPOSES. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/04/2017 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI; DATED: 28/04/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI