ACIT, CHENNAI V. West Asia Maritime Limited, CHENNAI

ITA 935/CHNY/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6241 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-05-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: G STANLY
• Section: 14A; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . ! , ' $ BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO.935/ MDS/2013 ( / ASSESSMENT YEAR: 2008-09) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(3) NEW BLOCK, 4 TH FLOOR,, 121, M.G.ROAD, CHENNAI-600 034. VS M/S. WEST ASIA MARITIME LTD. BHUARI TOWERS, 6 TH FLOOR, 4, MOORES ROD, CHENNAI-600 006. PAN:AAACW1023E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. ANIRUDH RAI, CIT /RESPONDENT BY : MR. G.STANLY, ADVOCATE / DATE OF HEARING : 1 ST MAY, 2014 /DATE OF PRONOUNCEMENT : 13 TH JUNE, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-III, CHENN AI DATED 22.01.2013 FOR THE ASSESSMENT YEAR 2008-09. 2. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT ITA NO.935/MDS/2013 2 ASSESSEE IS ENTITLED FOR BENEFIT OF TONNAGE TAX SCH EME PROVIDED UNDER CHAPTER XII C OF THE ACT. 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.1195/MDS/2010 DATED 1.7.2011 WHEREIN THIRD MEMBE R AGREED WITH THE VIEW OF THE ACCOUNTANT MEMBER AND H ELD THAT SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNORE TRANSPORTING THERMAL COAL FROM ONE LOCATION TO ANOT HER LOCATION WITHIN THE COUNTRY IS A QUALIFYING SHIP UNDER SECTI ON 115VD OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE IS ENTIT LED FOR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER SECTIO N XII C OF THE ACT. 4. WE HAVE PERUSED THE ABOVE ORDER OF THE THIRD MEM BER AND FIND THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE HOLDING THAT SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNORE TRANSPORTING THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY IS A QUALIFYING SHIP UN DER SECTION ITA NO.935/MDS/2013 3 115VD OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME PROV IDED UNDER SECTION XII C OF THE ACT. RESPECTFULLY FOLLOWING TH E ORDER OF THE THIRD MEMBER, WE REJECT THE GROUNDS RAISED BY THE R EVENUE ON THIS ISSUE. 5. THE NEXT GROUND OF APPEAL RAISED BY THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE ASS ESSING OFFICER WHILE COMPLETING THE ASSESSMENT MADE DISALL OWANCE UNDER SECTION 14A OF THE ACT. ON APPEAL, THE COMMIS SIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT HOLDING THAT ONCE ASSESSEES INCOME IS COMPUTED AS PER TONNAGE TAX SCHEME THEN FURTHER DISALLOWANCE UNDER SECTION 14A CANNOT BE MADE FOLLO WING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VARUN SHIPPING CO.LTD. VS. ADDL.CIT (134 ITRD 339). THE REVENUE IS IN APPEAL BEFORE US. ITA NO.935/MDS/2013 4 6. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE COUNSEL FOR THE ASSESSEE RELIES ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) AND THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL I N THE CASE OF VARUN SHIPPING CO.LTD. (SUPRA). 7. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION OF THIS TRIBUNAL RELIED ON. THE M UMBAI BENCH OF THIS TRIBUNAL CONSIDERED THIS ISSUE IN THE IN THE CASE OF VARUN SHIPPING CO.LTD. (SUPRA) AND DELETED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT OBSERVING AS UNDER:- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE IS MAINLY ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS AND ITS INCOME FROM THE SAID BUSINESS WAS DECLARED AND ASSESSED AS PER THE SPECIAL PROVISIONS CONTAINED IN CHAPTER XIIG WHICH LAY DOWN TONNAGE TAX SCHEME. AS PER THE PROVISIONS OF SECTION 115VA CONTAINED IN CHAPTER XIIG, THE INCOME FROM THE BUSINESS OF OPERATING QUALIFYING SHIPS CAN BE COMPUTED AT THE OPTION OF THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XIIG A ND ONCE THIS OPTION IS EXERCISED BY THE ASSESSEE, THE INCOME SO COMPUTED SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TA X UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR ITA NO.935/MDS/2013 5 PROFESSION NOTWITHSTANDING ANYTHING TO THE CONTRAR Y CONTAINED IN SECTION 28 TO 43C. IT, THEREFORE, FOLL OWS THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS IS COMPUTED AS PER THE SPECIAL PROVISIONS CONTAINED IN CHAPTER XIIG, ONLY THE EXPENSES INCURRED BY THE ASSESSEE FOR EARNING INCOME OF THE SAID BUSINESS ARE DEEMED TO BE ALLOWED AND NOTHING ELSE. IT, THEREFORE, CANNOT BE SAID THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS IS COMPUTED AS PER THE SPECIAL PROVISIONS OF CHAPTER XIIG, ANY EXPENDITURE OTHER THAN THE EXPENDITURE INCURRED FOR THE PURPOSE OF THE SAID BUSINESS HAS BEEN ALLOWED AND CONSEQUENTLY NO ADDITION TO INCOME SO COMPUTED CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A ON ACCOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXEMPT DIVIDEND INCOME. WE, THEREFORE, FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS HAVING BEEN COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XIIG, ONLY THE EXPENSES INCURRED FOR THE SA ID BUSINESS ARE DEEMED TO HAVE BEEN ALLOWED AND NO ADDITION TO SUCH INCOME CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A ON ACCOUNT OF ANY EXPENDITURE INCURRED IN RELATION TO EARNING OF EXEMPT DIVIDEND INCOME. IN OUR OPINION, IF AT ALL THE ASSESSEE HAS CLAIMED ANY SUCH EXPENDITURE IN COMPUTATION OF PROF IT OF BUSINESS OF SHIPPING, THE SAME ARE TO BE TAKEN A S DISALLOWED WHEN THE INCOME OF THE SAID BUSINESS IS FINALLY COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XIIG AND NO SEPARATE DISALLOWANCE ON ACCOUNT OF SUCH EXPENDITURE U/S 14A CAN BE MADE. WE, THEREFORE, DELETE THE DISALLOWANCE MADE BY THE AO U/S 14A AND CONFIRMED BY THE LEARNED CIT(APPEALS) AND ALLOW GROUND NO.1 OF THE ASSESSEES APPEAL. ITA NO.935/MDS/2013 6 8. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE UP HOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) ON THIS ISSUE AND REJECT THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 13 TH DAY OF JUNE, 2014 AT CHENNAI. SD/- SD/- ( N.S. SAINI ) ( CHALLA NAGENDRA PRASAD ) ( . . ) ( % '( ) ACCOUNTANT MEMBER / * JUDICIAL MEMBER/ ' * ' /CHENNAI, + /DATED, 13 TH JUNE, 2014 SOMU -. /. /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 0 () /CIT(A) 4. 0 /CIT 5. . 4 /DR 6. /GF .