The ITO, International Taxation, GANDHIDHAM V. M/s. Forbes & Co. Ltd., GANDHIDHAM

ITA 99/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0219 (ITAT-RAJKOT)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-12-2012
• Assessment Year: 2010-2011
• Appeal Filed On: 20-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N R SONI
• Keywords: Recovery proceedings; Double taxation relief; Permanent establishment
• Section: 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . . , . . , BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAVA, AM IT A NO . 99 /RJT/201 2 / ASSESSMENT YEAR 20 10 - 11 INCOME TAX OFFICER, ( INTERNATIONAL TAXATION ) , GANDHIDHAM ( / APPELLANT) VS. M/S FORBES & CO. LTD. 2 ND FLOOR, PLOT NO.3 26 , SEC.1/A, GANDHIDHAM AS AGENT OF M/S FORBES CONTAINER LINE PTE.LTD , SINGAPORE. PAN: AA RCF 1765A / RESPONDENT CO NO. 22 /RJT/2012 IN ITA NO. 99 /RJT/201 2 / ASSESSMENT YEAR 2010 - 11 M/S M/S FORBES & CO. LTD. / CROSS - OBJECTOR ) VS. INCOME TAX OFFICER, (INTERNATIONAL TAXATION), GANDHIDHAM / RESPONDENT / REVENUE BY SHRI N.R.SONI / ASSESSEE BY SHRI VIMAL DESAI /DATE OF HEARING 21 . 1 2 .2012 / DATE OF PRONOUNCEMENT 21. 12. 2012 / ORDER . . , / T. K. SHARMA, J. M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 1.12.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 20 10 - 11 . ITA NO. 99/RJT/2012 AND CO NO.22/RJT/2012 2 ITA NO. 99 /RJT/2012 (BY REVENUE) 2. THE FACTS IN BRIEF ARE THAT THE AGENT M/S FORBES & CO. LTD. AND M/S VOLKART FL EMING SHIPPING AND SERVICES LTD., GANDHIDHAM FILED VARIOUS VOVAGE PROVISIONAL RETURN U/S 172(3) OF THE INCOME TAX ACT 1961 ON VARIOUS DATES F OR THE FINANCIAL YEAR 2009 - 2010 RELEVANT TO ASSESSMENT YEAR 2010 - 11 FOR THE FREIGHT BENEFICIARY OF M/S FORBES C ONTAINER LINES PTE.LTD., SINGAPORE, WITHOUT PAYING FREIGHT TAX. THE AO FOR THE SAKE OF CONVENIENCE AND SINCE THE ISSUE INVOLVED IN THE MA T TER PASSED COMMON ORDER U/S 172(4) OF THE ACT ON 29.12.2010 IN RESPECT OF ENTIRE VOVAGE RETURN FILED DURING THE F INANCIAL YEAR 2009 - 10. IN THIS ORDER, THE AO HELD THAT M/S FORBES CONTAINER LINE PTE.LTD, SINGAPORE HAVING OCCASIONAL BUSINESS ON PORT AT MUNDRA AND NOT ENGAGED IN REGULAR BUSINESS OF SHIPPING AND HENCE, NOT ELIGIBLE FOR BENEFIT OF ARTICLE 8 OF INDO - SIN GAPORE TREATY. FURTHER IN THIS ORDER THE AO HELD THAT THE PRINCIPAL IS NOT OWNED OR CHARTERED NONE OF THE VESSEL, THEREFORE, THE AGENT/FREIGHT BENEFICIARY IS NOT ENTITLED TO CLAIM OF DTAA BENEFIT FOR THE SAID CHARTERED VESSEL FOR THE VARIOUS REASONS DISCUSSED IN PARAGRAPH 10 OF THE IMPUGNED ORDER. TO SUM UP, THE AO WORKED OUT THE INCOME AND TAX PAYABLE THEREON AS UNDER: TOTAL AMOUNT OF FREIGHT EARNED IN INDIAN RUPEES WHICH IS INCLUDING THC : RS. 1 ,24,63,666 / - TAXABLE INCOM E I.E. 7.5% : RS. 9,34,775/ - TAX PAYABLE ON TAXABLE INCOME : RS. 3,94,775/ - INCOME TAX LESS : DOUBLE INCOME - TAX RELIEF : NIL TAX PAID ON FINAL RETURN DATED : NIL BALANCE TAX PAYABLE : RS. 3,94,7 5 5/ - ITA NO. 99/RJT/2012 AND CO NO.22/RJT/2012 3 3 . ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT PRINCIPAL M/S FORBES CONTAINER LINE PTE.LTD, SINGAPORE IS ENGAGED IN REGULAR SHIPPING BUSINESS AND NOT OCCASIONAL BUSINESS. THEY ARE FILING RETURN OF INCOME U/S 139(1) OF T HE ACT FOR THE PAST SEVERAL YEARS INCLUDING FOR THE ASSESSMENT YEAR UNDER CONSIDERATION . THE ACKNOWLEDGMENT OF COPY OF RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 11 WAS SUBMITTED BEFORE THE AO DURING SECTION 172 PROCE EDINGS. IT WAS FURTHER CLAIMED THAT THE APPELLANT WAS ASSESSED TO TAX U/S 4 4B OF THE ACT BEFORE THE ADD. DIRECTOR OF INCOME - TAX (IT), CIRCLE 3(2) , MUMBAI . AND THEREFORE IT WAS HELD THAT THE ASSESSEE WAS LIABLE TO CLAIM THE BENEFIT OF TREATY. IT WAS AL SO ARGUED THAT ONCE THE PROVISIONS OF SECTION 44B ARE APPLICABLE THEN APPLICABILITY OF SECTION 172 NO MORE SURVIVE S . THIS IS BECAUSE THE HIGHER AMOUNT IS SUBJECT TO TAX U/S 44B AS IT CONSIDERED TOTAL INCOME OF THE ASSESSEE AS COMPARED TO TAX UNDER SECTI ON 172 WHICH CONSIDERED ONLY INCOME ON A PARTICULAR PORT OR A SHIPPING . AFTER CONSIDERING THEIR ARGUMENTS, THE LD. CIT(A), IN THE IMPUGNED ORDER HELD THAT THE ORDER PASSED U/S 172(4) IS NULL AND VOID BECAUSE THE ASSESSEE IS NOT ENGAGED IN OCCASIONAL BU SINESS IS BACKED BY ITS ACTING ALTERNATIVE C LAUSE PROVIDED UNDER SECTION 172 (7) OF THE ACT, 1961. THE RELEVANT PORTION OF THE DECISION OF T HE LD. CIT(A) AS CONTAINED IN PARAGRAPH 6 SUB - PARA 2 AND 3 AT PAGE S 15 AND 16 OF THE CIT(A) S ORDER WHICH IS REPRODUCED BELOW: I HAVE PERUSED THE SUBMISSION MADE BY THE APPELLANT AND AM OF THE OPINION THAT THE APPELLANT IS IN REGULAR SHIPPING BUSINESS AND NOT IN OCCASIONAL SHIPPING BUSINESS. I HAVE CONSIDERED THE JUDGMENTS CITED. ONCE A PERSON CLAIMS THAT I T IS NOT ENGAGED IN ITA NO. 99/RJT/2012 AND CO NO.22/RJT/2012 4 OCCASIONAL SHIPPING BUSINESS AND WANTS TO GO OUT OF THE AMBIT OF SECTION 172, THE RECOURSE IS PROVIDED IN SECTION 172 (7) ONLY AND FOR THAT IT HAS TO OPT FOR FILLING RETURN U/S 139(1). OTHERWISE ALSO IT HAS BEEN FILING RETURN U/S 139 (1) AND ONCE AN ASSESSEE HAS TAKEN THIS OPTION UNDER SECTION 172(7) HE GOES OUT OF THE AMBIT OF 172 (4) EVEN IF IT IS IN OCCASIONAL SHIPPING BUSINESS. IN THE PARTICULAR CASE THE APPELLANT HAS BEEN FILING RETURN AT MUMBAI AND ALSO INFORMED THE AO THAT TH E RETURN FOR THE PARTICULAR YEAR HAS ALSO BEEN FILED. THE AO HAS REFUSED TO TAKE COGNIZANCE OF THE SAME SAYING THAT NO TAX HAS BEEN OFFERED IN THE RETURN SO FILED. IN THE ASSESSMENT ORDER AT PAGE 6 THE AO HAS MENTIONED THESE FACTS AND OBSERVATIONS . SINC E, THE APPELLANT HAS OPTED FOR THE OPTION TO BE ASSESSED U/S 172(7) BY FILING RETURN OF INCOME U/S 139(1) IT IS ESTABLISHED THAT THE APPELLANT IS LIABLE TO BE ASSESSED UNDER OTHER PROVISIONS OF THE ACT INCLUDING 44AB AND NOT U/S 172(4). THUS, THE ORDE R PASSED U/S 172(4) BY THE ITO IS NULL AND VOID. ONE MORE ASPECT HERE IS THAT ONCE THE AO SAYS THAT THE APPELLANT IS NOT OWNER/CHARTERER OF THE VESSEL; THE HE COULD NOT HAVE TAKEN RECOURSE TO SECTION 172 ITSELF AS THE SECTION APPLIED TO FREIGHT INCOME P AID/PAYABLE TO THE OWNER/CHARTERER ONLY (OR ANY PERSON ON ITS BEHALF). THE SUBSECTION (1) READS AS UNDER : 172. (1) THE PROVISIONS OF THIS SECTION SHALL, NOTWITHSTANDING ANYTHING CONTAINED IN THE OTHER PROVISIONS OF THIS ACT, APPLY FOR THE PURPOSE O F THE LEVY AND RECOVERY OF TAX IN THE CASE OF ANY SHIP, BELONGING TO OR CHARTERED BY A NON - RESIDENT, WHICH CARRIES PASSENGERS, LIVESTOCK, MAIL OR GOODS SHIPPED AT A PORT IN INDIA . 172. (3) BEFORE THE DEPARTURE FROM ANY PORT IN INDIA OF ANY SUCH SHIP, TH E MASTER OF THE SHIP SHALL PREPARE AND FURNISH TO THE [ASSESSING] OFFICER A RETURN OF THE FULL AMOUNT PAID OR PAYABLE TO THE OWNER OR CHARTERER OR ANY PERSON ON HIS BEHALF , ON ACCOUNT OF THE CARRIAGE OF ALL PASSENGERS, LIVESTOCK, MAIL OR GOODS SHIPPED AT T HAT PORT SINCE THE LAST ARRIVAL OF THE SHIP THEREAT: THEREFORE, THE ACTION APPLIED ONLY FOR FREIGHT RECEIVED/RECEIVABLE BY OWNER/CHAR T ER (OR ANY PERSON ON ITS BEHALF). HOWEVER, WHETHER THE APPELLANT IS OWNER/CHARTER OR NOT ON THE FACT OF THE CASE IS NOT A DJUDICATED HERE, BECAUSE E V EN IN ITA NO. 99/RJT/2012 AND CO NO.22/RJT/2012 5 CA S E IT IS IT HAS TO BE ASSESSED AS PER OPTION EXERCISES U/S 172(7) 4 . AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL BY TAKING FOLLOWING GROUNDS : 1. THE LD. CIT(A) HAS E RRED IN LAW AND ON FACTS IN HOLDING THAT THE ORDER OF THE AO IS NULL AND VOID AND THAT THE ASSESSEE IS ASSESSABLE U/S 172(7) OF THE ACT; 2. THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE HAS TO BE TAXED UNDER NORMAL PR OVISIONS OF THE ACT ON THE BASIS OF ANNUAL RETURN WHILE CONTRADICTING TO ITS STAND IN HOLDING THAT THE FREIGHT INCOME OF THE PRINCIPAL IS TAXABLE IN INDIA IN VIEW OF ARTICLE 7 OF THE DTTA BETWEEN INDIA AND SINGAPORE . 5 . AT THE TIME OF HEARING BEFORE US, ON BEHALF OF THE REVENUE SHRI N . R . SONI , THE LD. DR APPEARED AND CONTENDED THAT PRINCIPAL HAS NOT OWNED OR CHARTERED ANY OF THE VESSEL, THEREFORE, PRINCIPAL HAD WRONGLY CLAIMED DTAA BENEFIT FOR THE SLOT CHARTERED VESSELS. HE ACCORDINGLY RE LYING ON THE REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER CONTENDED THAT THE ASSESSEE THROUGH ITS LOCAL AGENT HAS WRONGLY CLAIMED DTAA BENEFIT, THEREFORE, THE AO RIGHTLY MADE THE ASSESSMENT U/S 172(4) OF THE ACT AND LD. CIT(A) IS NOT JUSTIFIED IN H OLDING THE SAME AS NULL AND VOID ON THE GROUND M/S FORBES CONTAINER LINE PTE.LTD, SINGAPORE IS ASSESSABLE U/S 172(7) OF THE ACT. 6 . IN REPLY, SHRI VIMAL DESAI , THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). H E CONTENDED THAT THE PRINCIPAL OF ASSESSEE AND THE FREIGHT BENEFICIARY NAMELY M/S FORBES CONTAINER LINE PTE.LTD, SINGAPORE IS ENGAGED IN THE REGULAR SHIPPING BUSINESS AND NOT IN OCCASIONAL SHIPPING BUSINESS AND ITA NO. 99/RJT/2012 AND CO NO.22/RJT/2012 6 THEREFORE, THE PROVISIONS OF SECTION 17 2 (4) OF THE ACT ARE INAPPLICABLE TO THEM. IN THIS REGARD, HE DREW OUR ATTENTION TO THE FINDING RECORDED BY THE LD. CIT(A) AT PAGES 15 AND 16 OF THE OF IMPUGNED ORDER (WHICH IS REPRODUCED BY US HEREINABOVE AT PA RAGRAPH 3 OF THIS ORDER AND SUBMITTE D THAT THE DEPARTMENT HAS PLACED NO MATERIAL TO REBUT THE FINDINGS OF THE LD. CIT(A) AND MERELY RELIED ON THE FINDINGS OF THE ASSESSING OFFICER. HOWEVER, THE FREIGHT BENEFICIARY OF M/S FORBES CONTAINER LINE PTE.LTD, SINGAPORE WAS REGULARLY ENGAG ED IN SHIPPING BUSINESS WAS APPARENT FROM THE FACT THAT THE PRINCIPAL IS REGULARLY ENGAGED IN THE BUSINESS OF SHIPPING, AS OBSERVED BY THE LD. CIT(A) THAT THE PRINCIPAL IS REGULARLY FILING ITS RETURN OF INCOME AT MUMBAI. IN SUPPORT OF THIS HE FILED A COP Y OF THE ACKNOWLEDGMENT OF RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 11 AT PAGES 11 OF THE ASSESSEE S PAPER BOOK . FINALLY THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INCOME - TAX ACT DOES NOT STIPULATE MULTIPLE ASSESSMENT AGAINST THE SAME ASSESS EE, SIMULTANEOUSLY U/S 172(4) AND ALSO UNDER THE NORMAL PROVISIONS OF ACT. UNDER THESE CIRCUMSTANCES, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) RIGHTLY QUASHED THE ORDER PASSED BY THE AO U/S 172(4) OF THE ACT. THE LD. COUNSEL OF THE ASSESSEE ALSO PLACED A COPY OF THE DECISION OF THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF I .T.O V/S M/S CMA CGM AGENCIES (INDIA) PVT. LTD. IN ITA NOS. 151 TO 190/RAJ/2012(AY - 2010 - 2011) DATED 31.08.2012 WHEREIN ON IDENTICAL FACTS THE TRIBUNA L DISMISSED THE APPEAL OF THE ASSESSEE WITH CERTAIN OBSERVATIONS. ITA NO. 99/RJT/2012 AND CO NO.22/RJT/2012 7 7 . HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF I.T.O V/S M/S CMA CGM AGENC IES (INDIA) PVT. LTD. (SUPRA) ON IDENTICAL FACTS RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE , QUASHED THE ORDER PASSED U/S 172(4) OF THE ACT WITH THE OBSERVATION THAT THE JURISDICTIONAL AO MAY VERIFY THE POSITION AND TAKE SUCH ACTION AS MAY BE WARRANTED IN LAW IN TERMS OF SECTION 172(7) TO ENSURE THAT THE INCOME OF THE ASSESSEE FROM THE VARIOUS VOYAGES DOES NOT ESCAPE ASSESSMENT AS PER THE NORMAL PROVISIONS OF THE I - T ACT. THE FACTS OF THE ASSESSEE S CASE ARE IDENTICAL TO THAT OF THE CASE RELIED ON B Y THE ASSESSEE. THE PRINCIPAL M/S FORBES CONTAINER LINE PTE.LTD, SINGAPORE HAS FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 11 WITH ADD. DIRECTOR (IT), CIRCLE 3(2) (INTERNATIONAL TAXATION) CIRCLE 1(1), MUMBAI ON 30.9.2010 . THE SAID CASE HAS A LREADY BEEN UNDER SCRUTINY OF THE REGULAR ASSESSING OFFICER OF M/S FORBES CONTAINER LINE PTE.LTD, SINGAPORE. THIS CLEARLY INDICATES THAT M/S FO R BES CONTAINER LINE PTE.LTD, SINGAPORE HAS ACCEPTED THE LIABILITY TO BE DEA LT WITH THE PROVISIONS OF SECTION 1 72(7) OF THE ACT. THE JURISDICTIONAL AO MAY , THEREFORE, VERIFY THE POSITION AND TAKE SUCH ACTION AS MAY BE WARRANTED IN LAW IN TERMS OF SECTION 172(7) TO ENSURE THAT THE INCOME OF THE ASSESSEE FROM THE 37 VOYAGES DOES NOT ESCAPE ASSESSMENT AS PER NORMA L PROVISIONS OF THE ACT. 8 . IN VIEW OF THE FOREGOING DISCUSSION, THE APPEAL OF THE REVENUE IS DISMISSED SUBJECT TO THE OBSERVATIONS MADE ABOVE. ITA NO. 99/RJT/2012 AND CO NO.22/RJT/2012 8 CO NO.2 2 /RJT/2012 (BY ASSESSEE) 9 . GROUND TAKEN BY THE ASSESSEE IN THE CROSS - OBJECTION ARE AS UNDER : 1 . THE LD. CIT(A), GANDHINAGAR ERRED IN HOLDING THAT THE INCOME OF THE APPELLANT FROM TRANSPORTATION OF GOODS IS TAXABLE IN INDIA; 2. THE LD. CIT(A), GANDHINAGAR ERRED IN HOLDING THAT THE INCOME OF THE APPELLANT IS TAXABLE UNDER ARTICLE 7 OF THE INDIA SINGAPORE TAX TREATY. 3. THE LD. CIT(A), GANDHINAGAR FURTHER ERRED IN HOLDING THAT THE APPELLANT HAD A PERMANENT ESTABLISHMENT THROUGH ITS AGENT IN INDIA. 4. THE LD. CIT(A) HAVING HAD HELD THAT THE PROVISIONS OF SECTION 172 COULD NOT BE INVOKED IN THE RESPONDENT S CASE AS THE ORDER PASSED UNDER SECTION 172(4) BY TH E AO IS NULL AND VOID, ERRED IN ADJUDICATING ON THE AFORESAID ISSUES 10 . IN RESPECT OF THE AFORESAID GROUNDS OF CROSS - OBJECTION, WE HAVE HEARD BOTH THE SIDES. IN REVENUES APPEAL IN P ARAGRAPH 7 (SUPRA), WE HAVE STA TED THAT JURISDICTIONAL AO IS FREE TO VERIFY THE POSITION AND TAKE SUCH ACTION AS MAY BE WARRANTED IN LAW IN TERMS OF SECTION 172(7) TO ENSURE THAT INCOME OF THE ASSESSEE FROM THE 37 VOYAGES DOES NOT ASPECT ASSESSMENT AS PER NORMAL PROVISIONS OF THE ACT. IN VIEW OF THIS OBSERVATIONS, THE CROSS - OBSERVATION OF THE ASSESSEE BECOMES INFRUCTUOUS AND WE DISMISS IT AS INFRUCTUOUS . 11 . IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS - OBJECTION FILED BY THE AS SESSEE ARE DISMISSED. ITA NO. 99/RJT/2012 AND CO NO.22/RJT/2012 9 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD SD ( . . / D. K. SRIVASTAVA) ( . . / T. K. SHARMA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / ORDER DATE 21. 12. 2012. /RAJKOT SRL / COPY OF O RDER FORWARDED TO: - 1. / APPELLANT - , 2. / RESPONDENT - 3. / CONCERNED CIT . 4. - / CIT (A) . 5. , , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT.