TaxTMI 
TaxTMI 
2009 (10) TMI 649
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....ion for Tonnage Tax Scheme under section 115VP/115VR of the Income-tax Act, 1961. During the course of which assessee filed detailed submissions regarding its eligibility for the launch of Tonnage Tax Scheme. Assessing Officer, however, rejected the option of the assessee by following observations : "I have gone through the submission of the assessee and the Assessing Officer's report. After going through the submission of the assessee as well as the Assessing Officer's report, I am satisfied that assessee's claim is not found to be acceptable for the purpose of section 115VP/115VR of the Income-tax Act because as per Income-tax Act, the drilling rig is not covered under the definition of "Qualifying ship". The claim of the assessee was not registered as a ship under the Merchant Shipping Act, 1958. The assessee's main object of business was not the carrying on of the business of the operation of ships." 3. Aggrieved assessee preferred appeal. At the time of above proceedings before Assessing Officer, the assessee had not received registration certificate under section 407 of Merchant Shipping Act, 1958. This fact has been noted by Assessing Officer in his order that assessee....
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....nsult the English dictionaries. As per the English dictionaries, it is found that the word 'offshore' has not been defined anywhere but the words 'offshore' and 'installation' have been separately defined in the dictionary. As per the New Lexicon Webster's Dictionary, 'offshore' means 'moving away from the shore and towards sea'. The word 'installation' has been defined an installing or being installed/an apparatus set in a position for use such as lighting installation/a military establishment including the base and all its equipment. Therefore, any installation which has been fixed or set in a position at a distance place from shore or away from the shore is called 'offshore installation'. The installation is built by installing various equipments, fixing them for the work and after the work is over, they are dismantled and shifted to its another site. Contrary to that the drilling ship is built or constructed by various equipments and material for the purpose for which it is required to be used but they are not dismantled and shifted to its another site. Contrary to that the drilling ship is built or constructed by various equipments and material for the purpose for which it is ....
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.... I find a substantial support in the contention of the ld. AR of the appellant. It is a fact that many ships are given the nomenclature as per the function carried out by them, e.g., ships used for dredging are called 'dredgers', ships towing other ships are called 'tugs', ships used for exploring the mineral water are called 'Rigs', ships carrying arms or missiles called 'torpedoes war ship' and so on. Therefore, the nomenclature given to a ship as per its functions cannot be considered at its face value. A ship engaged in the business of mineral exploration may be called as 'right' but same cannot be categorized 'offshore installations'. 'Offshore installations' are the structure, which is created by moving the various equipments used for the purpose of exploration or otherwise away from the shore. After the assigned task is over, these installations can be dismantled and shifted to other place of the need. Contrary to that 'rig' is a ship where equipments for exploration of mineral salt are installed as a part and parcel of the ship only. These equipments cannot be separate from the ship and installed independent. In fact, these ships are manufactured specifically for the purpos....
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....ntion that at the time of Assessing Officer's proceedings assessee's ship was not registered under the Merchant Shipping Act, although the application was pending. On this basis, Assessing Officer held that assessee is not eligible for Tonnage Tax Scheme. Thereafter, the assessee received the above registration/licence. The same was filed before CIT(A) as additional evidence, which was admitted and was sent to the Assessing Officer for remand report. In the remand report, Assessing Officer raised an objection that in the definition provided in section 115VD for qualifying ship, offshore installation has been specifically excluded. 6. Offshore installation has been defined. However, words 'offshore' and 'installation' have been separately defined in various dictionaries. In New Lexicon Webster's Dictionary, the word 'offshore' has been defined as an adjective as under : "Moving away from the shore and towards sea; Located at little distance from the shore, such as offshore fisheries." As the adverb it has been explained as under : "From the shore; at distance from the shore." In the Chambers Dictionary Deluxe Edition, this word "offshore" has been explained - from the....
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....nd availability of facilities. Further for a ship it is not only necessary to be registered under the Merchant Shipping Act but it has to fulfil all the requirements and formalities to be fulfilled. 7. The relevant Chapter of Merchant Shipping Act is named as "Control of Indian ships and ships engaged in coasting trade". This clearly shows that it applies to only ships and not to the offshore installation. Section 405 specifically explained about application of part - it clearly states as under:- "Application of part.-This Part applies only to sea-going ships fitted with mechanical means of propulsion of not less than one hundred and fifty tons gross, but the Central Government may, by notification in the Official Gazette, fix any lower tonnage for the purposes of this part." Thus 'ship' required to be licensed is sea-going ship fitted with mechanical means of propulsion which is not provided in any of the "offshore installation". The observations of Additional Commissioner of Income-tax that installation which are mounted/fitted/attached/installed on ships does not make the offshore installation as the ships. It is submitted that there is no equipment, i.e., 'rig' whic....
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....sions" provided in this section. The activity of dredging is limited to taking out sand while ships used for drilling are not only doing activity of taking out sand but afterwards drill further and give report of mud testing for which sophisticated equipments were installed and these ships used for drilling were never included in this list of exclusions as may be seen from the history of provisions. This clearly shows that ships used for drilling, dredging, etc., are not offshore installations otherwise deletion of dredgers was not required. The offshore installations are those which are fixed for the specific purpose of fishing, production of mineral oil and after finishing the purpose are dismantled and shifted to other site. In case of short distance, they are fixed to other site through cranes or through ships. While ships used for drilling, dredging, etc., are moved from one place to another without being dismantled or without the help of crane. It is, therefore, submitted that assessee's ship which is duly been registered and has obtained the licence under Merchant Shipping Act, 1958 by an authority of Director General Shipping be treated as "Qualifying ship" and not as an....
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.... reasons recorded that he was prima facie of the view that the vessel had been used in the Indian territorial waters prior to its acquisition by the assessee. A response was given by the assessee to the notice in which it was categorically mentioned that the ship was never used in India so deduction under section 80-IA(3) could not be denied to the assessee. The last issue addressed by learned counsel for the revenue relates, to section 80-IA(4) of the Act a bare reading of section 80-IA(4) of the Act shows that what is required to be determined is essentially factual and there is no legal issue which is involved, much less a substantial question of law. This issue was raised by the Assessing Officer during the course of reassessment proceedings and it was replied to by the assessee. The Assessing Officer was satisfied with the explanation and did not raise any further questions. The Tribunal has not erred in taking the view that it took, namely, that the CIT had overlooked the agreements dated 28-2-1995 and 30-9-1999 which were on the record of the Assessing Officer. In all the three issues that have been urged by the counsel for the revenue, no substantial question of law aris....
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....servations of Their Lordships of Hon'ble jurisdictional High Court are reproduced below : '13. Insofar as the first issue, whether the 'Deep Sea Matdrill' is a ship for the purposes of section 33AC of the Act is concerned, we find that this issue was decided in favour of the assessee in respect of the assessment year 1994-95. We find merit in the contention urged by learned counsel for the assessee that this issue cannot be agitated by the revenue again and again. 14. Learned counsel for the assessee contended that a drilling rig can be of two kinds, namely, one on a stationary platform and the other placed on a ship, which can be moved out. Insofar as the present case is concerned, it does appear quite clearly that the drilling rig was placed on a vessel described as a barge, which could be moved out from place to place for offshore drilling. The Tribunal considered this aspect of the matter and came to the conclusion (with which we do not find any fault) that the 'Deep Sea Matdrill' is nothing but a ship. It is a barge, which can be moved from place to place like any other ship. When the drilling rig is in use, then apparently to save some expenses the ship's propeller is r....