TaxTMI 
TaxTMI 
2010 (1) TMI 842
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....d by the assessee on ownership basis while the others are used on a Bare Boat Charter/Bare Boat Charter-cum-demise - (BBCD) arrangements. During the relevant previous year, the assessee owned 10 vessels and declared income of Rs.230.25 cr. and also claimed deduction of Rs.8.72 cr. u/s.33AC of the Act. During the assessment proceedings u/s.143(3), AO observed that the assessee has claimed total depreciation of Rs.46.36 cr. He called for the details relating to such claim. The assessee filed necessary details and AO noticed that the assessee has claimed depreciation on the fleet amounting to Rs.45.27 cr. In order to verify the correctness of the claim, further details were called for. The assessee submitted the details and the AO observed therefrom that assessee has claimed to have purchased one vessel by the name of 'NEEL AKASH' on 31-12- 2002 from its subsidiary company VSC International Pte. Ltd. (VIPL) for a consideration of Rs.19.67 cr. and on the very same day i.e. 31-12- 2002, sold it to the same party i.e. VSC International Pte. Ltd. (VIPL) for a consideration of Rs.20.23 cr. AO asked the assessee to furnish the purchase and sale bills. Assessee submitted the agreement dated ....
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.... of the right has resulted in long term capital gains and taxed the capital gains accordingly. 4. The AO further observed that the assessee had received interest income of Rs.1,03,95,219/- which has been offered as business income by the assessee and the assessee has claimed deduction u/s.33AC in respect of the said amount also. AO asked the assessee to explain as to why the said amount should not be taxed as income from other sources and deduction u/s.33AC should not be reduced to that extent. The assessee furnished its reply stating that the interest income is received on:- 1. FDs with banks for certain guarantees given and/or overdrafts allowed, 2. deposit kept as part of Lease Agreement, 3. various ICDs given, 4. bank account of American Express Bank etc., and this interest receipt is integral part of the business activities of the assessee and not income from other sources. It was also submitted that the interest receipt reduces interest expenses, which have been allowed as deductible expenditure and, therefore, this income is assessable as profits and gains of business. The AO considered the assessee's submissions on the allowability of assessee's claim of deduction u/s....
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....the purchase of ship cannot be considered to be independent of its simultaneous sale and that the AO has rightly held that the assessee was bound by the terms of BBCD to purchase the ship. But it has made the sale of the ship, which can be looked at as relinquishment of the right to purchase. It can also be looked at as purchase and simultaneous sale transaction and since the intention was not to use it as business asset , on purchase it could be looked at as a non business asset resulting into capital gains on its transfer and therefore whether one treats the transaction as a relinquishment or as a purchase and sale transaction, it will in any case result into capital gains. He also considered the revenue's contention that in the assessment order for A.Y 04-05, an identical transaction was involved and on facts the transaction has been treated as non genuine and the income resulting therefrom has been taxed as income from other sources. After perusing the various contentions of the assessee as well as the agreement, he held that the agreement in 1998 is a BBCD agreement and also that the parties to the agreement had every right to prepone the execution of the agreement. He also co....
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....ty u/s.271[1][c] is not justified. AO however was not satisfied with the assessee's explanation and held that not offering of capital gains of Rs.4,55,37,481/- by the assessee amounts to concealment of income. He therefore levied the minimum penalty. 9. As regards the interest income and the claim of deduction u/s.33AC of the Act, AO held that the assessee by furnishing inaccurate particulars of income, has falsely claimed deduction u/s.33AC knowing fully well that the interest income earned by it cannot be included in business income for claiming deduction u/s.33AC. He, therefore, levied minimum penalty u/s.271[1][c] of the Act. 10. Aggrieved, assessee filed an appeal before the CIT[A]. The CIT[A] considered the assessee contentions on both the issues and after referring to the decision of the Hon'ble Supreme Court in the case of Dhamendra Textiles concluded that the penalty is leviable if claim for deduction is not a bona fide claim and the assessee has consciously furnished inaccurate particulars of income. He, thus, held that the assessee has furnished inaccurate particulars of income without any bona fide cause and accordingly upheld the penalty levied by the AO on both the ....
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....ome. From perusal of pages 65 and 66 of the paper book filed by the assessee relating to the working of depreciation for the year ended 26-3-2003, we find that a note is appended to the said working stating that addition to the block of assets includes the ship 'Neel-Akash' sold in F.Y 97-98 and reacquired in the year under consideration and hence actual cost of the ship has been worked out to Rs.8,84,84,080/- calculated as per Explanation 4 to sec.43(1) of the Act as against Rs.9,50,74,029/- paid for the same. At page 67 of the paper book is the list of additions wherein addition of Neel Akash at the demise value of Rs.1,10 million is mentioned. Thus, it can be seen that the assessee has furnished all the details before the AO at the time of assessment of its income. For the levy of penalty u/s.271[1][c] of the Act, the assessee should not have offered any explanation or the explanation offered by the assessee should have been found to be not correct. In the case before us, such circumstances do not exist. The assessee has offered the explanation which has not been found to be incorrect. The AO has not accepted the assessee's claim and has only treated the transaction as relinquis....