TaxTMI 
TaxTMI 
TaxTMI 
2011 (7) TMI 584
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....carrying on the business of undertaking dredging operations through dredgers. The Chapter XII-G of the Income-tax Act, which encompasses sections 115V to 115VZC, contains special provisions for computing income of shipping companies in an alternative method known as "Tonnage tax scheme", provided the assessee is in the business of operating "Qualifying ships" as prescribed in the above said chapter. For the sake of convenience, we extract below section 115VA of the Act which is charging section under the above said chapter: "115VA. Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of a company, the income from the business of operating qualifying ships, may, at its option, be computed in accordance with the provisions of this Chapter and such income shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession". There is no dispute with regard to the fact that the assessee company is operating "Qualifying ships" and hence it is entitled to offer its income under Chapter XII-G of the Act. In the three years under consideration, the assessee company offered its income as....
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....of the Act. 5.1 The first issue in the "other ground" raised by the assessee for the assessment year 2006-07 relates to the validity of reopening of assessment. The assessee challenged the reopening of the assessment under section 148 of the Act before learned CIT(A) also and the first appellate authority dismissed the said ground with the following observations: "5.1 After hearing the learned Authorised Representative and on carefully considering the facts relating to admission of additional grounds of appeal for treating the reassessment proceedings as invalid, it may, at the threshold, be stated that the said additional ground of appeal, ipso facto, does not qualify to be admitted for the reason that never ever during the reassessment proceedings had the validity of issue of notice under section 148 been challenged on behalf of the appellant company and, as such, such additional ground cannot be said to arise from the assessment order under section 147/143(3), dated 2-12-2009. The appellant, having acquiesced to the reassessment proceedings by the Assessing Officer without any iota or objection or reservation, the additional ground relating to such issue does not merit to be a....
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....came refundable. The entire refund amount was adjusted against the existing tax demand pertaining to other years while processing the return under section 143(1) of the Act. The Assessing Officer did not grant interest under section 244A of the Act on the said refund arising out of the self-assessment tax. The Learned CIT(A), in the impugned common order, directed the Assessing Officer to grant interest on an amount of Rs. 2.66 crores instead of Rs. 5 crores. As stated earlier, both the parties are aggrieved by this decision. The assessee's grievance is that the interest under section 244A should have been granted on the entire amount of Rs. 5 crores. However, the department's grievance is that the Learned CIT(A) should not have granted interest at all on any portion of self-assessment tax payment. 5.2.1 However from the paper book filed by the assessee, we notice that the assessee has moved a petition under section 154 of the Act before the Assessing Officer seeking interest under section 244A of the Act on the refund arising out of self-assessment tax paid by it and the same was rejected by the Assessing Officer. Hence the assessee filed an appeal before Learned CIT(A) challengi....
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....lectible in a regular assessment. For the said purpose, the assessment made for the first time under section 147 of the Act is treated as "regular assessment". The impugned assessment is the assessment made for the first time under section 147 of the Act, i.e., there is no other section 147 assessment earlier. The only assessment order available is the assessment order made under section 143(3) of the Act. Accordingly, he submitted that the assessment made for the first time under section 147 of the Act is to be treated as "regular assessment" for the purpose of section 234D of the Act and hence interest is leviable in the hands of the assessee. On the contrary the learned Authorised Representative submitted that the impugned section is applicable only in cases where the refund granted under section 143(1) became collectable in a regular assessment. He submitted that, in the instant case, the impugned assessment is a reassessment made under section 147 of the Act, since the original assessment has already been completed under section 143(3) of the Act. Accordingly, he contended that the provisions of section 234D shall not apply in the facts and circumstances of the case. 5.3.2 We....
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....the sake of convenience, we extract below the relevant observations of the learned CIT(A): "9.1 After hearing the learned Authorised Representative and on a careful consideration of the facts relating to the issue, it may be stated that regular assessment has been defined to mean assessment order passed under section 143(3) or under section 144 or where the assessment has been made for the first time under section 147 or under section 153A. Thus, reassessment proceedings under section 147 after completion of the assessment under section 143(3) is excluded from the purview of "regular" assessment. Such exhaustive definition of "regular" assessment when considered in the light of the fact that in the appellant company's case the assessment under section 147 has been made not for the first time, but after the completion of an assessment under section 143(3), the same cannot be termed as "regular" assessment and, consequently, the provisions of sec.234D cannot apply in the appellant company's case, although as a logical corollary, the appellant company is liable to pay interest on the excess refund granted to it earlier in the manner where interest under section 144A is granted to the....
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.... contracts of affreightment Explanation-For the purpose of this sub-clause:- (a) "pooling arrangement" means an agreement between two or more persons for providing services through a pool or operating one or more ships and sharing earnings or operating profits on the basis of mutually agreed terms; (b) "contract of affreightment" means a service contract under which a tonnage tax company agrees to transport a specified quantity of specified products at a specified rate, between designated loading and discharging ports over a specified period; (B) specific shipping trades, being- (i) on-board on-shore activities of passenger ships comprising of fares and food and beverages consumed on board; (ii) slot charters, space charters, joint charters, feeder services, container box leasing of container shipping". According to sub-section (5) the incidental activities shall be the activities which are incidental to the core activities and which may be prescribed for the purpose. The incidental activities for the purposes of relevant shipping income are prescribed in rule 11R of the Income-tax Rules and the same is extracted below: "11R.....
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....m "derived from", which is used in section 80HH and other sections. The term "derived from" was explained by Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278/129 Taxman 539 as under: "It is clear, therefore, that the words 'derived from' in section 80HH of the Income-tax Act, 1961, must be understood as something which has direct or immediate nexus with the appellant's industrial undertaking. Although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. The derivation of profits on the deposit made with Electricity Board cannot be said to flow directly from the industrial undertaking itself". Accordingly, we shall follow the principles laid down by the Hon'ble Apex Court in the above cited case to ascertain the correctness or otherwise of the decision of Learned CIT(A). 9. In the case of Dy. CIT v. Core Healthcare Ltd. [2009] 308 ITR 263 (Guj.), the question whether the income generated from the sale of empty containers can be treated as income derived from industrial undertakings was raised before the High Court. The ....
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....ficer on these two types of receipts. 9.3 The gains realized on the foreign exchange fluctuation normally take the colour of the primary transactions. It has been stated that the assessee has entered into certain transactions in foreign currency in connection with its core activity of dredging. Accordingly the exchange difference arising out of such activities should be treated as related to the core activity of dredging. Similar view has been taken by Bangalore Bench of ITAT in the case of ITC Hotels v. Dy. CIT [2007] 107 TTJ 955. Accordingly, in our view, the learned CIT(A) is right in holding that the same are related to the activity of operating qualifying ships. 10. We shall now deal with the items of income which have been considered by the learned CIT(A) as not relating to the activity of operating qualifying ships. The learned CIT(A) observed that the receipts emanating from the activities which do not have a direct and necessary nexus with the shipping/dredging activities of the assessee company cannot be exempted under the tonnage tax scheme for the reason that the assessee company could well manage shipping activities without undertaking such extraneous activities. It ....
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....nish the required details, the order of Learned CIT(A) on this issue would stand confirmed. We order accordingly. 10.1 The assessee has also taken a stand that if any item of receipts is not considered as receipts relating to the core activity of dredging, then the deduction towards the expenditure incurred towards earning such receipts should be allowed as a deduction and accordingly only net income should be charged to tax. The tax authorities have pointed out that all the expenses incurred by the assessee shall be deemed to have been allowed while computing the income of the assessee under the special provisions of the Act, cited above and hence there cannot be any further deduction of the same expenditure. We agree with the observations of tax authorities in this regard. If the claim of the assessee is allowed, then it would amount to double deduction of the same expenditure, which is not permitted under the Act. Accordingly we dismiss this ground of the assessee. 11. The assessee has raised one more issue in its appeal filed for the assessment year 2008-09. While finalizing the assessment of that year, the Assessing Officer noticed that the assessee did not account for inter....
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....assessee. The Learned CIT(A) also confirmed the same. Hence the assessee is in appeal before us. 11.1 There is no dispute that the assessee is following mercantile system of accounting and the assessee has received both the arbitration award during the year under consideration. Though the assessee claims that the interest awarded by the arbitrator was disputed by both the parties, no material was placed on record to suggest that both the parties have resorted to any legal process in support of their respective claims. The Learned CIT(A) has observed that the assessee has accounted the impugned interest income on receipt basis in the subsequent assessment year. However, the details of interest income so accounted for in that year are not available on record. However, the very fact that the assessee has received interest income in the subsequent year very much suggests that the right to receive the impugned interest has accrued to the assessee during the year under consideration. Accordingly, we uphold the view of the learned CIT(A) that the impugned interest has to be assessed during the year under consideration as per the mercantile system of accounting followed by the assessee. ....