TaxTMI 
TaxTMI 
2012 (10) TMI 662
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 163 of the Income-tax Act, 1961. 2. The assessee is carrying on the business of transporting coal by time chartering of vessels. In the course of business, the assessee had availed the services of vessels owned by Foreign Shipping Companies (FSC), as well. The assessee had paid charges to those foreign companies for moving coal from various ports in India destined to Chennai and Tuticorin ports. The coal is brought to Tamilnadu ports for the consumption of Tamilnadu Electricity Board. 3. On going through the records, the Assessing Officer observed that the assessee had engaged two FSCs in the previous year relevant to the impugned assessment year for moving coal as stated above. He also found that the assessee had paid hire charges ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e' of the FSCs under sec. 163. The Commissioner of Income-tax (Appeals) relied on the decision of ITAT, Chennai 'B' Bench dated 23.06.2006 in ITA Nos. 99 & 100/Mds/2006 wherein the Tribunal has upheld the order of the Assessing Officer treating the assessee as an assessee under sec. 163. The appeal was accordingly, dismissed. 8. Thereafter, the assessee has filed a petition for rectification under sec. 154 stating that the relevant order of ITAT, Chennai 'D' Bench dated 4.10.2011 passed in ITA Nos. 1206/Mds/11 and 779/Mds/2011 was not considered by the Commissioner (Appeals) where the nature of payments made to FSCs have been adjudicated and as such, there is a mistake apparent in the order passed by the Commissioner of Income-tax (Appea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r ought to have been first decided before deciding the taxability in the hands of the Appellant." 10. We heard Shri S. Sathiyanarayanan, the learned counsel appearing for the assessee and Shri KEB Rengarajan, the learned Standing Counsel appearing for the Revenue. 11. In the present case, the assessing authority has applied the provisions of the DTAA to levy tax on hire charges paid to FSCs. While applying the provisions of the DTAA to levy taxes, the assessing authority has treated the hire charges paid to FSCs as 'royalty'. 12. In first appeal, the only issue decided by the Commissioner of Income-tax (Appeals) is that the Assessing Officer is justified in treating the assessee as a 'representative assessee' under sec. 163. Apart ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed below to make the matter clear : "It is not the case that anybody or everybody can operate a vessel. The powers of charter (in this case this assessee) under the time charter agreement is extremely limited like the charterer cannot dry-dock the vessel and the vessel is operated by its Captain/Master and its crews, who are appointed by the ship owner and not by the charterer (the assessee). There is a distinction between 'letting the asset' and 'use of asset' by the owner providing services. The payment made for the use of asset by owner for the purposes cannot be tantamount to a 'royalty'. In this case, the consideration is not for use of the ship only, but also for the services of moving the goods by a fully manned ship. In the decis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax is needed to be deducted at source under section 195 as the amount paid does not amount to 'royalty'." 15. The above discussion reflected in the order of the Tribunal passed in assessee's own case with reference to the same payment of hire charges to FSCs clearly shows that what was enjoyed by the assessee on the time charter shall be only a 'permissive right' to use the space provided by the Captain of the ship. The Tribunal has, therefore, categorically held that the payment is not royalty and the payment is covered by sec.172 of the Act. 16. The above decision of the Tribunal straightaway goes to decide the issue in the present appeal placed before us. The tax at compounding rate has already been estimated as provided under sec.....