TaxTMI 
TaxTMI 
TaxTMI 
2013 (4) TMI 391
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....ers, bulk carriers and offshore supply vessels. It is approved u/s 115 V-I(3) of the Income Tax Act, 1961 to pay Tonnage Tax in respect of its income from shipping business and accordingly total income of Rs. 4,47,46,686/- was offered by the assessee from its shipping operations in the return of income filed for A.Y 2005-06 under the Tonnage Tax Scheme provided in section 115V. During the course of assessment proceedings, it was noticed by the A.O. from the details of income from operations furnished by the assessee that there was an agency division operated by the assessee which was engaged in recruitment of personnel on foreign lines. The said agency division was advising foreign principals owning and operating cruise ships to recruit their Indian Food and Beverages Personnel and for the said services, the assessee company had received recruitment fees of Rs. 40,73,177/- during the year under consideration. The said activity carried on by the agency division was categorized by the assessee as incidental activity to its core shipping business in terms of Rule 11-R of the I.T. Rules and accordingly the income from recruitment fees was not offered to tax separately. According to the....
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..../- was brought by the A.O. to tax in the hands of the assessee under the head "income from other sources" in the assessment completed u/s 143(3) of the Act vide an order dated 16-12- 2008. 5. Against the order of the A.O. dtd. 16-12-2008 passed u/s 143(3) of the Act, an appeal was preferred by the assessee before the ld. CIT(A) disputing inter alia the action of the A.O. in treating the activity of its agency division relating in recruitment fees as not incidental to the core shipping activities. It was submitted on behalf of the assessee before the ld. CIT(A) that the expression "maritime education" and "recruitment fees" used in Rule 11-R of the Income Tax Rules indicates two distinct activities and both will quality as incidental activities as long as they are related to business of shipping. It was submitted that recruitment fees received by the assessee during the year under consideration included the fees received for recruitment of personnel on ships. It was submitted that the food and beverage personnel recruited by the assessee on foreign ships were part of floating staff of ocean going ships and the said personnel were part of minimum safe manning recruitment as specifie....
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...., he submitted that it means "specially in relation to seafaring commercial or military activity." He contended that if the recruitment is for ships, it will get covered in maritime recruitment fees as envisaged in Rule 11-R of the I.T. Rules, 1962. 8. The ld. counsel for the assessee also referred to Note No. 5 below Form No. 66 and submitted that recruitment fees has been explained as fees earned from foreign ship owners for rendering services by way of training, interview, short listing and recruitment of floating staff and officers. He invited our attention to the services provided by the assessee to the principal as per the Manning Agency Agreement and submitted that the services provided by the assessee resulting in recruitment fees are squarely covered in the incidental activities as provided in section 115 V-I (5) r.w.r. 11-R of the I.T. Rules. He also invited our attention to the copies of the debit notes issued by the assessee for recruitment fees placed at page No. 3 to 9 of his paper book and submitted that the recruitment fees was received by the assessee in relation to the crew members for their particular positions on the particular ships. He contended that the fees....
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....Act, the relevant shipping income of Tonnage Tax Company for the purpose of Chapter XII-G includes inter alia the profits from incidental activities as referred to in s.s. (5) and the issue involved in the present case before us is whether the recruitment fees received by the assessee can be regarded as the profits of Tonnage Tax Company from incidental activities as referred to in s.s. (5) of the Act. 12. As provided in s.s. (5) of section 115 V-I, 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 11-R of the Income Tax Rules which are as under:- "11R. The incidental activities (details given in Note 5 appearing after the corresponding Form No. 66) referred to in sub-section (5) of section 115 V-I shall be the following, namely :- (i) maritime consultancy charges;(ii) income from loading or unloading of cargo; (iii) ship management fees or remuneration received for managed vessels; and (iv) maritime education or....
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....he present context, is reproduced hereunder:- "1. To screen, select and hire on behalf of the PRINCIPAL qualified F&B PERSONNEL in compliance with the recruitment instructions and requirements of the PRINCIPAL, as such may be modified from time to time by PRINCIPAL. From time to time, PRINCIPAL shall advise AGENT in writing of the minimum qualification and experience requirements as to each position. In any event, all F&B PERSONNEL must have English skills both verbal and written, and be at least 21 years of age. 2. To provide the PRINCIPAL the detailed information about the qualified F&B PERSONNEL at least ten (10) business days prior to them leaving to join the vessel (or such shorter period as may be permitted by PRINCIPAL in emergency situations), including name, education, previous employment reference checks, police checks or confirmation that F&B PERSONNEL has an Emigration Check Not Required endorsement on his passport and such other information as PRINCIPAL may specify from time to time. Based on a review of the information provided, PRINCIPAL may direct that F&B PERSONNEL not be assigned to the vessel. 3. To arrange for the medica....
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....PAL unless such person is someone who PRINCIPAL has specified as being in a "Do Not Hire" status. Persons placed by PRINCIPAL on "Do Not Hire" status shall not be assigned by AGENT to a vessel pursuant to this Agreement. 10. To maintain communication with injured F&B PERSONNEL who have been repatriated to India and their health care providers in order to ensure PRINCIPAL receives relevant information regarding their maintenance, cure and recovery status. In case a F&B PERSONNEL is repatriated on medical grounds, a sum of US$75 per person per month with service tax as applicable will be remitted by the PRINCIPAL towards AGENT'S medical case handling charges, if services are demanded by the PRINCIPAL. 11. In case the PRINCIPAL expressly requests AGENT to conduct an interview outside Mumbai or overseas, then the PRINCIPAL will reimburse the AGENT all travel expenses incurred including accommodation, with payment to be made by PRINCIPAL within 15 days from the receipt of debit notes for the said expenses. Air travel is in economy class, in accordance with the PRINCIPAL'S travel policy." 14. As per the preamble of Manning Agency Agreement, the assessee was a....
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.... 15. As regards the contention of the Revenue that similar addition made by the A.O. separately in the earlier years was accepted by the assessee, it is observed that in the earlier years, Chapter XII-G was not applicable for the purpose of computing income of shipping companies containing special provisions which was inserted in the statute only w.e.f. 1-4-2005. Prior to A.Y. 2005-06 the benefits of shipping company were provided in section 33AC of the Act by way of deduction of an amount not exceeding 50% of profits derived from the business of operation of ships. As rightly submitted by the ld. counsel for the assessee, the scope of benefits provided u/s 33AC of the Act thus was limited to the profits derived from the operation of ships in which the recruitment fees arising from incidental activities was not covered. Chapter XII-G, however, has extended this scope from A.Y. 2005-06 which in addition to the profits from core activities from operating qualifying ships also includes profits from incidental activities. Keeping in view this extended scope of benefits available now under Chapter XII-G inserted in the statute w.e.f. 1-4-2005, the assessee has claimed the benefit in res....