TaxTMI 
TaxTMI 
2013 (7) TMI 223
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.... the value of SHIP PRABHU PUNI at US$9.50 million as per the Certificate of Valuation obtained from M/s. SIMPSON SPENCE & YOUNG SHIP BROKERS LTD., LONDON who are independent ship brokers of international repute and who are in shipping business for more than three decades, without any significant reason for not accepting the said valuation, overlooking that valuer is supposed to be an expert in valuing the asset which cannot be disapproved in routine course. 3. The Learned CIT(A) has erred in considering the market price of ship on the theory of increase in market price between February, 2002 and November, 2002 on account of inflationary trend in market prices on average basis which is not a correct method and which is also not approved by the I.T. Rules. 4. The Learned CIT(A) has erred in not accepting the Valuation report of M/s. J.B. BODA SURVEYORS & ADJUSTERS PVT. LTD. dated 11th June 2002 certifying the value of ship at US$9.60 million only on the ground that valuation report was submitted at the fag end of the assessment proceedings overlooking that A.O. vide letter dated 24th March, 2006 required to submit further information in connection with valuation of ship asking ....
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.... US $ 1 = Rs.47.71. AO considered this transaction of sale as an international transaction between two associated enterprises and invoked the provisions of section 92 of the Income Tax Act. He called for the specifications, manufacturing details and other particulars so as to verify the Arms Length Price of the sale. Assessee furnished the certificate of valuation obtained from valuer of ships M/s Simpson Spence & Young Shipbrokers London who has certified the value at US $ 9.5 million and also furnished the prices quoted in monthly magazine called 'The Platou Monthly'. AO did not agree with the sale price and he rejected the valuation certificate obtained from M/s Simpson Spence & Young Shipbrokers on the reason that the ship was not inspected when the valuation was taken and further they have given a disclaimer, therefore, he rejected the valuation certified by the said valuer. However, considering that assessee had entered into addendum/ revised sale agreement and ultimately delivered the ship in February, 2003, he took the prices from the said magazine and arrived at US $ 13 million as the ALP which was worked to Rs.62,20,50,000 (conversion rate for US $ 1 = Rs.47.85). The addi....
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....ps sold worldwide during this period are available as per 'The platou monthly' magazine which represent comparable un- controlled transactions. Although the AO has also followed prices given in this magazine, I do not consider the method adopted and conclusions drawn by him to be appropriate. This so because a ship of lower capacity and earlier make can not fetch as much price as another ship of slightly higher capacity which was built in a later year. AO has averaged out the prices of ships built from 1994 to 1996, most of which were of higher tonnage capacity. As against this the appellant's ship was built in 1992 and is of slightly lower capacity. Also, the AO has determined the sale price based upon the data contained in the said magazine and has also taken into account the rise in prices from month to month. However, this method adopted by the AO is also slightly wrong because the inflation in the prices are to be considered on a consistent basis. 3.7. It is seen that ships which are built before 1990 cannot be compared with the ships which are built in the later period because the price difference is very large and inflation of' prices from month to month is also quite at ....
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....aterial as to when the sale deed has been executed or when the money has been paid as is the case in any other sale purchase transactions, including bonafide transactions of immovable properties, as well as transactions in movable properties like shares etc. Hence the Arm's length price should be computed for November, 2002 only as argued by the appellant. The inflation in prices per month as computed above is 1.635%. So the aggregate inflation up to November, 2002 would be 14.71 % and hence Arm's length price for November would be US $ 11.32 million. 3.11. The exchange rate adopted by the AO is Rs.47.85 per US dollar which is for February. 2003. Since the' price is being determined for November, 2002, the exchange rate adopted should be Rs.47.71 per US dollar as adopted by the appellant. The Arm's length price of the ship is therefore, determined at Rs.54,00,77,200 which calls for an adjustment of Rs8,68,32,200 to the sale price of the ship. AO is accordingly directed to make the above adjustment. 3.12. The appellant has also advanced another argument that the sale of vessel is not a trading transaction as they are not dealing in purchase and sale of vessel. It is further ar....
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....he note as under: "During the course of the appellate proceedings, the Hon'ble members requested us to furnish information with regard to the correct dead weight, in tons, of vessel, mv Prabhu Puni, which was sold during the Financial Year 2002-03 (Assessment Year 2003-04). We have verified our records relating to the vessel and we confirm that both the figures are correct, i.e. 43,595 and 42,430, respectively, as they relate to summer and winter dwts of mv Prabhu Puni. Typically, when a vessel is described for sale/purchase purposes, the same is described in terms of its summer dwt. We are pleased to enclose extracts of information from independent sources, viz. Wikipedia, MarineTraffic.com, Clarkson Research Services Ltd. and Shippingdatabase.com. The extracts would show that the vessel, mv Prabhu Punis' dwt is 43,595. In addition, we brought to the notice of the M/s.Simpson, Spence and Young London, of th discrepancy, they have been kind enough to issue a clarification letter today which is self explanatory. Copy of the clarification letter is enclosed. Informatively, DWT is a measure of the ship carrying capacity which is denoted in terms of tonnes which is equivale....