TaxTMI 
TaxTMI 
2014 (1) TMI 1316
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.... are that assessee engaged in the business of shipping/port services, owned a ship named 'M V Gem of Ennore' along with three other shipping companies, which, inter alia included, a company named M/s.West Asia Maritime Ltd. The said ship was given on long term lease of ten years, by these co-owners to one M/s.Poompuhar Shipping Corporation, Chennai for moving thermal coal for Tamilnadu Electricity Board from Haldia, Pardip and Vizag to Ennor and Tuticorin ports. Assessee had claimed a benefit of Tonnage Tax Scheme (TTS) provided under Chapter-XIIG of the Act stating that it was eligible for such claim. However, the Assessing Officer during the course of assessment proceedings, held that coal was a commodity normally transported by road and therefore, a ship transporting such coal from port to port within India could not be considered as a qualifying ship for the benefit of tonnage tax under section 115VD of the Act. Further, as per Assessing Officer, assessee also did not fall within the definition of 'qualifying company' given under section 115VC of the Act, since the effective control and management was influenced by its major share holder named Gulf Fertilizers and Chemicals Ltd....
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....of TTS by the Assessing Officer was not only for the reason that the ship did not qualify for such scheme, but also for the reason that assessee itself did not qualify for such claim. Again, as per Ld. D.R, 99.38% of the shares of the assessee company was held by a company registered in Republic of Mauritius. Therefore, according to him, the place of effective management of the company was not in India. The place where board of directors of the company or its executive directors made their decision would mean the effective place where such decisions were taken and not where the board of directors had assembled for taking such decisions. This aspect, according to ld. D.R was never considered by the CIT(A). The CIT(A) had held that the assessee company was fully managed by a board of directors comprising of Mr.Abdul Qadir and Mrs. Mariam Abdul Quadir, who were in India, based on resolutions of the Board meeting alone. According to the Ld. D.R this alone was not sufficient to show that the place of effective management of the company was in India. 7. Per contra Ld. A.R strongly supported the order of the CIT(A). According to him, the question whether 'M V Gem of Ennore' satisfied t....
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....not claim the benefit of tonnage tax scheme. The law is not making any reference to any other alternative method available for transportation of goods and cargo from destination to destination. The law only says that an assessee company is entitled for opting for tonnage tax scheme if it is operating qualifying ship and satisfies other conditions provided therein. The law does not say that the ship should always do its voyage between international ports. The law does not say anything about the distance to be covered by ship in a single voyage. The law presumes that the benefit of tonnage tax scheme is available to all seagoing ships satisfying the condition where it is operated between Indian ports or between Indian ports and foreign ports. The operation of a seagoing ship does not assume any different character only for the reason that the ship is operating between two Indian ports. The character of operating a ship does not assume any other dimension only for the reason that the ship is operated between one Indian port and another foreign port. These are all matters never construed in the scheme of the Act providing the benefit of tonnage tax scheme to the assessees who are in th....
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.... owns at least one qualifying ship; and (d) the main object of the company is to carry on the business of operating ships. Explanation.- For the purposes of this section, "place of effective management of the company" means- (A) the place where the board of directors of the company or its executive directors, as the case may be, make their decisions; or (B) in a case where the board of directors routinely approve the commercial and strategic decisions made by the executive directors or officers of the company, the place where such executive directors or officers of the company perform their functions.' In the case of West Asia Maritime Ltd. (supra), the question whether the said company qualified for the claim under section 115VC of the Act, was never there. In fact, it was specifically mentioned in para-7 of the said order that all the other conditions stipulated under Chapter-XIIG for availing TTS were satisfied. Here, on the other hand, Assessing Officer has disputed the assessee's claim as a qualifying company for a reason that the place of effective management was....
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....made. For taking this view, he relied on the decision of Mumbai Bench of this Tribunal in the case of Varun Shipping Co. Ltd. v. ACIT (2012) 134 ITD 339 (Mum.). 12. Now, before us, Ld. D.R submitted that the decision of Special Bench of Tribunal in Daga Capital Management (P.) Ltd.(supra) stood reversed by Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. v. DCIT (2010) 328 ITR 1. According to him, it was held by Hon'ble Bombay High Court that Rule 8D is applicable only from A.Y. 2008-09. Nevertheless, as per Ld. D.R even for earlier years, an appropriate disallowance for expenses relatable to the exempt income claimed, was required as mentioned by the Hon'ble Bombay High Court in the above decision. Therefore, Ld. D.R. submitted that the disallowances were rightly done by the Assessing Officer. Per contra Ld. A.R strongly supported the orders of the CIT(A). 13. We have perused the orders of the lower authorities and heard the rival contentions. In so far as the disallowance under section 14A is concerned, there is no doubt that Rule 8D applied only from A.Y.2008-09 as held by the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. (supra). Howev....