TaxTMI 
TaxTMI 
2015 (3) TMI 751
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "3. On the facts and as per provisions of 'Act', 'Commissioner of Income-tax (Appeals)' has failed to appreciate that : 3.1 The appellant-company is covered under Chapter XII-G, of the 'Act' for determination of its taxable income. 3.2 The appellant-company's various incomes, viz., core shipping, incidental shipping, interest and dividend are from business of operation of qualified ships. 3.3 The appellant-company has, as per provisions of section 115VJ of the Act, given treatment of allocation of common cost in the return of income on reasonable basis. 4. On the facts and as per provisions of the 'Act' the Commissioner of Income-tax (Appeals), ought to have : 4.1 Allowed the appellant-company's appeal and 4.2 Allowed the appellant-company's treatment of reasonable allocation of common costs as per provisions of section 115VJ of the Act." 4. The assessee in the present case is a company engaged in the business of merchant shipping. In the return of income filed for the year under consideration, i.e., the assessment year 2005-06 on October 27, 2005, its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee was entitled to deduction against such income only on account of expenditure wholly and exclusively incurred for the purpose of earning such income and estimating such expenditure at Rs. 1 lakh out of establishment charges, he allowed the deduction only to that extent under section 57(iii) of the Act. 5. The disallowance made by the Assessing Officer on account of its claim for deduction for proportionate cost against interest and dividend income was challenged by the assessee in an appeal filed before the learned Commissioner of Income-tax (Appeals) and the following submission was made on behalf of the assessee before the learned Commissioner of Income-tax (Appeals) in support of its claim on this issue : "(1) SCI is engaged fully in shipping business. It has no other activity. During the course of business, interest is earned on funds deployed out of surplus cash/unutilised amount standing to the credit of statutory reserves while waiting for opportune time to acquire the assets. The interest generated needs to be treated as core shipping income. However interest on deposits and dividend from companies are suo motu considered by SCI as 'Income from other so....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mon cost. Even though expenses allocated to 'Income from other sources' is around Rs. 3.15 crores the amount deducted is required to be treated as expended wholly and exclusively for earning such income. Therefore the expenses should be allowed as the apportionment or allocation is not on ad hoc basis but as per special provisions of section 115VJ (as made available to a tonnage tax shipping company) and on the basis of mathematical and scientific formula applied for the purpose." 6. The learned Commissioner of Income-tax (Appeals) did not find merit in the submission made on behalf of the assessee on this issue. According to him, the income from interest and dividend was mainly derived by the assessee from surplus funds kept in the banks and other public financial institutions and since this investment was not made by the assessee on account of any business exigency, the income earned on account of interest and dividend was chargeable to tax under the head "Income from other sources". He held that the assessee therefore was entitled to claim deduction from such income only on account of expenditure incurred wholly and exclusively for the purpose of making or earning ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing Officer has rightly held that the assessee would not have incurred the expenditure claimed for earning income. The estimation of Rs. 1,00,000 by the Assessing Officer, in our opinion, is reasonable. Coming to reliance placed by the learned senior counsel, on the decision of the hon'ble jurisdictional High Court in Chinai and Co. P. Ltd. v. CIT [1994] 206 ITR 616 (Bom), we are of the opinion that these are factual matters and the same cannot be taken as a binding precedent. In view of the above discussion, we uphold the finding of the Commissioner (Appeals) and dismiss ground No. 7, raised by the assessee." 8. At the time of hearing before us, learned counsel for the assessee has submitted that the investment in fixed deposits was made by the assessee- company out of its income from shipping business and interest earned thereon thus very much formed part of core shipping business of the assessee. He submitted that similarly the dividend income was earned by the assessee on the investment made in the shares of other shipping company and the same therefore was also covered within the core shipping business of the assessee. He has contended that the assessee therefore was en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eparate business activity other than the tonnage tax business as envisaged in section 115VJ of the Act. The said income was chargeable to tax in the hands of the assessee under the head "Income from other sources" as rightly held by the authorities below and even the assessee itself had originally offered the said income under the head "Income from other sources". As regards the decision of the hon'ble Bombay High Court in the case of Punit Commercial Ltd. [2000] 245 ITR 550 (Bom) cited by learned counsel for the assessee, it is observed that the same was rendered in the context of section 80HHC(3)(a) of the Act and the ratio of the said decision therefore cannot be applied in the present case which involves the issue in the context of section 115VJ of the Act. In the case of Indo Swiss Jewels Ltd. [2006] 284 ITR 389 (Bom) cited by learned counsel for the assessee, the facts involved were different from the present case inasmuch as inter-corporate deposits were made by the assessee from the surplus funds that were kept apart for payment for imported machinery and the interest earned on such short-term deposits of the money kept apart for the purpose of business was held to be b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Act. In this regard, he relied on the decision of the hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC). On appeal, the learned Commissioner of Income-tax (Appeals) upheld the action of the Assessing Officer on this issue for the same reasons as given by the Assessing Officer. 13. We have heard the arguments of both sides and also perused the relevant material available on records. It is observed that the claim made by the assessee for relief under sections 90 and 91 of the Act on account of foreign taxes paid outside India was disallowed by the Assessing Officer as well as the learned Commissioner of Income-tax (Appeals) mainly on the ground that the same was not made by the assessee by filing a revised return. Reliance in this regard was placed by the authorities below on the decision of the hon'ble Supreme Court in the case of Goetze (India) Ltd. [2006] 284 ITR 323 (SC). As held by the hon'ble Bombay High Court in the case of CIT v. Pruthvi Brokers and Shareholders P. Ltd. [2012] 349 ITR 336 (Bom) cited by learned counsel for the assessee, the assessee is entitled to raise any additional claims before the appellate autho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on these issues. 15. Now, we shall take up the appeal of the assessee for the assessment year 2006-07 being I. T. A. No. 2945/Mum/2010. 16. As submitted by learned counsel for the assessee, ground Nos. 1 and 2 of its appeal are general seeking no specific decisions. 17. Ground Nos. 3 and 4 of the assessee's appeal read as under : "3. On the facts and as per provisions of the 'Act', the 'Commis sioner of Income-tax (Appeals)' has failed to appreciate that : 3.1. The appellant-company is covered under Chapter XII-G, of the 'Act' for determination of its taxable income. 3.2. The appellant-company's various incomes, viz., core ship ping, incidental shipping, interest and dividend are from business of operation of qualified ships. 3.3. The appellant-company has, as per the provisions of section 115VJ of the Act, given treatment of allocation of common cost in the return of income on reasonable basis. 4. On the facts and as per provisions of the 'Act', the 'Commis sioner of Income-tax (Appeals)', ought to have- 4.1. allowed the appellant-company's ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n written back 23.94 Sundry receipts (core shipping) 11.11 Sundry credit balances written back 0.47 Profit on sale of fixed ships (non ship) 0.29 Reimbursement from managed vessels 25.61 Amount reduced from turnover of core shipping 73.52 21. At the time of hearing before us, the learned representatives of both sides have agreed that a similar issue was involved in the assessee's own case for the assessment year 2007-08 and the Tribunal vide its order dated July 29, 2011, (Shipping Corporation of India Ltd. v. Addl. CIT [2012] 20 ITR (Trib) 332 (Mum)) has decided the same in respect of item No. 2 (excess provision written back) and item No. 4 sundry credit balances written back) in favour of the assessee and item No. 1 (profit on sale of ships) and item No. 5 (profit on sale of fixed ships (non-ship) against the assessee for the following reasons given in paragraphs 29 and 39 of its order (pages 347 and 351): "29. The provisions of section 115VA provides that the income from business of operating qualifying ships may be computed i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....15VA. As section 41(1) falls within sections 28 to 43C, no separate addition under that section can be made. As section 41(1) seeks to bring to tax certain specified items of receipts under the head 'Profits and gains of business' the scheme should not be invoked while computing profits and gains of business under Chapter XII-G. Hence, we are of the opinion that the argument of the assessee should succeed. . . 39. Coming to ground No. 10, as already stated, the assessee has no other activity which would result in income. It also does not have any other business. Thus, the income is from core activity only. Nevertheless, the income in question is taxable under the head "Capital gains" and does not fall within the ambit of sections 28 to 43C. Thus, the receipt cannot be considered as turnover in view of the provisions of section 115VA and consequently is out of the purview of Chapter XII-G. In view of the above discussion, we uphold the finding of the Assessing Officer in this regard." 22. Respectfully following the Tribunal's order dated July 29, 2011 (Shipping Corporation of India Ltd. v. Addl. CIT [2012] 20 ITR (Trib) 332 (Mum)) in the assessee's own case for....