TaxTMI 
TaxTMI 
2015 (11) TMI 1059
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....nd of appeal is whether interest u/s 234B and 234C of the Income Tax is leviable on the tax liability of the assessee where the scheme of demerger is sanctioned by the High Court after the close of financial year and the demerger is effective from the appointed date. 4. The facts in brief are that the assessee company was demerged out of the parent company namely M/s Great Eastern Shipping Co. Ltd in a scheme of demerger exhibited at page no 5 to 20 in order to transfer to the assessee the offshore service business of the parent company. The assessee was incorporated on 14.07.2005. The appointed date of demerger was 01.04.2005 as per scheme of demerger. The Hon'ble Bombay High Court vide order dated 03.02.2006 approved the initial scheme of demerger. The final demerger was to take place after receipt of consent from ONGC with whom the parent company had entered into various contracts for offshore services. The assignments of contracts in favour of the assessee was received vide letter dated 27.06.2006 and 22.08.2008 exhibited at page no 26 to 32 of the paper book no1 by the assessee subject to signing of tripartite agreement. Thereafter the parent company vide letter dated 24.08....
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....hat no evidence was placed on record whether the parent company claimed interest. The ld CIT(A) upheld the order of ld assessing officer on the various reasons incorporated in para 3.3 of the appeal order. 7. The ld. AR agrued that the assessee was incorporated on 14.07.2005 and the scheme of demerger sanctioned by the Hon'ble High court on 31.08.2015 making demerger effective from the appointed date of 01.04.2005.He further submitted that it was not possible for the assessee to estimate its income and income tax thereon in terms of provisions of section 209 particularly when the scheme of demerger was not sanctioned. He vehemently argued that it is only by virtue of high court order the demerger became effective from the appointed date i.e 01.04.2005 and in case of decline of sanction by the Hon,ble High Court for any reason whatsoever, the scheme as proposed would have failed with all the consequences. Therefore, he prayed for the quashing the order of first appellate authority as being against the spirit of law. He further argued that there is difference and distinction between the provisions of advance income tax and advance fringe benefit tax. He pointed out that the word "....
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....ficer by holding that the demerged company did not transfer the advance tax paid it on behalf of the assessee and hence the interest u/s 234 B & C was chargeable and thus rejected the submissions of the assessee's counsel which was incorporated in para 3.2 by CIT(A) and also incorporated his finding on para 3.3 of the said order. Since the scheme was approved after the close of the financial year the assessee could not have estimated its income and pay the advance tax on the same. We are in agreement with the arguments of the ld AR on this issue. Further the case of the assessee is squarely covered the decisions in the case of Prime Securities Ltd. Vs ACIT (Inv.) (333 ITR 464) and Ultratech Cement Ltd. Vs. DCIT (ITA Nos 7646,7647,7735 and 7736/Mum/2007. The Hon'ble Bombay High court in the case of Prime Securities Vs ACIT has held that in order to charge interest under section u/s 234B , there has to be default on the part of the assessee in estimating the the advance tax and payment thereof as per the provisions of section 209 r.w. s/ 210 of the Act. Once the default is attributed to the assessee , then the charging of interest becomes mandatory. The ratio decendie in the said dec....
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....icular business activity were apportioned and allocated by the assessee in the ratio of 67% to tonnage business activity and 33% to non tonnage business activity in conformity with the practice followed in the earlier year on the basis of annualized operating charter hire income. During the year, the assessee incurred a sum of Rs. 40,19,48,708/- as common expenditure under various heads and allocated in the ratio of 67:33 thereby apportioning Rs. 26,93,05,634/- to tonnage tax activity and Rs. 13,26,43,074/- to non tonnage tax activity. 11. The AO rejected the system of apportionment on the basis of annualized operating charter hire income adopted by the assessee and applied and apportioned the common expenditure on the basis of the receipts from tonnage and non tonnage activity which was Rs. 39,26,22,7285/- and Rs. 1447319165/- respectively being in the ratio of 73.06% and 26.94% of the total turnover. The AO worked out the disallowance on account of change in the basis of apportionment of expenses at Rs. 2,43,58,092 which is incorporated on page 4 of the assessment order. 12. The CIT(A) observed that the distribution of common expenses had to be done on the basis of actual r....
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....f annualized operating charter hire income may kindly be quashed and assessee be allowed to follow the same. 15. Ld. DR relied heavily upon the orders of authorities below and submitted that the provisions of section 115VJ empowers the AO to apportion the common expenses on a reasonable basis .He therefore prayed that the order of CIT(A) be upheld. 16. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record in the light of provisions of section 115VJ of the Income Tax Act, which reads as under:- "(1)Where a tonnage tax company also carries on any business or activity other than the tonnage tax business, common costs attributable to the tonnage tax business shall be determined on a reasonable basis. (2) Where any asset, other than a qualifying ship, is not exclusively used for the tonnage tax business by the tonnage tax company, depreciation on such asset shall be allocated between its tonnage tax business and other business on a fair proportion to be determined by the Assessing Officer, having regard to the use of such asset for the purpose of the tonnage tax business and for the other business. " 16.1 The sub section (1) of section ....
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....aised:- 1. "Whether on the facts and in the circumstances of the case and in Law, was the Ld. CIT(A) justified in allowing the apportioned expenses on demerger to the Assessee Company despite the fact that section 35DD (1) does not provide for any apportionment of expenses on demerger amongst the Demerged & Resultant Company?" 20. The only ground raised by the revenue is against the deletion of disallowance of expenses u/s 35DD(1). 21. The facts in brief are that 20% of the total demerger expenses was apportioned to the assessee in the scheme of demerger 80% to the demerged company. The assessee wrote off 1/5th of the said expenses in the current year u/s 35DD(1) of the Act. 22. The ld AO disallowed the said expenses on the ground that the deduction u/s 35DD(1) was admissible to the demerged company and not to the assessee, the resulting company. 23. The Ld. CIT(A) by disagreeing with the decision of the assessing officer deleted the disallowance by stating that the provisions of section 35DD(1) allows the deduction of expenses incurred for demerger by holding that the section only provides for writing of 1/5th of the expenses incurred on demerger. The ld CIT(A) furt....