TaxTMI 
TaxTMI 
2019 (6) TMI 1176
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....d indredging and dredging related activities in India. For this purpose, assessee has set up a project office in India. For carrying out the dredging work,assessee charter hires dredgers from its overseas associated enterprise (AE) on payment of charter hire/ lease charges. For the assessment year under dispute assessee had originally filed its return of income 30.11.2011 declaring total income of Rs.. 64,71,004/-. Subsequently, assessee filed revised return of income on 08.02.2013 claiming higher TDS credit. In the return of income assessee computed its profit from the dredging activity on presumptive basis as per the provision of TTS. Though, the assessing officer had no dispute which regard to the fact that profit from dredging activity has to be computed under the TTS, however he made a reference to the Transfer Pricing Officer todetermine the arm's length price (ALP) of international transactions entered with the AE. Before the transfer pricing officer assessee pleaded that since its income is computed under the provisions of TTS, transfer pricing provisions are not applicable. However, the Transfer Pricing Officer did not find merit of the submissions of the assessee and proc....
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....e and expenditure stated in the profit and loss account but is on the basis of net tonnage of the qualifying ship multiplied by the number of days such ship was operated during the previous year. No doubt, the Assessing Officer has computed the income of the assessee under section 115VG of the Act. Therefore, in the aforesaid factual backdrop and keeping in view the relevant statutory provisions as referred to hereinbefore, the conclusion drawn by Ld. Commissioner (Appeals) with regard to applicability of TP provisions to the present assessee needs to be tested. Notably, identical dispute came up for consideration before the Tribunal in assessee's own case in assessment year 2007-08. While deciding the issue in ITA no. 7228/Mum/2012 dated 22.05.2019 the Tribunal has held as under:- 6. We have carefully considered the rival submissions, perused the relevant material, including the orders of the lower authorities as well as the case laws referred at the time of hearing. Notably, the controversy before us primarily revolves around the applicability of transfer pricing provisions to the income that is covered by Chapter XII-G of the Act i.e. Tonnage Tax Scheme. The TTS was int....
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...., provides for computation of income to the exclusion of section 28 of the Act. In case of an assessee entering into international transactions with associated enterprise, the amount of allowable expenses is required to be determined as per the arm's length principle as per the machinery provisions of Chapter X (Section 92 to section 92F). The amount of allowable expenses determined as per the arm's length principle under section 92(1) of the Act would thus be relevant to compute business profits as provided for in sections 28 to 43C of the Act. The Assessee has opted to be governed by TTS, thus the provisions of section 115VA would override section 28 to section 43C and hence income has to be calculated with reference to the registered tonnage of the ships and not on basis of net profits depicted in the financial statements or as per the profits adjusted in terms of Chapter-X. In fact, the related party transactions are not relevant for computing income chargeable to tax as per Chapter-XII G of the Act and therefore, the arm's length price determined under transfer pricing provisions would be of no relevance. In other words, determination of income/ expense having rega....
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....t, if the assessee cannot claim any expenditure after opting out of the scheme, then the AO is also barred by making any disallowance for incurring of expenditure. Legislature, in its wisdom, has allowed the assessees for opting for the said scheme and with a specific purpose. Therefore, while computing the income of the assessee u/s. 115VP, the AO has to put on blinkers and assess the income as suggested by the Parliament. There is no scope for tinkering with the provisions of section 115 VP of the Act. He has to follow the simple rule that no deduction is to be allowed or no disallowance is to be made under any of the normal provisions of the Act, once it is found that an assessee is to be assessed as per the provisions of chapter XIIG of the Act. Section 14A is not an exception to the TTS. Rather the scheme is an exception to the normal computation provisions, including the section 14A.Therefore,it cannot be said that when the income of the assessee from the business of operating ships was computed under the special provisions of Chapter XII-G, expenditure other than the expenditure incurred for the purpose of the business had been allowed. Considering the twin factors ....
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....bility of section 28 to 43C of the Act i.e. chapter IV of the Act, when income is to be computed as per the provisions of the said section. Chapter-XII-G, was introduced by the Finance (No.2)Act,2004,with effect from April 1,2005,and it provides for TTS, which is optional. The Notes on Clauses appended to the Finance (No.2) Bill,2004,referring to clause 28 as regards the introduction of section 115VA specifically states that the provision relates to the computation of profits and gains of the shipping business. Tonnage tax was intended to make the industry internationally competitive and also to induce more ships to fly the Indian flag. As the whole of FEFG is covered by the provisions of chapter XII-G of the Act, there is no justification in computing it under a different chapter or section." (underlined for emphasis by us) 12. Before parting, we also think it apposite to refer to the judgment rendered by the Hon'ble Supreme Court in the case of Trans Asian Shipping Services Pvt Ltd (supra). In the said case, the Supreme Court observed that ".......It may be stated in brief that in view of the stiff competition faced by the Indian shipping companies vis-a-vis....
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....he approach of the Assessing Officer can be gauged from a perusal of the computation of taxable income made in para 11 of the assessment order. The Assessing Officer has sought to add Rs. 5,40,887/- as a separate line item captioned as "Proposed adjustment/addition in view of the above discussion. Thus, as per the perception of Assessing Officer, chapter X of the Act creates an independent or a separate charge of income, an aspect which is contrary to the judgment of the Hon'ble Bombay High court in the case of Vodafone Services Pvt.ltd. vs. UOI ( 2015) 53 Taxman.com 286 (Bom), wherein after referring to an earlier judgment dated 10th October, 2014 in the case of same assessee reported in 50 taxmann.com 300 (Bom) interalia, held that chapter X does not contain any charging provision but is a machinery provision to arrive at an arms length price of a transaction between associated enterprises. 16. In the final analysis, it is seen that in the instant case, the provisions of chapter X have been invoked to alter an expenditure, namely the mobilisation and demobilisation charges paid for a qualifying ship, an item which has no bearing on the income as computed under Chapte....