TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 713
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....und no 2: Additions under Sundry Receipts: 2.1 The CIT (A) has erred in holding that sundry receipts of Rs. 12.88 crore were not arising out of the core activity of operation of qualifying ships and the provisions of Tonnage Tax Scheme was not applicable to these receipts. 2.2 In the alternative and without prejudice to the above since the sundry receipts are assessed to tax as business income, The CIT (A) ought to have granted deduction in respect of expenditure laid out or expended wholly and exclusively for the purpose of its business and earning such income. 2.3 The CIT (A) failed to appreciate that the expenses Rs. 14.25 crores were incurred on account of rent to take the premises on lease which were subsequently let out to the employees from whom income by way of house rent was earned. Ground no 3: Adjustment to calculate Turnover: On the Facts and circumstances of the case and as per provisions of law The CIT(A) erred in confirming the A.O's action of adjusting the turnover by reducing sundry receipts Rs. 12.88 crores and profit on sale of assets of Rs. 3.49 crore from turnover to calculate excess over 0.25% of turnover. Ground no 4: Disallowance of expenses:....
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....for managed vessels is to be included in the turnover while working out the income as per the Tonnage Tax. 5. The appellant prays that the order of the ld. CIT(A) on the above ground be set aside and that of the Assessing Officer restored. 6. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 4. The brief facts of the case as emanating from the record are: The assessee is a private sector undertaking engaged in the business of merchant shipping. From the assessment year 2005-06, the assessee has opted for the Tonnage Tax Scheme, i.e., the presumptive taxation scheme provided in Chapter XII-G of the Act. Under the scheme, the income from business of operation of qualified ships related to core activities is taxed on a presumptive basis instead of according to the provisions of section 28 to section 43C of the Act. For the year under consideration, the assessee filed its return of income on 30/09/2008 declaring a total income of Rs. 245,70,05,370. The return filed by the assessee was initially processed under section 143(1) of the Act. Thereafter, the return of income was selected for scrutiny and statutory notices under section ....
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....e Assessing Officer further held that any item belonging to pre-tonnage tax era is not income from the core activity of qualified ships and, therefore, needs to be taxed under normal provisions of the Act. Further, in the post-tonnage tax era, any income other than covered under the core activity of qualified ship is also taxable under normal provisions of the Act. The learned CIT(A) vide impugned order granted partial relief observing as under:- "3.2 This issue is identical to the issue raised by the assessee in ground no. 4 of the grounds of appeal taken by it in the AY 2005-06. For the detailed reasons given in the appellate order for the AY 2005-06 and following the decision of the Hon'ble ITAT, I have held that the addition on account of the income under normal provisions of the prior to Tonnage tax era (before FY 2004-05) is to be deleted. The findings are contained in para 4.2 to 4.6 of the appellate order for the AY 2005-06. Following the said decision, I hold that the assessee is entitled to relief to the extent of Rs. 26,519/-. The addition of Rs. 26,519/- is directed to be deleted. The balance additions of Rs. 3,18,74,963/- and Rs. 1,77,06,939/- out of the prior pe....
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.... core shipping activity and thus, is not separately chargeable to tax. 11. As regards the Insurance and P & I claims of Rs.3,17,91,248, as per the assessee said receipt comprises of recovery made from Hull underwriters (property insurance)/protection and indemnity club (liability insurance). During the year, the assessee received pending claim of Rs.3,17,91,248 of insurance, which was credited in the assessee‟s books of account under the head prior period adjustments. These claims are related to 2 of its ships. The first one was 'Bankim Chandra Chatterjee‟ which had met with an accident on 22/03/2006 and the insurance claim was partially settled around May 2007. The other ship was 'Rishikesh' which had rudder damage in December 2006/January 2007 for which the claim was again partially settled around September 2007. As per the insurance policy, the assessee has to first incur the cost and then raise its claim for insurance proceeds. The insurance claim for damages is restricted up to actual expenses incurred or less than the cost incurred depending on the terms of insurance. The total expenditure incurred for the ship 'Bankim Chandra Chatterjee‟ was USD 6,57,202.6....
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....land/port, container storage charges, container monitoring fees, container leasing cost and expenses for chassis for cargo. We find that while dealing with a similar issue pertaining to recovery of cost incurred by the assessee on container business, the coordinate bench of the Tribunal in assessee‟s own case cited supra for the assessment year 2007-08, observed as under:- "35. Reading of this rule does not permit treating recovery of container related costs and detention charges as income from incidental activities for the purpose of relevant shipping income. In any event, when it is accepted that this receipt is nothing but recovery of cost, it would not be open for the Assessing Officer to bring to tax the gross receipt without eliminating the expenditure incurred for earning this income. If this receipt is to be treated as income from incidental activities, then the relatable cost is also to be excluded and only net income considered. As it is a mere reimbursement, there is no income element. In view of the above discussion, we uphold the contentions of the assessee and allow ground no.6." 16. Since the aforesaid receipt is mere reimbursement of expenditure, therefore ....
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.... cost @20% and taxed the balance of sundry receipts of Rs.10,30,91,601 under normal provisions of the Act. The learned CIT(A) vide impugned order and upheld the findings of the Assessing Officer. Being aggrieved, the assessee is in appeal before us. 22. We have considered the rival submissions and perused the material available on record. The assessee has taken accommodation on rent for its employees involved in the core activity of the organisation, which was further sublet to those employees. As per the assessee, it incurred an expenditure of Rs.14,25,55,708 and recovered the house rent from his employees only to an extent of Rs.1,21,83,784. It is the plea of the assessee that the accommodation was taken on rent in respect of employees involved in the core activity of the organisation and therefore the recovery of rent is nothing but related to its core activity. Since the assessee does not have any other business other than the business of operating qualifying ships and as it has no other activity as contemplated under Chapter XII-G, we are of the considered opinion that the income cannot be brought to tax separately and it is the income from the core activity. 23. Similarly, ....
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.... ships are debited to the revenue account, whereas the liquidated damages are credited. Since the liquidated damages on account of delay or deficiency in service in respect of the qualifying ships, therefore, we are of the considered opinion that such receipt is part of the core shipping activity of the assessee. 28. As regards the sundry receipts of Rs.1,44,81,883, the assessee has filed an application dated 12/02/2020 seeking admission of additional evidence. As per the assessee, the sundry receipts are in relation to volume incentives from CFS, additional free days charges, container damage/maintenance charges, documentation charges, ship-owners expenses recovery, additional terminal handling charges, non-manifested charges, and other receipts. As per the assessee, the learned DRP in the assessment year 2014-15 has held the similar receipt as integral to the core activity of the assessee on the basis of similar evidence. Further, as per the assessee, the aforesaid additional evidence could not be placed before the lower authorities due to the transition from old legacy systems to the implementation of SAP systems, and the concerned person maintaining these records in the wareho....
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....e of assets. 33. We find that the coordinate bench of the Tribunal in assessee‟s own case for the assessment year 2007-08 vide order dated 29/07/2011 cited supra held that the profit on the sale of assets is taxable under the head "capital gains" and thus the same cannot be considered as turnover in view of the provisions of section 115VA of the Act and consequently, out of the purview of chapter XII-G. The relevant findings of the coordinate bench in the aforesaid decision are as under:- "39. Coming to ground no.10, as already stated, the assessee has no other sctivity 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 out of the perview of Chapter-XII-G. In view of the above discussion, we uphold the finding of the Assessing Officer in this regard." 34. Thus, respectfully following the judicial precedent in assessee‟s own case, the reduction of profit on s....
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....assessee, even if such a claim was not made in return of income or by way of revised return of income. Therefore, the additional ground raised by the assessee is admitted for adjudication. 38. At the outset, the learned AR wishes not to press its claim in respect of dividend income. Accordingly, to this extent, ground No. 4.1 is dismissed as not pressed. As regards the interest income of Rs. 227.68 crores, the assessee submitted that the said receipt forms part of the core shipping activity of the assessee and therefore should be taxed on a presumptive basis under Chapter XII-G of the Act. As per section 115VT of the Act, tonnage tax company is required to credit to Tonnage Tax Reserve Account an amount not less than 25% of the book value derived from the activities referred to in section 115VI in each previous year. As per section 115VT(3) of the Act, the amount credited to the Tonnage Tax Reserve Account is required to be utilised by the company before the expiry of 8 years for acquiring a new ship for the purpose of the business of the company and until the acquisition of the new ship for the purpose of the business of operating qualifying ships. As per the assessee, in its Ton....
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....he same was not issued to the assessee and thus no interest under sections 234D of the Act is leviable. The learned AR submitted that in this regard the assessee has also filed a rectification application dated 14/02/2011 under section 154 of the Act, which is pending disposal. Therefore, in view of the above, we deem it appropriate to remand this issue to the file of the Assessing Officer for de novo adjudication, after verification of whether any refund was granted to the assessee. If the claim of the assessee is found to be true, the Assessing Officer is directed to delete the interest levied under section 234D of the Act. As a result, ground No. 5 raised in assessee‟s appeal is allowed for statistical purposes. 41. The issue arising in ground No. 1, raised in Revenue‟s appeal, is pertaining to allowing the tonnage tax provisions to the assessee on sundry creditors written back pertaining to pre-tonnage tax era. 42. The brief facts pertaining to this issue are: The Assessing Officer following its order rendered in assessee‟s own case for the assessment year 2007-08 treated the sundry creditors written back as not from operation of qualifying ships. The learne....
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....ficer as well as the Commissioner (Appeals) seem to have been influenced by the fact that the assessee has an income of Rs. 800 crores in its Profit & Loss account and whereas he has offered only Rs. 18 crores to tax under the tonnage tax scheme. The decision whether a particular income has to be brought to tax or not, cannot be based on such a view of the matter. The legislature in its wisdom provided the manner of computation of income under the tonnage tax scheme. In section 115VA, it is clearly provided that sections 28 to 43C would not over ride the computation of profits and gains under section 115VA. 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 shoul dnot 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. 30. With the introduction of chapter-XII-G, the entire methodology of taxing income from the business of operating qualifying ships has changed and recourse to the normal provisio....