2009 (3) TMI 653 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessment u/s 143(3) beyond four years.
2. Disallowance of deduction u/s 33AC.
3. Disallowance of Dry Docking expenses.

Summary:

1. Reopening of Assessment u/s 143(3) Beyond Four Years:
The first issue pertains to the reopening of assessments for the assessment years 1998-99 and 1999-2000 beyond the four-year period. The assessee argued that the original assessments were completed u/s 143(3) and all material facts were fully and truly disclosed. The Tribunal found that the assessee had indeed disclosed all material facts and that specific queries regarding the deduction u/s 33AC were made and answered. Thus, the reopening of the assessments beyond four years was deemed void ab initio, supported by the decision of the jurisdictional High Court in ICICI Bank Ltd. v. K.J. Rao, Dy. CIT [2004] 268 ITR 2031 (Bom.). Consequently, the assessments for these years were quashed.

2. Disallowance of Deduction u/s 33AC:
The second issue involved the disallowance of deduction u/s 33AC for the assessment years 1998-99 to 2004-05. The assessee claimed that it was engaged in shipping activities and had complied with all conditions for the deduction. The Tribunal noted that the assessee was a public company engaged in shipping operations, owning a vessel named 'Ganga Dolphin,' and had maintained a reserve account as required by law. The Tribunal found that the assessee's main object was the operation of ships, and the income from shipping operations was shown as 'charter hire fees.' The Tribunal held that the assessee was entitled to the deduction u/s 33AC, as the operations of shipping were the main activity, and the conditions for the deduction were satisfied. The Tribunal also noted that various Benches had held that owning a ship was not necessary for the deduction, but the operation of shipping was. Therefore, the claim for deduction u/s 33AC was allowed for all relevant years.

3. Disallowance of Dry Docking Expenses:
The third issue was the disallowance of Dry Docking expenses of Rs. 1,13,82,244 for the assessment year 2002-03. The assessee contended that this issue was covered by the Tribunal's decision for the assessment year 2001-02, where the expenditure was allowed on an actual basis. The Tribunal decided to send the matter back to the Assessing Officer to verify whether the expenditure was incurred during the year in question, in light of the Tribunal's decision for the previous year. The order of the authorities below was set aside, and the issue was restored to the Assessing Officer for fresh examination.

Conclusion:
All appeals of the assessee were allowed in full, except for the appeal for the assessment year 2002-03, which was allowed partly and partly for statistical purposes.