2015 (3) TMI 226 - AT - Income Tax

Benefit of tonnage tax scheme - Held that - ship operated by the assessee M.V.Gem of Ennore transporting thermal coal from one location to another location within the country is a qualifying ship under section 115VD of the Income Tax Act, 1961 and the assessee is entitled for the benefit of tonnage tax scheme provided under section XII C of the Act. Following decision of assessee's own previous case 2011 (7) TMI 1017 - ITAT CHENNAI Disallowance under section 14A - Held that - Following decision of Varun Shipping Co.Ltd. 2011 (11) TMI 370 - ITAT MUMBAI - order of the Commissioner of Income Tax (Appeals) on this issue is upheld - Decided against Revenue.

Summary

Issues:
1. Entitlement for benefit of tonnage tax scheme under Chapter XII C of the Act.
2. Deletion of disallowance under section 14A of the Act.

Entitlement for benefit of tonnage tax scheme under Chapter XII C of the Act:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2008-09. The first issue raised by the Revenue was regarding the entitlement of the assessee for the benefit of the tonnage tax scheme under Chapter XII C of the Income Tax Act. The Tribunal noted that a similar issue had been decided in favor of the assessee by a co-ordinate Bench for the assessment year 2006-07. The Third Member of the Tribunal in the previous case agreed that the ship operated by the assessee qualified under section 115VD of the Income Tax Act and was entitled to the benefit of the tonnage tax scheme under section XII C. Following the precedent, the Tribunal rejected the grounds raised by the Revenue on this issue.

Deletion of disallowance under section 14A of the Act:
The second issue raised by the Revenue was the deletion of disallowance under section 14A of the Act by the Commissioner of Income Tax (Appeals). The Assessing Officer had initially made the disallowance, which was later deleted by the Commissioner of Income Tax (Appeals) based on the assessee's income being computed under the tonnage tax scheme. The Tribunal referred to a decision of the Mumbai Bench in a similar case where it was held that when the income of the assessee is computed under special provisions like Chapter XIIG, only expenses directly related to the business are deemed allowed. Therefore, no separate disallowance under section 14A can be made for expenditure related to earning exempt dividend income. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on the Mumbai Bench's ruling and dismissed the appeal of the Revenue.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the entitlement of the assessee for the tonnage tax scheme benefit and the deletion of disallowance under section 14A of the Act. The decision was based on previous rulings and interpretations of the relevant provisions of the Income Tax Act.