2011 (6) TMI 959 - AT - Income Tax

Summary

Issues involved:
The issues involved in the judgment are the qualification of a rig as a ship under section 115VD of the Income Tax Act, 1961 for opting the Tonnage Tax Scheme, and the disallowance of expenses under section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962.

Qualification of Rig as a Ship:
The revenue contended that the rig owned by the assessee, placed in a vessel for offshore drilling operations, does not qualify as a ship u/s 115VD for opting the Tonnage Tax Scheme. The High Court decision under section 33AC, holding that a rig on a barge may be considered a ship, was cited by the assessee. The Tribunal upheld the CIT(A)'s order based on the earlier decision, as no distinguishable features were presented by the lower authorities regarding the ship's classification as a factory ship.

Disallowance of Expenses under Section 14A:
The cross objection by the assessee pertained to the disallowance of expenses under Rule 8D. The Tribunal noted that Rule 8D was not applicable for the assessment year 2007-08, as per a Bombay High Court decision. The matter was remanded to the Assessing Officer for a fresh decision in accordance with the law, considering the facts of the case and the High Court's ruling.

Conclusion:
The Tribunal dismissed the revenue's appeal regarding the ship classification issue and allowed the assessee's cross objection on the expense disallowance for statistical purposes. The matter was remanded to the Assessing Officer for a fresh decision in line with the law and relevant court rulings.