2018 (5) TMI 1761 - AT - Income Tax

Benefit of Tonnage Tax Scheme u/s 115VP/115VR - Offshore installations - Held that - rigs are qualifying ships u/s 115VD - Since the learned CIT (Appeals) while deciding the issue in favour of the assessee has followed the decision of the Tribunal in assessee s own case as well as the decision of Hon ble Jurisdictional High Court, therefore, in absence of any contrary material brought to our notice by the learned Departmental Representative, we find no infirmity in the order of the learned CIT (Appeals) allowing the ground raised by the assessee. - Decided against the revenue. Addition on account of difference in receipt as per TDS Certificate and amount shown in P L A/c - Held that - The assessee has properly reconciled the receipts vis- -vis the amount shown in the profit and loss account. The learned Departmental Representative could not controvert the factual finding of the learned CIT (Appeals) on this issue. - No additions - Decided against the revenue. Bad debts - amount written off - Held that - The reason assigned by the AO that assessee is having business relationship with these parties in later years is incorrect because in subsequent years there were no such business relationship continued with M/s Frontier Drilling as evident from the various documents and in view of the Arbitration award. - Claim of bad debts allowed - Decided against the revenue. Disallowance u/s 14A - no expenditure has been incurred for earning the dividend income - Held that - when the assessee gets tonnage tax benefit under section 115VP / 115VR of the Act, the addition under section 14A read with Rule 8D is not at all required. - Decided against the revenue.

Issues Involved:
1. Qualification of "rigs" as "qualifying ships" under section 115VD for Tonnage Tax Scheme.
2. Addition due to difference in receipts as per TDS Certificate and P&L Account.
3. Disallowance of amounts written off.
4. Disallowance under section 40(a)(ia) for late deposit of TDS.
5. Deletion of disallowance of depreciation on aircrafts.
6. Proportionate disallowance of interest on account of advancing interest-free loans to sister concern.
7. Disallowance under section 14A read with Rule 8D for exempt income.

Issue-wise Detailed Analysis:

1. Qualification of "rigs" as "qualifying ships" under section 115VD for Tonnage Tax Scheme:
The Revenue challenged the CIT (Appeals) decision to consider "rigs" as "qualifying ships" under section 115VD. The Tribunal upheld the CIT (Appeals) decision, noting that the issue had been previously decided in favor of the assessee by the Hon'ble Jurisdictional High Court. The High Court had observed that the vessels were registered under the Merchant Shipping Act and were qualifying ships for sea, dismissing the Revenue's contention that they were offshore installations.

2. Addition due to difference in receipts as per TDS Certificate and P&L Account:
The Assessing Officer added ?19,16,80,789/- due to a discrepancy between the receipts as per TDS certificates and the P&L account. The CIT (Appeals) deleted the addition after examining the reconciliation provided by the assessee, noting that the total receipts were correctly accounted for, including adjustments for TDS and rate fluctuations. The Tribunal upheld this decision, finding no infirmity in the CIT (Appeals) order.

3. Disallowance of amounts written off:
The Assessing Officer disallowed ?64,60,281/- written off by the assessee, arguing that the debts were not non-recoverable. The CIT (Appeals) accepted additional evidence and deleted the disallowance, noting that the write-off was due to an arbitration award and related to payments made under court directions. The Tribunal upheld this decision, finding no contrary material to dispute the CIT (Appeals) findings.

4. Disallowance under section 40(a)(ia) for late deposit of TDS:
The Assessing Officer disallowed ?2,01,280/- under section 40(a)(ia) for late TDS deposit. The CIT (Appeals) deleted the disallowance, aligning with the amendment allowing TDS deposit before the due date of filing the return. The Tribunal upheld this decision, citing consistent Tribunal views and the amendment's retrospective applicability.

5. Deletion of disallowance of depreciation on aircrafts:
The Assessing Officer disallowed depreciation on an aircraft not in use. The CIT (Appeals) directed the deletion, referencing the block of assets concept and previous assessments where depreciation was allowed. The Tribunal upheld this decision, noting that the asset's use in prior years sufficed for depreciation under the block of assets method.

6. Proportionate disallowance of interest on account of advancing interest-free loans to sister concern:
The Assessing Officer disallowed ?2,53,61,633/- interest on loans, arguing that interest-bearing funds were used for interest-free advances. The CIT (Appeals) deleted the disallowance, finding that the advances were made from interest-free funds and were commercially expedient. The Tribunal upheld this decision, agreeing that sufficient interest-free funds were available.

7. Disallowance under section 14A read with Rule 8D for exempt income:
The Assessing Officer disallowed ?15,12,468/- under section 14A read with Rule 8D for expenses related to exempt income. The CIT (Appeals) deleted the disallowance, noting that the assessee was entitled to tonnage tax benefits, making the disallowance unnecessary. The Tribunal upheld this decision, referencing similar Tribunal rulings and the principle of consistency.

Conclusion:
The Tribunal dismissed all appeals filed by the Revenue, upholding the CIT (Appeals) decisions on all issues, including the qualification of rigs as qualifying ships, reconciliation of receipts, write-offs, TDS deposit timing, depreciation on aircrafts, interest-free loans, and disallowance under section 14A. The judgments consistently favored the assessee, citing previous rulings, legal principles, and amendments.

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