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2017 (3) TMI 1941 - AT - Income TaxBenefit of tonnage tax scheme provided under Chapter XII C of the Act - CIT(A) held that the assessee is eligible for tonnage tax scheme, thus further disallowance u/s 14A cannot be made - CIT(A) further deleting the addition of 14A for the purpose of 115JB disallowances holding that section 14A is not acceptable to shipping companies - As contended by the ld. DR that against the order of the Tribunal for the assessment year 2006-07, as has been followed in the assessment year 2008-09, the Department has filed an appeal before the Hon ble Madras HELD THAT - As respectfully following the decision of the Coordinate Benches of the Tribunal in assessment year 2008-09 2015 (3) TMI 226 - ITAT CHENNA , we sustain the order of the ld. CIT(A), who has passed a well reasoned order by holding that the assessee is entitled for the benefit of tonnage tax scheme provided under Chapter XII C of the Act. Disallowance under section 14A read with Rule 8D as well as inclusion of the said disallowance to 115JB of the Act, the ld. CIT(A) followed the decision of the Tribunal for earlier assessment years, wherein, the decision of Mumbai Benches of the Tribunal in the case of Varun Shipping Corporation Ltd. v. ACIT 2011 (11) TMI 370 - ITAT MUMBAI has been followed. Under the above facts and circumstances, we find no reason to interfere with the orders of the ld. CIT(A) and all the three grounds raised in the all the appeals of the Revenue are dismissed.
Issues:
1. Eligibility for tonnage tax scheme under Chapter XII C of the Income Tax Act, 1961. 2. Disallowance under section 14A cannot be made if income is computed under tonnage tax scheme. 3. Deletion of addition of 14A for the purpose of 115JB disallowances. Eligibility for Tonnage Tax Scheme: The appeals by the Revenue challenged the order of the ld. Commissioner of Income Tax (Appeals) regarding the eligibility of the assessee for the benefit of the tonnage tax scheme under Chapter XII C of the Income Tax Act, 1961. The Tribunal referred to previous decisions, including one for the assessment year 2006-07, where it was held that the ship operated by the assessee qualified for the tonnage tax scheme. The Tribunal upheld the decision, rejecting the Revenue's grounds against it. The Tribunal emphasized that the income from operating ships computed under Chapter XIIG allowed only expenses related to the business, disallowing any addition to income under section 14A for expenditure related to earning exempt dividend income. Disallowance under Section 14A and 115JB: The Revenue contested the deletion of disallowance under section 14A by the ld. Commissioner of Income Tax (Appeals). The Tribunal noted that the Mumbai Bench had previously deleted such disallowances under similar circumstances. It highlighted that when income is computed under special provisions like the tonnage tax scheme, only expenses directly related to the business are allowed, and no separate disallowance under section 14A can be made. The Tribunal upheld the ld. Commissioner's decision based on the Mumbai Bench's ruling, rejecting the Revenue's grounds against it. The Tribunal further emphasized that the Department's appeal against previous decisions could not warrant a different view, sustaining the order of the ld. Commissioner. Deletion of Addition for 115JB Disallowances: The ld. Commissioner's decision to delete the addition of 14A for the purpose of 115JB disallowances was based on following the Tribunal's decision for earlier assessment years. The Tribunal upheld this decision, citing the Mumbai Bench's ruling in a similar case. It concluded that there was no reason to interfere with the ld. Commissioner's orders, and all the grounds raised by the Revenue in the appeals were dismissed. Consequently, all the appeals filed by the Revenue were dismissed, affirming the decisions of the ld. Commissioner of Income Tax (Appeals). In conclusion, the Tribunal upheld the eligibility of the assessee for the tonnage tax scheme, rejected the Revenue's appeal against the deletion of disallowance under section 14A, and dismissed the addition of 14A for 115JB disallowances. The decisions were based on previous rulings and the specific provisions of the Income Tax Act, ensuring that only expenses directly related to the business were allowed under the tonnage tax scheme, precluding additional disallowances under section 14A.
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