2023 (7) TMI 14 - AT - Income Tax

Disallowance of depreciation and various expenditure - assessee is a qualifying Tonnage tax company - applicability of provisions of Section 28 to 43C are not applicable while computing the Tonnage tax income - CIT-A deleted the addition - HELD THAT - As per order dated 30th May, 2014. To the Tonnage tax company, special provision are applicable and the profits are computed from operating qualifying ships on the Tonnage income of the assessee u/s 115VP of the Act. The provisions of Section 28 to 43C of the Act are not applicable while computing the Tonnage tax income. The claim of the depreciation is also not separately allowed. It is not the case of the AO that the certificate for Tonnage tax scheme originally granted to the assessee on 17th February, 2005 and subsequently, renewed on 30th May, 2014 is not applicable to the assessee. In view of the above facts, the disallowance made by the CPC of depreciation and various expenditure are correctly deleted. No infirmity in the order of the CIT (A) in deleting the disallowance of expenditure as well as the depreciation made by CPC. We confirm the order of the CIT (A) - Decided against revenue.

Summary

Issues involved:
The judgment involves the appeal filed by the Deputy Commissioner of Income Tax against the appellate order passed by the National Faceless Appeal Centre, Delhi, regarding the computation of income for a company engaged in operating and chartering ships and vessels under the tonnage tax scheme for the assessment year 2018-19.

Comprehensive Details:

Issue 1: Computation of Income
The assessee, a tonnage tax company, filed its return of income for A.Y. 2018-19, but the Central Processing Centre determined the total income without considering the taxability under the tonnage tax scheme. The assessee contended that its income should be computed based on qualifying ship income under Chapter XII-G, and that disallowance under Sections 28 to 43C of the Act was not applicable due to its tonnage tax company status.

Issue 2: Disallowance of Expenses and Depreciation
The learned CIT (A) allowed the appeal, stating that the assessee qualified as a tonnage tax company and its income was correctly computed under Chapter XII-G. The disallowance made by the Central Processing Centre of various expenses and depreciation was deleted, as the company had not claimed additional depreciation under Section 32 of the Act. The Assessing Officer, aggrieved by this decision, appealed to the tribunal.

Judgment:
The tribunal confirmed the CIT (A)'s order, noting that the company was indeed a qualifying tonnage tax company with approved status. The profits were computed based on operating qualifying ships, and provisions of Sections 28 to 43C were deemed inapplicable. The tribunal found no fault in deleting the disallowance of expenditure and depreciation, as the company's tonnage tax scheme certificate was valid. Consequently, the appeal filed by the Assessing Officer was dismissed, affirming the decision of the CIT (A).

Separate Judgment:
The order pronounced on 27.06.2023 dismissed the appeal filed by the Assessing Officer, upholding the decision in favor of the tonnage tax company regarding the computation of income and disallowance of expenses and depreciation.