2014 (8) TMI 31 - HC - Income Tax

Applicability of section 44B operation of ships - reimbursement of demurrage charges paid - Held that - The amount referred to in sub-section (1) of Section 44B and which are deemed to be profits and gains of the business of operation of ships chargeable to tax under the head Profits and gains of business or profession shall be the amount firstly, paid or payable, whether in or out of India, to the Assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India and secondly, received or deemed to be received in India by or on behalf of the Assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India - Both conditions envisaged by sub-section (1) of Section 44B are not fulfilled - The provision has been invoked in case of reimbursement of demurrage charges paid or reimbursed by the present Assessee for import of crude oil - It cannot be termed, by any stretch of imagination, as perverse or vitiated by error of law apparent on the face of the record Decided against Revenue.

Summary

Issues involved:
1. Whether the Tribunal was justified in deleting the demand raised under sections 201(1) and 201(1A) as being barred by limitation.
2. Whether the provisions of Section 44B are applicable in the case.

Analysis of the judgment:
Issue 1:
The High Court admitted the appeal on the substantial question of law regarding the deletion of the demand raised under sections 201(1) and 201(1A) as being barred by limitation. The Court noted that the appeal deserved admission due to a similar controversy involving the same Assessee for a prior Assessment Year. The Court framed the substantial question of law as to whether the Tribunal was justified in deleting the demand raised under the mentioned sections. The Court considered this question deserving of admission and directed the appeal to be heard along with other pending appeals related to the same matter.

Issue 2:
Regarding the applicability of Section 44B, the Court observed that the Assessee, a Company engaged in refining crude oil, had entered into contracts with a consortium for various projects. The Department contended that the Assessee had remitted amounts for certain contracts. However, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal found that the provisions of Section 44B were not applicable in this case. The Court explained that the reimbursement of demurrage charges paid or reimbursed by the Assessee for importing crude oil did not fulfill the conditions specified under Section 44B. The Court upheld the findings of fact by the lower authorities, stating that the view taken was based on the peculiar facts and circumstances of the case and was not erroneous. Consequently, the Court dismissed the appeal on this issue, emphasizing that the second question did not constitute a substantial question of law.

In conclusion, the High Court admitted the appeal on the issue of the demand raised under sections 201(1) and 201(1A) being barred by limitation, while dismissing the appeal on the applicability of Section 44B due to the specific facts of the case. The judgment provided detailed reasoning for each issue, emphasizing the importance of the specific circumstances and legal provisions involved in determining the outcomes.