2019 (2) TMI 652 - HC - Income Tax

Tonnage Tax Provisions to prior period income, reversal of prior period expenses, income from other sources, income from incidental activity and provisions to Sundry receipts of liquidate damages (Dry Dock) - profits on bar / shop sales and directors fees being eligible for benefit of tonnage tax provisions contending that the same do not arise out the assessee s core activity of operation of ships - Held that - The disputed amount under the head profits on bar / shop sales is extremely small. We keep such question to be considered in the appropriate cases. With respect to the director s fees, the Tribunal by the impugned judgment has recorded that such fees would have been allowed as an expenditure and therefore, refund of the same should be treated as income directly relatable to the core activity. It would appear, therefore, that the refund of the director s fees would only give rise to the accounting adjustment against the expenditure for such fees that the assessee s would have claimed while computing its income eligible for tonnage tax provisions. No question of law in this context, therefore arises. The Registry is directed to communicate copy of this order to the Tribunal. This would enable the Tribunal to keep papers and the proceedings relating to the present appeal available, to be produced when sought for by the Court.

Summary

Issues:
1. Deletion of addition of sundry credit balance and excess provisions.
2. Applicability of Tonnage Tax Provisions to prior period income, expenses, and other sources.
3. Profits on bar/shop sales and director's fees eligibility for tonnage tax provisions.

Analysis:
1. The first issue revolves around the Tribunal's decision to uphold the deletion of additions made by the Assessing Officer, totaling a significant amount, which were considered as assessed income. The question of law arises whether the Tonnage Tax provisions are applicable to these amounts. The Tribunal's reasoning for upholding the deletion needs to be examined in light of the specific circumstances and legal provisions.

2. The second issue concerns the Tribunal's decision to apply Tonnage Tax Provisions to prior period income, reversal of expenses, income from other sources, income from incidental activity, and provisions to Sundry receipts. The Assessing Officer's additions were deleted by the Ld. CIT(A), and the Tribunal upheld this decision. The question of law here is whether the Tribunal's application of Tonnage Tax Provisions to these various components was correct under the circumstances and in accordance with the law.

3. The third issue involves the objection raised by the Revenue regarding the profits on bar/shop sales and director's fees being eligible for tonnage tax provisions. The Revenue argued that these profits were not directly related to the core activity of operating ships. The Tribunal examined this objection and concluded that the director's fees, if refunded, should be treated as income directly linked to the core activity. However, the profits on bar/shop sales were considered extremely small, and the Tribunal suggested considering such questions in appropriate cases. The legal aspect of whether these profits and fees are entitled to tonnage tax provisions needs further analysis based on the Tribunal's findings and the relevant legal principles.

In conclusion, the judgment addresses complex issues related to the application of Tonnage Tax Provisions to various components of income and expenses, as well as the eligibility of certain profits and fees for tonnage tax benefits. The Tribunal's decisions in deleting additions and upholding certain provisions need to be scrutinized in light of the legal framework and specific factual circumstances to determine the correctness of the rulings.