9911796707
TMI Blog2002 (2) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in sustaining the disallowance of Rs. 51,460 on account of expenditure towards rent and depreciation. 6. That on the facts and in the circumstances disallowances of Rs. 51,460 on account of expenditure on rent and depreciation is not justified. 7. That the manner and basis on which interest under sections 234B and 234C has been calculated is incorrect and the Commissioner (Appeals) should have directed the Assessing Officer to correct the said manner and basis. 2. The assessee carried on business of long distance transport of goods by road and sea and also owned diesel pumps at various places. The assessee had also other business including TCI Shipping, Wheels Rent A-Car, Gati Desk-to-Desk Cargo and Transcorp International Bureau D Exchange. For the assessment year under consideration, the assessee filed its return declaring total income of Rs. 4,77,35,842 on 31-12-1993. After going through the procedure prescribed under law, the Assessing Officer completed the assessment by making various additions vide order dated 28-3-1996. The assessee filed an application on 12-2-1996 to the Assessing Officer requesting that its claim amounting to Rs. 1,97,94,400 being twice the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleting the assessment on 28-3-1996 for the assessment year 1993-94. The assessee filed an application under section 154 of the Income-tax Act, 1961 for consideration of the same request vide application dated 22-4-1996, the contents of which are as under: "The Deputy Commissioner of Income-tax, Special Range-2, Hyderabad. Dear Sir, Sub: Assessment Year 1993-94 We write with reference to the order of assessment made for the assessment year 1993-94. In this connection, we invite your kind attention to our letter dated 12-2-1996 wherein we had made the following claims for deductions while completing the assessment: 1. Deduction for rent of Rs. 43,500 paid to National Airport Authority of India for the period from 1-9-1992 to 31-3 -1993. 2. Deduction under section 35(1)(ii) for a donation of Rs. 1,00,000 paid to Indian Institute of Education, Pune. 3. Deduction under section 33AC in respect of our Shipping Division for a sum of Rs. 1,97,94,400. It appears from the assessment order that said letter has escaped your attention while completing the assessment. As all the relevant information and papers in connection with the above claims made by us in the said lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the disallowance of Rs. 51,460 on account of expenditure towards rent and depreciation and ground No. 7 is about interest under sections 234B and 234C which he challenged. Learned counsel for the assessee first argued grounds 5 and 6 i.e. about disallowance of expenditure towards rent and depreciation for which he stated that this claim of the assessee has been wrongly disallowed by the Revenue authorities which has already been settled by decisions of various High Courts and the Income-tax Appellate Tribunal. He produced before us a copy of the order dated 28-11-2001 of the Hyderabad Bench 'A' of this Tribunal in I.T.A. No. 169/Hyd./96 for the assessment year 1993-94 in the case of this very same assessee and stated that the issue in dispute in ground Nos. 5 6 is squarely covered in favour of the assessee and prayed that the same relief may be given to the assessee in the present appeal also. 4. To the above prayer of the learned counsel for the assessee, no serious objection has been raised by the learned Departmental Representative. 5. We have gone through the order of the Tribunal, Hyderabad Bench 'A' dated 28-11-2001 in ITA No. 169/Hyd./96 for the assessment year 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Transport was Rs. 172.96 crores and the Shipping Freight and Charter Hire was Rs. 4.78 crores. This indicates that the appellant's main object was not, carrying on the business of operation of ships and even the shipping freight was less than the income by way of sales and services. Moreover, the appellant has not fulfilled the condition of debiting the income from shipping business to the profit and loss account and crediting the same to a Reserve account. Therefore, I hold that the appellant was not entitled to the deduction under section 33AC. This ground fails." From the aforesaid analysis the learned counsel stated that the first appellate authority was of the opinion that out of the total freight earned of Rs. 177.74 crores freight received from road transport was Rs. 172.96 crores and shipping freight and charter hire was Rs. 4.78 crores. Therefore, he concluded that the assessee's main business was not of operation of ships and the requirement of section 33AC of the I.T. Act have not been met. He drew our attention towards the order passed by the Commissioner (Appeals) wherein the second reason given by him is that the appellant has not complied with the requirement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, no allowance under this sub-section shall be made in respect of such excess." 6.1 According to the learned counsel for the assessee, the main ingredients for applicability of section 33AC for the assessment year 1993-94 are as under: (a) It is applicable only to a Government Company or a Public Company. (b) Such Company should have been formed and registered in India with the main object of carrying on business of operation of ships. (c) The available deduction is of an amount not exceeding total income (computed before making the deduction under this section and Chapter VI-A). (d) An amount equal to deduction should be debited to profit loss account of the year in which the deduction is to be allowed and credited to a Reserve Account. (e) The reserve account should be utilised in the manner laid down in sub-section (2). The total amount of allowance under section 33AC for all years put together, cannot exceed twice the amount of paid up share capital. The main emphasis of the learned counsel for the assessee is that the amendment was brought about with effect from 1-4-1996 which has made a major change. Prior to the amendment, the section envisaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than shipping business, or from sources other than business. 24.4 The amendment will take effect from 1-4-1996 and will accordingly apply in relation to the assessment year 1996-97 and subsequent years. 6.2 The learned counsel for the assessee submitted that the assessee Company was incorporated on 6-4-1965 and the requirements with respect to the Memorandum of Association are contained in section 13 of the Companies Act which requirements have been fulfilled. He drew our attention to clause 2 of the objects clause in the Memorandum of Association of the assessee Company which is as under: "To carry on the business of public carriers, transporters and carriers, goods, passengers, merchandise, corn-commodities and other products and goods and luggage of all kinds and description in any part of India and elsewhere, on land, water and air by any conveyance whatsoever." He argued that the business of the assessee Company is to carry on business of as transporters of goods on land, water and air and the main object of the assessee Company is carrying on this business which it is doing for the past several years. But the Assessing Officer has wrongly considered that the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portation. The assessee derived maximum revenue from the business of road transport. Of the total freight receipt of Rs. 177.74 crores, the freight received from Road Transport was Rs. 172.96 crores and the shipping freight and charter hire was Rs. 4.78 crores. This according to the learned Departmental Representative shows that the assessee's main object was not carrying on the business of operation of ships. He pointed out that though the Memorandum of Association of the assessee contained a long List of 36 objects it nowhere indicated as to what is the main object. An analysis of the objects of the Company showed that more than 90% of the objects related to road transport. The learned Departmental Representative sought to controvert the assessee's argument that the Company is registered prior to 1965 and as per section 13(1)(c) of the Companies Act there was nothing like main object, as not tenable because the assessee company was reincorporated on 2-1-1974 and there was change in the objects clause, which came into effect from 6-5-1981. However, here too no main object found place. As there is no definition of the main object in the Income-tax Act, the learned Departmental Repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y created a reserve as per the requirement. This kind of after-thought explanations and make-belief stories are not acceptable. (d) Alternatively, as per section 33AC(2), the reserve created should be utilised in a period of 8 years. The assessment year in question is 1993-94 and the time limit available to the assessee was upto 31-3-2001. Had the General Reserve is really meant for the purpose of section 33AC then the assessee should have utilised the reserve for acquiring a new ship or would have offered the same as income in the assessment year 2001-2002. The assessee failed to produce any evidence to show that the assessee has complied with this requirement as the time limit of 8 years as the same is completed by now. 8. No other point has been argued by both sides. 9. We have heard the learned counsel for the assessee as well as the learned Departmental Representative. We have also perused the relevant records available with us as well as the written submissions filed by the assessee's counsel as well as by the learned Departmental Representative. We have also perused the paper book filed by the assessee. No doubt the Assessing Officer completed the original assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be considered by us on the basis of the order passed by the revenue authorities. No doubt the assessee has filed an application dated 12-2-1996 for considering the claim in dispute but the Assessing Officer has completed the assessment without considering the claim of the assessee. The Assessing Officer has, however, considered the application under section 154 dated 22-4-1996 filed by the assessee. Aggrieved by the same, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) who vide his order dated 28-2-1997 decided the issue against the assessee holding as under in paras 10 to 10.3 of his order: "10. The appellant has contended in the next ground that the Assessing Officer erred in not allowing deduction of Rs. 1,97,94,500 under section 33AC of the IT Act in respect of appellant's shipping division. The learned A.R. has submitted that this claim had been made by the appellant during the assessment proceeding by its letter dated 12-2-1996. A copy of the letter has been furnished before me. In paragraph 3 of the aforesaid letter, the appellant has claimed as under: 'We are entitled to a deduction out of profits and gains derived from ships at our TCI Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from shipping business to the Profit and Loss Account and crediting the same to a Reserve Account. Therefore, I hold that the appellant was not entitled to the deduction under section 33AC. This ground fails." 9.1 The learned Counsel for the assessee drew our attention to the written submissions along with the paperbook filed by it in which his main stress on the fact that the assessee is in the business of shipping and its object is also to carry on the business of public carriers, transporters and carriers, goods, passengers, merchandise, corn-commodities and other products and goods and luggage of all kinds and description in any part of India and elsewhere, on land, water and air by any conveyances whatsoever. He also drew our attention towards the Memorandum of Association of the assessee Company which came into existence on 6-4-1965 and has stressed that the unamended provisions of section 33AC is applicable to the case of the assessee and that it is entitled to deduction of the amount of the total income as debited to the Profit and Loss Account of the previous year and credited to the Reserve Account in respect of which deduction is to be allowed. He has also brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it. This is the requirement of section 33AC of the Act. No doubt the assessee company is registered prior to 1965 as per section 13(1)(c) of the Companies Act but without fulfilling the requirements prescribed by the Statute, the benefit under section 33AC cannot be granted to the assessee. As already stated above under section 33AC(2) reserve is to be created by debiting the profit and loss account and crediting the reserve account and the same should be utilised for the purpose of acquiring new ships within a period of 8 years. The assessee has not produced any evidence to satisfy the same either before the Revenue authorities or before us. The assessee has not debited any amount to create the reserve as required under this section and has not shown any evidence for utilising the same even within the prescribed period under law. Keeping in view all the facts and circumstances of the present case and after examining the relevant records available with us, we are of the considered opinion that the assessee has failed to produce any evidence to show that it has complied with the requirements prescribed under law under which he has claimed the deduction in dispute without substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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