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TMI Blog2011 (11) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... and confirmed by the CIT(Appeals). It is observed that both the amounts in question which were added back by the AO for the purpose of computing book profit of the assessee in accordance with the provisions of section 115JB admittedly related to the activities of a tonnage tax company and the same were already deducted by the assessee for the purpose of computing book profit derived from the said activity. In these circumstances, we are of the view that the same should have been added back even for the purpose of computing book profit derived from the activities of a tonnage tax company which is eligible for exclusion from the book profit for the purpose of section 115JB – Decided in favor of assessee. - IT Appeal No. 5576/Mum./2011 - - - Dated:- 30-11-2011 - P.M. Jagtap, V. Durga Rao, JJ. Arvind Sonde and A.T. Jain for the Appellant. Subachan Ram for the Respondent. ORDER P.M. Jagtap, Accountant Member This appeal filed by the assessee is directed against the order of learned CIT(Appeals)-9, Mumbai dated 21-06-2011. 2. The issue raised in ground No. 1 of this appeal relates to the disallowance of Rs. 44,07,875/- made by the AO and confirmed by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned by them. So far as the applicability of Sec. 14A and Rule 8D is concerned, as regards dividend income of Rs. 90,64,409/- it cannot claim that no expenditure at all has been incurred for earning this exempted income. After the decision of Bombay High Court in the case of Godrej Boyce Mfg Co. Ltd. 328 ITR 81. It is very clear that Rule 8D is applicable from Assessment year 2008-09. In this case, the Assessing Officer has made his calculation as per Rule 8D which are perfectly correct. The appellant has relied on certain case laws. However, these case laws are not relevant here because they are not on the issue involved. Therefore, this ground of appeal is dismissed." 5. The learned counsel for the assessee invited our attention to the relevant provisions of Chapter XIIG and explained the special tonnage tax scheme provided therein for the purpose of taxing the income from shipping business. He submitted that once the income from shipping business is offered by the assessee under the said scheme and the same is assessed accordingly, no expenditure other than the expenditure incurred for earning income from shipping business can be said to have been allowed. He contended that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the business of operating ships is computed as per the special provisions of Chapter XIIG, any expenditure other than the expenditure incurred for the purpose of the said business has been allowed and consequently no addition to income so computed can be made by way of disallowance u/s 14A on account of expenditure incurred by the assessee in relation to earning of exempt dividend income. We, therefore, find merit in the contention of the learned counsel for the assessee that the income of the assessee from the business of operating ships having been computed in accordance with the provisions of Chapter XIIG, only the expenses incurred for the said business are deemed to have been allowed and no addition to such income can be made by way of disallowance u/s 14A on account of any expenditure incurred in relation to earning of exempt dividend income. In our opinion, if at all the assessee has claimed any such expenditure in computation of profit of business of shipping, the same are to be taken as disallowed when the income of the said business is finally computed in accordance with the provisions of Chapter XIIG and no separate disallowance on account of such expenditure u/s 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business u/s 115VO also if they were to be excluded while computing the book profit u/s 115JB. This contention of the assessee was also not accepted by the AO on the ground that book profit of shipping business u/s 115VO for the purpose of tonnage tax was computed at Rs. 223,42,48,971/- as per form 29B submitted by the assessee company itself duly certified by a Chartered Accountant. He held that the assessee, therefore, was entitled for deduction while computing the book profit u/s 115JB only to the extent of Rs. 223,42,48,971/- and there was no provision for claiming any further deduction u/s 115VO as claimed by the assessee. Accordingly the amounts of Rs. 50 crores and Rs. 12,62,29,000/- were added back by the AO while computing the book profit of the assessee company u/s 115JB in the assessment completed u/s 143(3) vide an order dated 25-11-2010. 10. Against the order passed by the AO u/s 143(3), an appeal was filed by the assessee before the learned CIT(Appeals) challenging inter alia, the additions of Rs. 50 crores and Rs. 12,62,29,000/- made by the AO while computing book profit u/s 115JB on account of provision for exchange rate variation and impairment loss respectively. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e because the exchange gain related to the loan taken for acquiring qualifying ship is found to be from the core activities of the appellant and is excluded for computing Book Profit u/s. 115JB of the Act." 11. The learned counsel for the assessee submitted that as per the provisions of section 115VO, the book profit derived from the activities of a tonnage tax company is liable to be excluded from the book profit of the company for the purposes of section 115JB. He invited our attention to the statement giving computation of book profit of the assessee company to show that both the amounts in question were excluded for the purpose of computation of book profit u/s 115JB as well as while computing the book profit derived from the activities of a shipping business computed u/s 115VO which was excluded from the book profit u/s 115JB. He submitted that both these amounts which have been added back by the AO for the purpose of computing book profit u/s 115JB are relevant to the shipping business of the assessee and the same, therefore, ought to have been added by him for computing the book profit derived from the shipping business u/s 115VO which was liable to be excluded from the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added back by the AO for the purpose of computing book profit u/s 115JB were related to the activities of tonnage tax company i.e. shipping business and the same were deducted for the purpose of computing book profit derived from the activities of tonnage tax company as well as for the purpose of computation of book profit u/s 15JB. These two amounts have been added back by the AO for the purposes of computing book profit of the assessee company as per Explanation 1 to section 115JB. 14. Before us, it is not the case of the assessee that these adjustments are not permissible as per Explanation 1 to section 115JB. The plea of the assessee is that the said two adjustments being undisputedly relating to the shipping business, i.e. the activities of a tonnage tax company, similar adjustments should have been made in computation of book profit derived from the said activities which was liable to be excluded from the book profit of the assessee company for the purpose of section 115JB as provided in section 115VO. This stand of the assessee, however, has not been accepted either by the AO or by the learned CIT(Appeals) on the ground that the book profit derived from the activities of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him for the purpose of computing book profit u/s 115JB were related to the activities of a tonnage tax company on the ground that the book profit of the said activities as declared by the assessee was duly certified by the Auditors in the report furnished in form No. 29B. This stand taken by the AO, in our opinion, is self contradictory and inconsistent which cannot be upheld. 16. It is observed that both the amounts in question which were added back by the AO for the purpose of computing book profit of the assessee in accordance with the provisions of section 115JB admittedly related to the activities of a tonnage tax company and the same were already deducted by the assessee for the purpose of computing book profit derived from the said activity. In these circumstances, we are of the view that the same should have been added back even for the purpose of computing book profit derived from the activities of a tonnage tax company which is eligible for exclusion from the book profit for the purpose of section 115JB. In our opinion, the book profit derived from the activities of a tonnage tax company which is eligible for exclusion from the book profit of the company for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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