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TMI Blog2012 (5) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... have to take into account use of such asset for tonnage tax business and the other business.Assessing Officer is said to have accepted the same formulae, as is rejected in this assessment year, for apportionment of expenditure in the immediately succeeding assessment year, in our humble understanding, cannot act as a estoppel against the specific provisions of law. The provisions of law under section 115 VJ have not been taken into account by the authorities below. Appeal is allowed by way of remand to AO - IT APPEAL NO. 824 (KOL.) OF 2009 - - - Dated:- 17-2-2012 - PRAMOD KUMAR, MAHAVIR SINGH, JJ. Manish Tiwari for the Appellant. Amitava Roy for the Respondent. ORDER Pramod Kumar, Accountant Member By way of this appeal, the assessee appellant has called into question correctness of CIT(A)'s order dated 10th February 2009, in the matter of assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for the assessment year 2006-07, on the following grounds: 1. That on the facts and in the circumstances of the case, learned CIT(A) is wrong and unjustified in holding that the Assessing Officer made no mistake in ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 3,70,22,435, i.e. the difference between revenues and expenditure relating to shipping business, and paid tax on income of Rs. 1,18,57,063 as computed under section 115 VG. So far as this computation of income under tonnage scheme is concerned, the Assessing Officer had no issues with the assessee. 3. However, while examining computation income from activities other than shipping business, the Assessing Officer had some reservations on the course adopted by the assessee. He noted that the assessee has shown income from interest at Rs. 2,95,93,810, service charges recovered at Rs. 51,94,300 and rent at Rs. 48,300, thus aggregating to Rs. 3,48,36,410 as income from activities other than shipping business. Out of these revenues, the assessee claimed deduction for proportionate expenses of Rs. 1,01,80,626. These proportionate expenses, as the Assessing Officer, were computed by aggregating (a) non-shipping business expenses at Rs. 1,92,04,870, (b) salaries, wages and other benefits at Rs. 36,05,158, (c) depreciation on assets other than ships at Rs. 13,07,341, (d) donations at Rs. 31,17,270. The aggregate amount so worked out was Rs. 2,10,00,099, and the same was divided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what is the quantum of expenditure that should be ignored in the light of option for tonnage tax scheme". Having noted that the assessee as also the Assessing Officer agree that all the direct expenses for shipping activities, as also a portion of common expenses related to, or apportionable to, the shipping activities are to be ignored for this purpose, and the dispute is confined to the ratio in which common expenses are to be apportioned between shipping and non-shipping business activity, the CIT(A) expressed the view that gross receipts from shipping business as also non shipping business should be taken into account for this purpose. He was of the opinion that the assessee's insistence on taking into account gross income from non-shipping activity and net income from shipping activity is 'completely misplaced'. He thus approved the action of the Assessing Officer and declined to interfere in the matter. The assessee is aggrieved and is in appeal before us. 5. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 6. We find that, in terms of the provisions of Section 115 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnalia, the same is not the position so far as earning passive incomes such as interest, dividend and rent are involved. Take for example, the position regarding interest income. When an assessee places bank deposits for earning interest income, which are surplus funds at that point of time, it cannot be said that a part of entire general management costs can be reasonably allocated, leave aside allocation of such costs in the ratio of income generated by business in general and by placing the deposits, as costs to earn that interest income. Similarly, when the assessee has used borrowed funds for earning interest income, no part of relatable interest costs can be allocated to the shipping business income. As far as depreciation is concerned, there is a further rider that not only the allocation of depreciation has to be on a reasonable basis but such reasonable basis should have regard to "the use of such asset for the purpose of the tonnage tax business and for the other business" or other activity. The allocation of depreciation costs has to be on the basis of usage of asset in respect of which depreciation is claimed. It is thus clear that allocation of all the common costs on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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