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TMI Blog2012 (11) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... in law. His finding in this behalf is therefore confirmed. Similarly, the Department has not placed any material on record to rebut the finding recorded by the CIT(A) that the respondent-company has already filed its return of income at Mumbai. That being the position, the provisions of section 172(7) would apply to the respondent-company. Besides, as rightly observed by the CIT(A), the Income-tax Act does not permit multiple assessments in the hands of the same taxable entity and that too in respect of income from the same business. On these facts, unable to disturb the finding recorded by the CIT(A) that the respondent-company is liable to be assessed on the basis of return filed u/s 139(1) for its entire income is therefore confirmed. His further order quashing the order passed by the AO u/s 172(4) is also resultantly confirmed. Perusal of the order passed by the CIT(A) shows that he has taken a view that the case of the respondent falls u/s 172(7) and not u/s 172(4). The respondent-company has also accepted the liability to be dealt with u/s 172(7). The jurisdictional AO may therefore verify the position and take such action as may be warranted in law in terms of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal company, i.e., freight beneficiary, is registered in France and resident of France. In the year under appeal, the principal company operated 40 voyages arriving at Mundra Port. The respondent-company, acting as agent of the freight beneficiary, filed voyage returns in respect of the aforesaid 40 voyages before the Assessing Officer at Gandhidham as required by section 172(3) of the Income-tax Act. Instead of passing 40 orders u/s 172(4) separately to dispose of each of the aforesaid 40 voyage returns filed by the Respondent u/s 172(3) before him, the Assessing Officer passed, for the sake of convenience, a composite order u/s 172(4) on 29.12.2010 disposing of all the 40 voyage returns filed by the Respondent-company for the assessment year under appeal as the factual matrix and the issues in all of them were identical. He has worked out taxable income in respect of each voyage covered by each return filed by the respondent-company u/s 172(3) separately in the order passed by him u/s 172(4). Perusal of assessment order shows that the AO has assessed the taxable income u/s 172(4) in respect of all the 40 voyages at Rs. 2,09,67,176/-, being 7.5% of total amount of freight ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, main or goods shipped at a port in India" In addition, the relevant part of subsection (3) reads as under:- 172 (3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Assessing Officer a return of the full amount paid or payable to the owner or charter or any person on his behalf, on account of the carriage of all passengers, livestock, mail or goods shipped (emphasis supplied) at that port since the last arrival of the ship thereat. Therefore, the section applies only for freight received/receivable by owner/charter (or any person on its behalf). However, whether the appellant is owner/charter or not on the facts of the case is not adjudicated here, because even in case of it is, it has to be assessed as per option exercised u/s. 172(7). Therefore, ground 5 (for all the 40 appeals) is decided in appellant's favour." 5. Aggrieved by the order passed by the CIT(A), the Department is now in appeal before this Tribunal. 6. At the time of hearing before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO u/s 172(4). He submitted that the ld. CIT(A) ought to have confirmed the action of the AO unless there was material on record to indicate that the Respondent-company had exercised its option in terms of section 172(7). According to him, the ld. CIT(A) ought to have verified as to whether the respondent-company had included the income from 40 voyages which was taxed by the AO in the order under appeal, in its return of income filed u/s 139(1). He urged that the order passed by the CIT(A) should therefore be vacated or alternatively the AO be given the option to verify the facts and thereafter tax the income from 40 voyages in accordance with law. 9. In reply, the ld. ld. authorized representative for the Respondent-company supported the order passed by the CIT(A). His submissions were three-fold: One, the appellant and the freight beneficiary are engaged in regular shipping business and not in occasional shipping business and therefore the provisions of section 172 are inapplicable to them. In this connection, he referred to the finding recorded by the CIT(A) and submitted that the Department has placed no material on record to rebut the finding recorded by the CIT(A) in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case. 4. For this purpose, "tax effect" means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter referred to as "disputed Issues"). However the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. 5. The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of disputed issues in an assessment year in the case of every assessee exceeds Rs. 3 lakhs. After careful consideration of the rival submissions, we hold that tax effect in a "case" means overall tax effect in respect of disputed issues in a particular assessment year in the case of the assessee himself. Tested on the aforesaid basis, tax effect in respect of disputed issues in the assessment year under appeal in the case of respondent-company is more than Rs. 3 lakhs and hence all the 40 appeals filed by the Department are held to be maintainable. 12. The aforesaid view taken by us is also supported by the judgment dated 29.8.2011 (unreported so far) of the Hon'ble Supreme Court in CIT v. Surya Herbal Ltd. [2011], in which the Hon'ble Court has held as under: "Liberty is given to the Department to move the High Court pointing out that the Circular dated 9th February 2011 should not be applied ipso facto, particularly, when the matter has a cascading effect. There are cases under the Income-tax Act, 1961, in which a common principle may be involved in subsequent group of matters or large number of matters. In our view, in such cases if attention of the High Court is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows that the persons covered by section 172 are only those who are in occasional shipping business and not in the regular shipping business. Those who are in the regular shipping business are clearly outside the scope of section 172. They are covered by section 44B which contains "Special provision for computing profits and gains of shipping business in the case of non-residents". While section 172 seeks to tax profits of non-residents from occasional shipping business, section 44B seeks to tax their profits from regular shipping business. Sub-section (1) section 172 empowers the Assessing Officer to levy and recover tax in the case of any ship belonging to or chartered by a non-resident in a summary manner notwithstanding anything contained in any other provisions of the I-T Act. Sub-section (2) of section 172 contains summary procedure for computing the income of non-residents from such ships @ 7.5% of the amount paid or payable on carriage of passengers, livestock, mail or goods to the owner or charterer of such ships or to any person on his behalf. Sub-section (3) of section 172 requires the master of the ship to prepare and furnish, before the departure of any such ship, to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a return of the full amount paid or payable to the owner or charterer on account of the carriage of all passengers shipped at that port since the last arrival of the ship thereat. Sub-section (3) provides that if the master is unable to do so, he has to make satisfactory arrangement for the filing of the return and payment of the tax by any other person on his behalf. Sub-section (6) provides that a port clearance certificate shall not be granted to the ship until the Collector of Customs is satisfied that the tax assessable under this section has been duly paid or that satisfactory arrangements have been made for the payment thereof. In our view, the aforesaid procedure of assessing the income of a non-resident Indian because of his occasional activity in shipping business in India would not be applicable in a case where there is a convention between the Government of India and the foreign countries as provided under section 90 of the Income-tax Act. In the case of such agreement, section 90 would have overriding effect." 17. It is thus quite evident that the summary procedure contemplated by section 172 would not be applicable to (i) assess the profits of non-residents from reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-resident Indian because of his occasional activity in shipping business in India would not be applicable in a case where there is a convention between the Government of India and the foreign countries as provided under section 90 of the Income-tax Act". The reason for such a view is obvious. Section 172(2)/(4) provides for summary assessment @ 7.5% of the freight paid or payable. By the very nature of assessment contemplated by section 172, it is not possible to deal with the cases covered by Double Taxation Avoidance Agreement. In the matters before us, the AO has rejected the claim of the respondent-company that its case falls under DTAA. Such an examination, in our view, cannot be undertaken in the proceedings u/s 172 as the AO has no discretion u/s 172(2)/(4) except to compute the income @ 7.5% of freight paid or payable. It is perhaps for this reason that section 172(7) gives an option to the owners/charterers of ships to seek assessment of their income in accordance with the normal provisions of the Income-tax Act. Once a return is filed by a non-resident u/s 139 claiming the benefit of DTAA, his assessment would need to be completed under the normal provisions of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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