9911796707
TMI Blog2012 (12) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants: Shri Sampath Raghunathan, Adv. Shri Venkatesan R, Adv. For Respondent: Smt S Vijayaprabha, Jr.DR ORDER Per: B R Baskaran: Both the appeals of the assessee are directed against the orders passed by the Ld. CIT(A)-II, Kochi and they relate to the assessment years 2005-06 and 2008-09. 2. The various grounds raised by the assessee in both the years give rise to a main question, viz., whether the Ld. CIT(A) is justified in holding that the assessee is not entitled to the benefit of presumptive taxation prescribed under Chapter XII-G of the Act in respect of ships chartered in by it under slot charter arrangement, for want of valid certificate defined in sec. 115VX of the Act. 3. The facts relating to the said issue are stated in brief. The impugned assessment relating to the assessment year 2005-06 was completed by the Assessing Officer u/s. 143(3) r.w.s. 263 of the Act. The assessment for the assessment year 2008-09 was completed u/s. 143(3) of the Act. In both the years, the assessee opted for computation of shipping income under Chapter XII-G of the Act which contains Special Provisions relating to income of shipping companies in sections 115V to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed on the basis of net tonnage capacity of the qualifying ships, irrespective of actual freight charges earned by the qualifying ships. Sec. 115VA overrides the provisions of computation of business income prescribed in sec. 28 to 43C of the Act and the income computed as per Chapter XII-G shall be deemed to be the profits and gains of the business of operating qualifying ships. 6. We shall further examine the relevant provisions by posing various questions to ourself. The first question is What is Chapter XII-G? The answer is that Chapter XII-G contains Special provisions relating to income of shipping companies . The next question is What is a Shipping Company ? Though no direct answer to this question is provided in the provisions, yet we can say that a shipping company is a company whose main object is to carry on the business of operating ships (on the basis of definition of Qualifying company given in sec. 115VC of the Act). 7. The next question is What is meant by Operating ships ? Section 115VB of the Act defines the term Operating ships as under:- Operating ships. 115VB. For the purposes of this Chapter, a company shall be regarded as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its net tonnage is in force But does not include (i) A sea going ship or vessel if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land; (ii) Fishing vessels; (iii) Factory ships; (iv) Pleasure crafts; (v) Harbour and river ferries; (vi) Offshore installations (vii) Dredgers (up to 31.3.2005) (viii) A qualifying ship which is used as a fishing vessel for a period of more than thirty days during a previous year. 11. The next question is - How the income of tonnage tax company is determined?. The income is determined in accordance with sec. 115VG of the Act on the basis of net tonnage of the qualifying ship at a predetermined rate. For the sake of convenience, we extract below the provisions of sec. 115VG:- Computation of tonnage income 115VG (1) The tonnage income of a tonnage tax company for a previous year shall be the aggregate of the tonnage income of each qualifying ship computed in accordance with the provisions of sub-sections (2) and (3). (2) For the purposes of sub-section (1), the tonnage income of each qualifying ship shall be the daily tonnage income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a ship shall be determined in accordance with the valid certificate indicating its tonnage. (b) valid certificate means.- (i) in case of ships registered in India- (a) having a length of less than twenty four meters, a certificate issued under the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987 made under the Merchant Shipping Act, 1958 (44 of 1958); (b) having a length of twenty four meters or more, an international tonnage certificate issued under the provisions of the Convention on Tonnage Measurement of Ships, 1969, as specified in the Merchant Shipping (Tonnage Measurement of Ship) Rules, 1987 made under the Merchant Shipping Act, 1958 (44 of 1958); (ii) in case of ships registered outside India, a license issued by the Director-General of Shipping under section 406 or section 407 of the Merchant Shipping Act, 1958 (44 of 1958) specifying the net tonnage on the basis of Tonnage Certificate issued by the Flag State Administration where the ship is registered or any other evidence acceptable to the Director-General of Shipping produced by the ship owner while seeking permission for chartering in the ship. 13. To summarise, in our view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we analyse the various provisions of Chapter XII-G, we notice that (a) Section 115V is Definitions section. (b) Sections 115VA to 115VE provide the eligibility criteria . (c) Sections 115VF to 115VO contain computation provisions . (d) Sections 115VP to 115VS contain procedure for exercising option to avail tonnage tax scheme . (e) Sec. 115VT to 115VW prescribes the conditions to be complied with. (f) Sec. 115VX provides the method of Determination of tonnage . There should not be any dispute that a company should pass the test of eligibility criteria prescribed under sec. 115VA to 115VE of the Act in order to avail the benefit of Chapter XII-G. Once a company is shown as eligible, then it is required to compute the income and comply with the conditions as prescribed in the succeeding sections. As per sec. 115VA, the chapter XII-G is applicable only to the business of operation of qualifying ships. Conversely, the said provisions are not applicable if the ship operated by a tonnage tax company is not a qualifying ship. Hence, in our view, the ship chartered in under slot charter should also be a qualifying ship . Consequently, the assessee is required to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing ship, the income attributable to operating such non-qualifying ship shall be computed in accordance with the other provisions of this Act. This provision also reinforces our view that the provisions of Chapter XII-G applies only to the business of operation of qualifying ship. Accordingly, the ships chartered in under Slot charter arrangement should also be a qualifying ship. 19. In view of the foregoing discussions, we are of the view that the ld CIT(A) was right in law in upholding the order of the AO on this issue. 20. Another effective ground taken by the assessee relates to the question of submission of separate profit and loss account. The AO has taken the view that the assessee has failed to submit separate profit and loss account. However, it is the contention of the assessee that it has submitted it and accordingly it is contended that the AO was not right in estimating the income. We also notice that the AO has computed the income from the figures reported in the Profit and Loss account. In that case, there is no necessity to mention as estimation of income . However, the assessee did not point out any mistake in the computations made by AO in both the year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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