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TMI Blog2013 (7) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... mv Prabhu Puni. Typically, when a vessel is described for sale/purchase purposes, the same is described in terms of its summer dwt enclosing extracts of information from independent sources, viz. Wikipedia, MarineTraffic.com, Clarkson Research Services Ltd. and Shippingdatabase.com. The extracts would show that the vessel, mv Prabhu Punis' dwt is 43,595. We are not in a position to approve the value of the CIT (A) on the basis of average prices of different category of ships adopted, as he has relied on prices quoted in a magazine and adopted an average method which is not prescribed. As noticed that the JB Boda certificate which was relied upon by assessee before the CIT (A) was issued in connection with the insurance of the Ship by M/s United India Insurance Co. Ltd as on 1.7.2002. The ship was insured for a sum of Rs.50.00 crores. In that the United India Insurance Company Ltd has stated that the Hull and Machinery insured value at Rs.50.00 crores. This Insurance was valid w.e.f. 1.7.02 to 30.06.03. In view of the above document available, this value accepted by the Insurance Company for the ship can be taken as reasonable value to arrive at ALP rather than going by the esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in considering the market price of ship on the theory of increase in market price between February, 2002 and November, 2002 on account of inflationary trend in market prices on average basis which is not a correct method and which is also not approved by the I.T. Rules. 4. The Learned CIT(A) has erred in not accepting the Valuation report of M/s. J.B. BODA SURVEYORS ADJUSTERS PVT. LTD. dated 11th June 2002 certifying the value of ship at US$9.60 million only on the ground that valuation report was submitted at the fag end of the assessment proceedings overlooking that A.O. vide letter dated 24th March, 2006 required to submit further information in connection with valuation of ship asking Assessee Company to furnish information on or before 24th March, 2006 and in compliance with the A.O.'s letter Assessee company furnished information alongwith Valuation Report of M/s. J.B. BODA SURVEYORS ADJUSTERS PVT. LTD. and therefore the said report cannot be overlooked by the A.O. and simultaneously disregarded by the learned CIT(A) when he had sufficient time to apply his mind on the Valuation Report as the said evidence was also available with the learned AO. 5. Alternately, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished the prices quoted in monthly magazine called 'The Platou Monthly'. AO did not agree with the sale price and he rejected the valuation certificate obtained from M/s Simpson Spence Young Shipbrokers on the reason that the ship was not inspected when the valuation was taken and further they have given a disclaimer, therefore, he rejected the valuation certified by the said valuer. However, considering that assessee had entered into addendum/ revised sale agreement and ultimately delivered the ship in February, 2003, he took the prices from the said magazine and arrived at US $ 13 million as the ALP which was worked to Rs.62,20,50,000 (conversion rate for US $ 1 = Rs.47.85). The addition under this head was made at Rs.16,74,75,000. 5. Before the CIT (A), assessee has raised various grounds including the jurisdiction to make addition under section 92C and also reliance on the magazine prices, whereas assessee has furnished a valuation certificate. However, in the course of appellate proceedings, they also furnished another valuation certificate from M/s JB Boda Offshore Surveyors and Adjustments Pvt. Ltd who has given the certificate of valuation at USD 9.60 million. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 1994 to 1996, most of which were of higher tonnage capacity. As against this the appellant's ship was built in 1992 and is of slightly lower capacity. Also, the AO has determined the sale price based upon the data contained in the said magazine and has also taken into account the rise in prices from month to month. However, this method adopted by the AO is also slightly wrong because the inflation in the prices are to be considered on a consistent basis. 3.7. It is seen that ships which are built before 1990 cannot be compared with the ships which are built in the later period because the price difference is very large and inflation of' prices from month to month is also quite at variance. From the data given in the magazine, it is therefore evident that very limited data only can be utilized for the purpose of determining Arm's length price of the ship. The data which in my opinion can be relevant and can be utilized is as under :- The Platou Monthly Dry Bulk Carriers Month Capacity in DWT Year and country in which manufactured Sale price in US $ (Millions) Feb.2002 45228 94 Japan 11.20 Avg.11.13 -do- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued by the appellant. The inflation in prices per month as computed above is 1.635%. So the aggregate inflation up to November, 2002 would be 14.71 % and hence Arm's length price for November would be US $ 11.32 million. 3.11. The exchange rate adopted by the AO is Rs.47.85 per US dollar which is for February. 2003. Since the' price is being determined for November, 2002, the exchange rate adopted should be Rs.47.71 per US dollar as adopted by the appellant. The Arm's length price of the ship is therefore, determined at Rs.54,00,77,200 which calls for an adjustment of Rs8,68,32,200 to the sale price of the ship. AO is accordingly directed to make the above adjustment. 3.12. The appellant has also advanced another argument that the sale of vessel is not a trading transaction as they are not dealing in purchase and sale of vessel. It is further argued that this is a transaction of selling a capital asset and the market price should be fixed on the basis of yield on account of profit earning capacity. However, no such ground has been taken in the grounds of appeal and hence this is only an after thought. Even on merits, the provisions of the Act are applicable so far as the dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm that both the figures are correct, i.e. 43,595 and 42,430, respectively, as they relate to summer and winter dwts of mv Prabhu Puni. Typically, when a vessel is described for sale/purchase purposes, the same is described in terms of its summer dwt. We are pleased to enclose extracts of information from independent sources, viz. Wikipedia, MarineTraffic.com, Clarkson Research Services Ltd. and Shippingdatabase.com. The extracts would show that the vessel, mv Prabhu Punis' dwt is 43,595. In addition, we brought to the notice of the M/s.Simpson, Spence and Young London, of th discrepancy, they have been kind enough to issue a clarification letter today which is self explanatory. Copy of the clarification letter is enclosed. Informatively, DWT is a measure of the ship carrying capacity which is denoted in terms of tonnes which is equivalent to a thousand kilograms. Basically, the deadweight of the ship is the total load it can carry safely. Now this total load not only includes the load of the cargo which it intends or is designed to carry but also the other non-cargo loads and these include bunkers, stores, fresh water, lube oil and even crew members. The deadweight is usually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on inspection of the vessel, condition of the vessel and further they have furnished a revised certificate as stated in the note with reference to the dead weight of the ship. Therefore, we cannot take the certificate given by the said surveyor as a valid one to be relied for arriving at the ALP. Even though the JB Boda certificate dated 11.06.2002 was for internal purposes, may be for the purpose of insurance, we are of the opinion that the insurance value as accepted by the insurer can be considered as reasonable valuation for the purpose of arriving at the ALP. Therefore, we direct AO to adopt the value of Rs.50.00 crores to be ALP for the purpose of arriving at the ALP under the provisions of the Act. Accordingly AO is directed to modify the order. Assessee's grounds are considered partly allowed. 12. The ground 3 on 5% standard deduction can not be allowed in view of change in law as well as there is only one price determined. The Additional grounds raised are academic in nature and more of submissions on facts therefore there is no need to consider them. 13. In the result appeal filed by assessee is partly allowed. Order pronounced in the open court on 30th April ..... X X X X Extracts X X X X X X X X Extracts X X X X
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