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TMI Blog2014 (1) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... e board of directions with regard to the affairs of the assessee company - Therefore, while holding that the ship was indeed a qualifying ship for enjoying the TTS, the issue as to whether assessee qualified under section 115VC of the Act, remitted back to the Assessing Officer for fresh consideration – Decided partly in favour of Revenue. Deletion made u/s 14A of the Act – Held that:- As the disallowance under section 14A is concerned, there is no doubt that Rule 8D applied only from A.Y.2008-09 as decided in Varun Shipping Co. Ltd. Versus Additional Commissioner of Income-tax - 5(3), Mumbai [2011 (11) TMI 370 - ITAT MUMBAI] – the matter is already set aside the issue as to whether assessee was eligible for TTS, back to the Assessing Officer for consideration afresh - thus, it will be appropriate if the Assessing Officer once again consider the question of disallowance if any, to be made under section 14A of the Act for all these years, afresh. Addition to be made in book profits u/s 115JB of the Act - Provision for loan on revision of foreign currency loans – Held that:- It was included by the assessee as a part of establishment and other expenses, Assessing Officer had si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodity normally transported by road and therefore, a ship transporting such coal from port to port within India could not be considered as a qualifying ship for the benefit of tonnage tax under section 115VD of the Act. Further, as per Assessing Officer, assessee also did not fall within the definition of 'qualifying company' given under section 115VC of the Act, since the effective control and management was influenced by its major share holder named Gulf Fertilizers and Chemicals Ltd., which had its registered office in the Republic of Mauritius and which held 99.38% shares of the assessee company. He therefore, held that computation of the income of the assessee had to be done under the normal provisions of the Act. Apart from computing income under the normal provisions of the Act, Assessing Officer also computed tax payable under Section 115JB of the Act on the adjusted book profit as well. Where tax payable under MAT was higher, he assessed such tax as payable by the company and where tax payable under the normal provisions was higher, he opted for that. 5. In its appeal before the CIT(A), assessee argued that it could not be denied the special provisions applicable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). The CIT(A) had held that the assessee company was fully managed by a board of directors comprising of Mr.Abdul Qadir and Mrs. Mariam Abdul Quadir, who were in India, based on resolutions of the Board meeting alone. According to the Ld. D.R this alone was not sufficient to show that the place of effective management of the company was in India. 7. Per contra Ld. A.R strongly supported the order of the CIT(A). According to him, the question whether 'M V Gem of Ennore' satisfied the requirement of sec.115 VD, stood answered by the Tribunal in the case of West Asia Maritime Ltd. (supra). As for the question whether assessee qualified for the claim under section 115VC of the Act, there was a clear finding by the CIT(A) that Board of Directors were in India and Explanation(A) to Sec.115VC would clearly show that effective management of a company was at the place where board of directors took their decisions. 8. We have perused the orders of the lower authorities and heard the rival contentions. There is no dispute that 'M V Gem of Ennore' the ship on which assessee had claimed TTS under Chapter-XIIG of the Act was co-owned by the assessee and one of the other co-owners was Wes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and foreign ports. The operation of a seagoing ship does not assume any different character only for the reason that the ship is operating between two Indian ports. The character of operating a ship does not assume any other dimension only for the reason that the ship is operated between one Indian port and another foreign port. These are all matters never construed in the scheme of the Act providing the benefit of tonnage tax scheme to the assessees who are in the shipping industry and operating qualifying ships. This is not an issue particular to India. World over countries are providing such incentives to shipping industry for their own economic advantage. The policy of giving such incentives to shipping industry is a matter of larger policies relating to economic priorities. If the intent of the law is interpreted in such a manner to arrive at an erratic conclusion, that interpretation must always be avoided. The normal interpretation of the provision makes it clear that the restriction provided in sub-cl. (i) of s. 115VD applies only to those provision of goods or services unrelated to the core activities of operating ship. Even though the ship operated by the assessee is tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifically mentioned in para-7 of the said order that all the other conditions stipulated under Chapter-XIIG for availing TTS were satisfied. Here, on the other hand, Assessing Officer has disputed the assessee's claim as a qualifying company for a reason that the place of effective management was not in India. Assessee is relying on Explanation(A) despite 99.38% of its equity share being held by a company having registered office in Republic of Mauritius. According to the Assessing Officer, the effective management of the assessee was not in India. However, as per the CIT(A), two members comprising the board of directors were in India. In our opinion, this aspect has not received the required attention either by the Assessing Officer or by the CIT(A). The place where the board of directors of the company made their decision would not be India just because the two of the directors were in India. Attendant circumstances as to whether the said persons were residents of India or residing abroad or whether functioning from an office abroad were all required to be seen before coming to a decision regarding the place of effective management. We are therefore of the opinion that this aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the orders of the lower authorities and heard the rival contentions. In so far as the disallowance under section 14A is concerned, there is no doubt that Rule 8D applied only from A.Y.2008-09 as held by the Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. (supra). However, even for earlier years, a disallowance had to be done under section 14A of the Act based on facts and circumstances as ruled by their lordships in the above mentioned case. Nevertheless, after the decision of Hon'ble Bombay High Court in Godrej Boyce Mfg. Co. Ltd. (supra), Hon'ble Delhi High Court has in the case of Maxopp Investments Ltd. v. CIT (2012) 347 ITR 272, considered the retrospective applicability of sub-sections (2) (3) of Sec.14A and Rule 8D. View taken by the CIT(A) here is that if the assessee was eligible for claiming TTS under Chapter XIIG of the Act, then a disallowance under section 14A of the Act cannot be made. This no doubt is correct, in view of the decision of the Mumbai Bench in the case of Varun Shipping Co. Ltd. (supra). There cannot be any dispute in this regard. However, we have already set aside the issue as to whether assessee was eligible for TTS, back t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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