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TMI Blog2015 (3) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... e restored to the file of the Assessing Officer for deciding the same afresh after taking into consideration the assessment made for the assessment year 2005-06 on similar issue and after verifying of the relevant facts. As the learned Departmental representative has also not raised any objection in this regard, we restore this limited issue to the file of the Assessing Officer for deciding the same afresh. As regards the claim of the assessee for allocation of common costs towards interest and dividend income, we follow our conclusion drawn in the assessment year 2005-06 and decide this issue against the assessee - Decided partly in favour of assessee for statistical purposes. Re-adjusting the turnover by reducing 73.52 crores from core shipping - Held that:- Respectfully following the Tribunal s order dated July 29, 2011 (Shipping Corporation of India Ltd. v. Addl. CIT [2011 (7) TMI 588 - ITAT, Mumbai]) in the assessee s own case for the assessment year 2007-08, we uphold the action of the authorities below in reducing the profit on sale of ships and fixed ships from the turnover of core shipping. The action of the authorities below in reducing the excess provision written back a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore have been heard together and are being disposed of by this single consolidated order for the sake of convenience. 2. As submitted by learned counsel for the assessee, ground Nos. 1 and 2 raised by the assessee in its appeal for the assessment year 2005-06 are general seeking no specific decision from us. 3. The issues involved in ground Nos. 3 and 4 are interlinked and the same read as under : "3. On the facts and as per provisions of 'Act', 'Commissioner of Income-tax (Appeals)' has failed to appreciate that : 3.1 The appellant-company is covered under Chapter XII-G, of the 'Act' for determination of its taxable income. 3.2 The appellant-company's various incomes, viz., core shipping, incidental shipping, interest and dividend are from business of operation of qualified ships. 3.3 The appellant-company has, as per provisions of section 115VJ of the Act, given treatment of allocation of common cost in the return of income on reasonable basis. 4. On the facts and as per provisions of the 'Act' the Commissioner of Income-tax (Appeals), ought to have : 4.1 Allowed the appellant-company's appeal and 4.2 Allowed the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business related activity. He held that the income earned by the assessee on account of interest on monies deployed out of surplus funds as well as dividend income was chargeable to tax under the head "Income from other sources" and the assessee therefore was not entitled to claim the deduction on account of apportionment of common costs as provided in section 115VJ of the Act. He held that the assessee was entitled to deduction against such income only on account of expenditure wholly and exclusively incurred for the purpose of earning such income and estimating such expenditure at ₹ 1 lakh out of establishment charges, he allowed the deduction only to that extent under section 57(iii) of the Act. 5. The disallowance made by the Assessing Officer on account of its claim for deduction for proportionate cost against interest and dividend income was challenged by the assessee in an appeal filed before the learned Commissioner of Income-tax (Appeals) and the following submission was made on behalf of the assessee before the learned Commissioner of Income-tax (Appeals) in support of its claim on this issue : "(1) SCI is engaged fully in shipping business. It ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest income is emerging due to temp in of funds in deposits, which are earned out of core shipping activities. The administrative expenses are incurred for entire activities, which include core shipping activities and incidental activities and other income. More over as per provision of section 115VJ SCI is allocating the expenses or allocating common cost. Even though expenses allocated to 'Income from other sources' is around ₹ 3.15 crores the amount deducted is required to be treated as expended wholly and exclusively for earning such income. Therefore the expenses should be allowed as the apportionment or allocation is not on ad hoc basis but as per special provisions of section 115VJ (as made available to a tonnage tax shipping company) and on the basis of mathematical and scientific formula applied for the purpose." 6. The learned Commissioner of Income-tax (Appeals) did not find merit in the submission made on behalf of the assessee on this issue. According to him, the income from interest and dividend was mainly derived by the assessee from surplus funds kept in the banks and other public financial institutions and since this investment was not ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of making or earning such income.' As the expenditure being claim by the assessee cannot be said to have been laid down or expended wholly and exclusively for the purpose of making or earning such income, we uphold the finding of the Revenue authorities in this regard. In our opinion, the Assessing Officer has rightly held that the assessee would not have incurred the expenditure claimed for earning income. The estimation of ₹ 1,00,000 by the Assessing Officer, in our opinion, is reasonable. Coming to reliance placed by the learned senior counsel, on the decision of the hon'ble jurisdictional High Court in Chinai and Co. P. Ltd. v. CIT [1994] 206 ITR 616 (Bom), we are of the opinion that these are factual matters and the same cannot be taken as a binding precedent. In view of the above discussion, we uphold the finding of the Commissioner (Appeals) and dismiss ground No. 7, raised by the assessee." 8. At the time of hearing before us, learned counsel for the assessee has submitted that the investment in fixed deposits was made by the assessee- company out of its income from shipping business and interest earned thereon thus very much formed part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income was earned by the assessee- company on account of interest on fixed deposits made out of surplus funds and dividend income earned on investment made in the shares of other company and having regard to all the facts of the case, we are of the view that the same cannot be said to have earned by the assessee by carrying on any separate business activity other than the tonnage tax business as envisaged in section 115VJ of the Act. The said income was chargeable to tax in the hands of the assessee under the head "Income from other sources" as rightly held by the authorities below and even the assessee itself had originally offered the said income under the head "Income from other sources". As regards the decision of the hon'ble Bombay High Court in the case of Punit Commercial Ltd. [2000] 245 ITR 550 (Bom) cited by learned counsel for the assessee, it is observed that the same was rendered in the context of section 80HHC(3)(a) of the Act and the ratio of the said decision therefore cannot be applied in the present case which involves the issue in the context of section 115VJ of the Act. In the case of Indo Swiss Jewels Ltd. [2006] 284 ITR 389 (Bom) cite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome and the relevant details showing how the said relief was attracted in its case were not furnished by the assessee, the Assessing Officer disallowed the claim of the assessee for relief under sections 90 and 91 of the Act. In this regard, he relied on the decision of the hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC). On appeal, the learned Commissioner of Income-tax (Appeals) upheld the action of the Assessing Officer on this issue for the same reasons as given by the Assessing Officer. 13. We have heard the arguments of both sides and also perused the relevant material available on records. It is observed that the claim made by the assessee for relief under sections 90 and 91 of the Act on account of foreign taxes paid outside India was disallowed by the Assessing Officer as well as the learned Commissioner of Income-tax (Appeals) mainly on the ground that the same was not made by the assessee by filing a revised return. Reliance in this regard was placed by the authorities below on the decision of the hon'ble Supreme Court in the case of Goetze (India) Ltd. [2006] 284 ITR 323 (SC). As held by the hon'ble Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the issues raised in ground No. 7 relating to interest charged under sections 244A and 234D are consequential. The Assessing Officer is accordingly directed to allow consequential relief to the assessee on these issues. 15. Now, we shall take up the appeal of the assessee for the assessment year 2006-07 being I. T. A. No. 2945/Mum/2010. 16. As submitted by learned counsel for the assessee, ground Nos. 1 and 2 of its appeal are general seeking no specific decisions. 17. Ground Nos. 3 and 4 of the assessee's appeal read as under : "3. On the facts and as per provisions of the 'Act', the 'Commis sioner of Income-tax (Appeals)' has failed to appreciate that : 3.1. The appellant-company is covered under Chapter XII-G, of the 'Act' for determination of its taxable income. 3.2. The appellant-company's various incomes, viz., core ship ping, incidental shipping, interest and dividend are from business of operation of qualified ships. 3.3. The appellant-company has, as per the provisions of section 115VJ of the Act, given treatment of allocation of common cost in the return of income on reasonable basis. 4. On the facts and as per provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rores) Profit on sale of ships 12.10 Excess provision written back 23.94 Sundry receipts (core shipping) 11.11 Sundry credit balances written back 0.47 Profit on sale of fixed ships (non ship) 0.29 Reimbursement from managed vessels 25.61 Amount reduced from turnover of core shipping 73.52 21. At the time of hearing before us, the learned representatives of both sides have agreed that a similar issue was involved in the assessee's own case for the assessment year 2007-08 and the Tribunal vide its order dated July 29, 2011, (Shipping Corporation of India Ltd. v. Addl. CIT [2012] 20 ITR (Trib) 332 (Mum)) has decided the same in respect of item No. 2 (excess provision written back) and item No. 4 sundry credit balances written back) in favour of the assessee and item No. 1 (profit on sale of ships) and item No. 5 (profit on sale of fixed ships (non-ship) against the assessee for the following reasons given in paragraphs 29 and 39 of its order (pages 347 and 351): "29. The provisions of section 115VA provides that the income from business of operating qualifying ships may be computed in accordance with the provisions of Chapter XII-G, and that the income so co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition under that section can be made. As section 41(1) seeks to bring to tax certain specified items of receipts under the head 'Profits and gains of business' the scheme should not be invoked while computing profits and gains of business under Chapter XII-G. Hence, we are of the opinion that the argument of the assessee should succeed. . . 39. Coming to ground No. 10, as already stated, the assessee has no other activity which would result in income. It also does not have any other business. Thus, the income is from core activity only. Nevertheless, the income in question is taxable under the head "Capital gains" and does not fall within the ambit of sections 28 to 43C. Thus, the receipt cannot be considered as turnover in view of the provisions of section 115VA and consequently is out of the purview of Chapter XII-G. In view of the above discussion, we uphold the finding of the Assessing Officer in this regard." 22. Respectfully following the Tribunal's order dated July 29, 2011 (Shipping Corporation of India Ltd. v. Addl. CIT [2012] 20 ITR (Trib) 332 (Mum)) in the assessee's own case for the assessment year 2007-08, we uphold the action of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fresh direction may therefore be given to the Assessing Officer to correct the mistakes pointed out by the assessee after verification. We accordingly direct the Assessing Officer to rectify the mistakes, if any, as pointed out by the assessee in working of turnover of core shopping activities after verification. Ground No. 6 of the assessee's appeal is accordingly treated as allowed. 25. As regards ground Nos. 7 and 8 of the assessee's appeal for the assessment year 2006-07, it is observed that the issue involved therein relating to the assessee's claim under sections 90 and 91 of the Act on account of foreign taxes paid outside India is similar to the one involved in ground Nos. 5 and 6 of the assessee's appeal for the assessment year 2005-06. Following our conclusion drawn in the assessment year 2005-06, we restore this issue to the file of the Assessing Officer for deciding the same afresh after verifying the relevant details. Ground Nos. 7 and 8 of the assessee's appeal for the assessment year 200607 are accordingly treated as allowed for statistical purposes. 26. The issues raised in ground No. 9 of the assessee's appeal relating to interest under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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