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TMI Blog2011 (10) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... f asset (land) is being ascertained, the Assessing Officer usually try to take shelter under the guideline value. On the contrary, the approved valuer in his report has relied on the market value, which is based on local enquiries made from the surroundings and he has also relied on the local status of this land existing in that year. Hence, we accept the computation given by the assessee and delete the entire addition made in this regard. TDS u/s 195 - Disallowance under section 40(a)(i) non-deduction at source on the amount paid to FSC for the time charter hire - Held that:- Section 172 is a complete code by itself. Thus, the amount paid by the assessee to the FSC on time charter agreement would not amount to ‘royalty’ neither under Explanation 2 or under section 9(1)(b)(ii) or under the DTAA and in this case only section 172 applies. This, no tax is needed to be deducted at source under section 195 as the amount paid does not amount to ‘royalty’. Therefore, the disallowance under section 40(a)(i) for non-deduction at source on the amount paid to FSC for the time charter hire is erroneous and the same is set aside. Disallowance under section 40A r.w. Rule 8D has been correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 4,19,38,000 6. New product development cost disallowed : 7,21,072 7. Bad debts disallowed : 52,74,395 8. Addition under agricultural produce : Sale of timber : 11,48,573 9.Disallowance u/s 40(a)(i) : 5,94,98,541 10. Income of wholly owned subsidiary : 5,91,34,782 Brought forward : (25,17,44,778) Less I. Depreciation allowable under IT Act on new product development cost of AY 2006-07 2007-08 : 1,61,073 Income from business : (25,19,05,851) II. Income from house property (as reworked above) : ₹ 14,11,781 III. L.Term Capital Gains (as per Ann. I) : Rs.98,68,58,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es is regarding ascertaining the fair market value (FMV) as on 01.04.1981, which according to the assessee is based on a report obtained by the assessee from the Registered Valuer, who has adopted the rate as on 01.04.1981 at ₹ 665.80 per sq.mt. The Assessing Officer found this report to be not supported by any proof to arrive at conclusion. Therefore, the Assessing Officer has rejected the same. In a bid to arrive at the fair market value as on 01.04.1981, the Assessing Officer obtained guideline value from the Sub-Registrar s office, vide letter dated 03.08.2009. According to this letter, fair market value of this property as on 01.04.1981, could be between ₹ 15,000/- to ₹ 50,000/-, per acre. The assessee objected to adoption of such vague report and with the contention that the guideline value is stamp-duty specific and invariably the fair market value cannot be derived from the guideline value of the Sub-Registrar office. But the Assessing Officer has proceeded to rework the fair market value of this land as on 01.04.1981 at ₹ 3,25,861/- and has worked out the long term capital gains at ₹ 98,68,58,048/- resulting in an addition of ₹ 18,41,57, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of land situated in anywhere in India because, the parameters, where adopting guideline value of a particular land are entirely different and they do not represent the fair market value of a property as on a given date. The report of the Sub-Registrar itself is self-explanatory in this regard because he has given the rate, which is extreme on one side and extreme on other side and that too without any basis. Had there been a guideline value specific to a given land, the Sub-Registrar would have quoted a fixed amount only. The guideline value for the purpose of stamp duty is always a fixed amount and not in variables. The SubRegistrar has no option but to adopt stamp duty valuation as per his discretion, but has to go by a specific and definite guideline value fixed in this regard. Moreover, the fair market value depends on various factors like, the situation of the land, proximity to road, distance from city, nearness with either residential colony or industrial estate et al. It seems that there were no comparable instances of sales during that particular period, otherwise, the Sub-Registrar s office would have given the same and the Assessing Officer would have ascertained from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt has held that while determining the fair market value of the property, certificate from the Sub-Registrar and Municipal tax can be taken into account. The Hon ble Court has not directed in that case that the guideline value to be adopted in that given case, a certificate from Municipal tax was also evidence produced before the Hon ble High Court. Thus, the facts of the case are entirely distinguishable, whereas the later case, which, we have referred, is directly relevant in this case. 9. When we have accepted the report of the chartered engineer as correct and rejected the vague report of the Sub-Registrar, who has made an estimate regarding the fair market value as on 01.04.1981. The Sub-Registrar cannot do that. He can only tell about a guideline value on a given date. But, astonishingly, he has given two distantly divergent values and arrived at an Arithmetic Mean, which is not in his domain. Moreover, it is a common factor that the guideline values were not updated in earlier period. The valuer s report has taken into account all the relevant factors. Therefore, we left with no option but to accept the valuer s report. The Assessing Officer could confront the chartered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as otherwise agreed, port charges, customary pilotages, agencies commissions . 71) That the whole reach of the vessels hold, decks and usual places of loading ..... shall be at the charterers' disposal, reserving only proper and sufficient space for the ships, officers, crew .. 77) The captain (although appointed by the owners), shall be under the orders and directions of the charterers as regards employment and agency. 82) That the charteres shall have permission to appoint a Supercargo, who shall accompany the vessel and see that the voyages are prosecuted with utmost dispatch. 145) Vessel to work night and day, if required by charterers, and all cranes to be at charterers disposal during loading and discharging steamer 10.2 The Assessing Officer has concluded that the entire payment to the foreign companies is like payment made while hiring of car with Chauffeur. The Assessing Officer has invoked section 9(1)(vi) to say that the term Royalty includes payment for use of Commercial and Industrial Equipment and agreed to his term equipment also includes a ship. So, he has treated the payment for the use of the ship as royalty and has opined that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds to be allowed from the costs while arriving at the profit as defined under section 28 and there cannot be any disallowance under section 40(a)(i) in respect of this expenditure. It was vehemently argued that the payments made to foreign shipping companies are covered under section 172 and hence the provisions of section 195 do not apply to this case. It was argued that once it is found that the provisions of section 195 are not applicable to a specific payment then there cannot be any disallowance under section 40(a)(i). It was further argued that the facts of this year is entirely different from the facts of the earlier year, and that decision is not applicable because in that case, the decision of the Hon ble Supreme Court was not considered, and so also the decision of the Hon ble Delhi High Court in the case of Asia Satellite Telecommunication Co. Ltd. vs. DCIT reported in 332 ITR 340. 13. We have heard rival submissions and have perused the entire record available before us. The assessee had hired vessels from Foreign Shipping Companies (FSC) for the transportation of coal for Karanataka Power Corporation Limited; based on the availability of cargo and vessels. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny permanent establishment in India. We are also not in agreement in Department s contention that the payment made in time charter of vessels in this case constitutes royalty . This perception seems to be misconceived. The Hon ble Delhi High Court in the case of Asia Satellite Telecommunication Co. Ltd. vs. DCIT (supra) has held that two things are necessary to christen a payment as a royalty under Explanation 2 appended to clause (vi), which speaks about possession and control of the vessel in the given case, the assessee neither has control nor possession over the vessels. The Captain/Master and the crew is instructed, directed and controlled by the ship owner only and not by the assessee. The assessee simply informs the description of the cargo to be carried on and from which port to which port the cargo has to be transported. Thus, it becomes clear that the assessee neither has control nor the possession over the vessel in question. The decision of the Hon ble Supreme Court in the case of Bharat Sanchar Nigam Limited and others vs. UOI (2006) 282 ITR 273 (SC), of which the ld. AR has placed reliance, the Hon ble Apex Court has laid down the significance to hold licen ..... 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