×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
02-11-2018, The Shipping Corporation, Section 115V, 115VG, 115VD,Tribunal Mumbai
These two appeals, filed by assessee, being ITA No. No.3870 & 3871/Mum/2016, are directed against two separate appellate orders dated 16.03.2016 and 07.03.2016 respectively passed by learned Commissioner of Income Tax (Appeals)-1, Mumbai (hereinafter called “the CIT(A)”), for assessment year 2006-07 & 2005-06 respectively , the appellate proceedings had arisen before learned CIT(A) from the penalty orders dated 14.11.2014 and 13.11.2014 respectively passed by learned Assessing Officer (hereinafter called “the AO”) u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter called “the Act”) for AY 2006- 07 & 2005-06 respectively. First we shall take up appeal of the assessee for AY 2006-07 and as similar issue‟s are involved in appeal for AY 2005-06, our decision for AY 2006-07 shall apply mutatis mutandis to the appeal filed by the assessee for AY 2005-06.
2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) for AY 2006-07 , read as under:-
“1. The learned Commissioner of Income Tax (Appeals), Mumbai -1 has erred in law and on facts in upholding the action of the learned Assessing Officer ('the Id. AO') of levying penalty u/s 271(1)(c) of the Income Tax Act, 1961 ('the Act') on
(i) disallowance of claim of Rs. 12,10,00,000/- and Rs. 29,00,000/- in respect of profit on sale of ships and profit on sale of fixed assets respectively as turnover of core activities while computing income from incidental a tivi ies in excess of 0.25% of turnover from core activities and
(ii) disallowance of claim of deduction of Rs. 6,35,13,110/- as proportionate cost against interest and dividend income on the alleged ground that the appellant had furnished inaccurate particulars of the income and explanation offered by the appellant was not bonafide. The ld. CIT(A) ought to have appreciated the following:
a) The appellant had furnished all relevant material in its possession at the time of filing of return of income and had disclosed truly & fully all relevant particulars.
b) The claim of the appellant was based on the bonafide interpretation of provisions of Chapter XII-G of the Act.
c) The issue of computation of income of shipping companies under Chapter XII-G of the Act was debatable and hence levy of penalty was unwarranted.
The appellant craves leave to add to and / or to amend and / or to modify and / or to cancel the above ground of appeal at any time before or at the time of hearing.”
3.1 The brief facts of the case are that assessee is engaged in merchant shipping business. The assessee declared income under tonnage tax scheme defined in Section 115V of the 1961 Act, and tonnage income was computed in accordance with provisions of section 115VG of the 1961 Act. It was claimed by the assessee that all the ships operated by the assessee during the year under consideration were qualifying ships within the meaning of Section 115VD and valid certificates was produced by the assessee before the AO to substantiate the same. The assessee has also offered apart from the tonnage income, income from incidental activities in terms of proviso to sub-section 1 of section 115VI of the 1961 Act. The assessee also furnished necessary report from Chartered Accountant in Form no. 66 as well as the assessee furnished certificate from Director General of Shipping in respect to minimum training requirement for tonnage tax company u/s. 115 VU(2) of the 1961 Act.
3.2 The assessee had offered in addition to tonnage income , including income from incidental activities , income from interest and dividend under the head „Income from other sources‟ The assessee allocated and claimed administrative expenses of Rs. 6,28,79,765/- against interest income of Rs. 172.11 crores and also the assessee claimed administrative expenses of Rs 7,33,346/- against dividend income of Rs. 2.01 crores. The allocation of administrative expenses was
claimed to be done in the ratio of turnover as per provision of Section 115VJ of the 1961 Ac dealing with treatment of common costs. The assessee submitted that it is engaged fully in shipping business and it has no othe activity. It was submitted that during the course of business, interest is earned on fundsdeployed out of surplus cash/unutilized amount standing to the credit of statutory reserves while waiting for opportune time to acquire the assets. It was submitted that the interest generated needs to be treated as core shipping income. It was submitted that the said income from interest on deposits and dividend from companies are suo moto considered by the assessee as „income from other sources‟ while computing taxable income under tonnage tax scheme. It was submitted that a tonnage tax company is guided by provisions of Chapter XIIG which incorporates special provisions relating to income of shipping companies. The assessee drew attention of the AO to provision of