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2022 (11) TMI 1404 - ITAT DELHIAddition on account of shipping business - benefits of the provisions of section 115VO under the Tonnage Tax Scheme denied - AO has made this addition stating that the drilling of Oil is the main operation and it is not provided in the Act that drilling and exploration of Oil will be the shipping income, to be included in computation of income under Tonnage Tax Scheme - HELD THAT:- As decided in assessee own case A.Y. 2014-15 held that revenue's contention that the vessel is nothing but 'off shore' installations had no merit. Since the Hon'ble High Court has rendered the findings in the appellant's own case for the A.Y. 2006-07 & 2007-08, that the appellant is taxable under the provisions of Chapter XIIG, no change in the facts and circumstances are brought out by the AO in the assessment order vis-a-vis those years, it is held that the benefit of the said Chapter is to be allowed to the appellant. It may be mentioned here that on specific requisition by the undersigned the AR has filed an additional paper book enclosing herewith the computation of total income filed with the return of income and the computation of such income separately in respect of shipping unit and port infrastructure unit. The relevant certificates of registration, tonnage certificate, mobile offshore drilling unit (MODU) safety certificate, and all other such certificates in respect of the three vessels namely Deepsea Matdrill, Deepsea Fossil and Deepsea Fortune have also been filed. Although not discussed by the AO in the Assessment Order perusal of these certificates show that the three vessels owned by the appellant are of the same nature as that of the Deepsea Matdrill on which the Hon'ble High Court rendered its decision, Accordingly, ground is allowed. Applicability of MAT provisions - HELD THAT:- CIT(A) held that income of assessee is taxable under provisions of section of Chapter XIIG of the Act, and since income of shipping unit is exempt u/s 115V-I of the Act, in view of section 115VO of the Act, same is liable to be excluded from the computation of book profit under section 115JB of the Act. Since, the decision of the ld. CIT(A) is in-consonance with the provisions of the Act, we decline to interfere with the order of the ld. CIT(A). Disallowance of interest - assessee has given interest free loans to its subsidiary company without substantiating commercial expediency - HELD THAT:- Hon'ble Supreme Court [2015 (11) TMI 1314 - SUPREME COURT] approved of the view taken by Delhi High Court in Dalmia Cement Pvt. Ltd.[2001 (9) TMI 48 - DELHI HIGH COURT].and disapproved of the Punjab & Haryana High Court decision in the case of Abhishek Industries [2006 (8) TMI 123 - PUNJAB AND HARYANA HIGH COURT] Incidentally in the case of Hero Cycles, it was found that the interest liability of the assessee towards the bank on borrowings made had no bearings on the issue as otherwise, the assessee had sufficient funds of its own to advance the funds to the sister concern. Under such circumstances it was for the AO to establish such nexus between the borrowings and advances to prove that the expenditure was for non-business purposes, which the AO failed to do. In the present case also, it is found that the appellant has sufficient funds of its own which he could have advanced and therefore the interest liability on the borrowings made could not be disallowed, particularly when the AO failed to prove that the expenditure was for non-business purposes. Accordingly, it is held that no notional interest can be attributed towards the interest free advances made during the impugned year. The decision of the ld. CIT(A) is affirmed. Disallowance on account of late deposit of PF& ESI - HELD THAT:- As the issue of payment of employees contribution towards the PF has been ruled against the assessee by the Hon’ble Supreme Court in the case of Checkmate Services P. Ltd.[2022 (10) TMI 617 - SUPREME COURT] Hence, the appeal of the revenue on this ground is allowed. Disallowance u/s 14A - CIT(A) held that no exempt income has been earned by the assessee, hence, in view of the judgment of the Hon’ble Jurisdictional High Court in the case of Cheminvest Ltd [2015 (9) TMI 238 - DELHI HIGH COURT] no disallowance is called for. Hence, we decline to interfere with the order of the ld. CIT(A). Disallowance u/s 40(a)(ia) – TDS u/s 195 - HELD THAT:- As services rendered by the foreign consultants cannot be said to amount to a permanent establishment or a fixed place for a business through which the foreign enterprise carries out its business in India, wholly and partly. It is also seen that during the appellate proceedings relating to A.Y. 2011-12 my Ld. Predecessor considered the letter issued by Nobel Denton Middle East Ltd. clarifying that they did not have a permanent establishment in India as per Article 5 of the DTAA and were assessed to tax in the UAE. Also find from the tax audit report for the impugned years placed at pages 28 & 69 of the paper book that the auditors have clarified that no amount is inadmissible u/s 40(a). Keeping in view the above facts it is held that neither the provisions of section 40(a)(ia) nor 40(a)(i) are applicable. Ground are allowed.
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