TMI Blog2008 (7) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... he deduction claim to that extent of income out of sale of ship. 4. The Assessing Officer further found that there is no separate books for the shipping business. The assessee has not accounted for any interest expenditure. There is no proof that the loan taken was for the shipping business. The Assessing Officer further went to deny the claim of the assessee on the ground that the main object of the assessee is not specific about with the object of carrying on the business of operation of ships and on going through the Memorandum and Articles of Association of the assessee company, the assessee company s object contains 1 to 73 types of business and from the Memorandum and Articles of Association, the assessee company is not a company formed with the main object of carrying on the business of operation of ships. On further investigation of accounts, the Assessing Officer came to the finding that shipping is not the main business of the assessee company which made the Assessing Officer to reject the claim of the assessee under section 33AC. 5. On appeal to the CIT(A), it was pleading that deduction under section 33AC is to be allowed as it is being the reserve created for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on had a separate books of account and the Assessing Officer failed to look into the facts that all the loans obtained for purchase of ships have been fully repaid. On this factual satisfaction, the CIT(A) reversed the findings of the Assessing Officer. 7. Coming to the presumptive and ad hoc allocation of interest, on clarification, the presumptive and ad hoc allocation of interest has been rightly deleted by the CIT(A). Coming to the ad hoc allocation of administrative expenses attributable to shipping business which go to reduce the shipping income, this was clarified that this is an ad hoc disallowance. There is no scope for making any ad hoc reduction in the shipping profit. On this plea, the CIT(A) examined these issues in details and found that deduction under section 33AC and the computation of quantum made by the assessee is in order. Under the above reasonings, the CIT(A) allowed the claim of the assessee. Aggrieved by the quantum of conclusion made by the CIT(A), the Department is in appeal before us. 8. We have gone through the arguments of the learned Representatives and perused the material available on record including the precedents. Section 33AC i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer denied the relief holding that the total income of the assessee in the shipping business is not the main income. In the proposition learned Departmental Representative relied on the decision of the ITAT, Hyderabad A Bench in the case of Transport Corpn. of India Ltd. v. Dy. CIT [2003] 84 ITD 183 . As rightly contended by the learned Chartered Accountant for the assessee, this decision rendered by the Tribunal is quite distinguishable. The condition for deduction under section 33AC falls mainly when there should be reserve created. On perusal of the order, we also agree with the argument of the learned Chartered Accountant that there is no reserve created under section 33AC. The assessee has not created the reserve as required under the law is the observation of the Hyderabad Bench of the Tribunal in the case of Transport Corprn. of India Ltd. ( supra ). Hence, the decision relied on by the learned Departmental Representative is quite distinguishable as in this case it is not disputed that the assessee has created the reserve for the purpose of deduction under section 33AC. Further, the ld. Chartered Accountant for the assessee submitted that the decision of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be transferred for the period of (AY) 8 years from the end of the P.Y. in which it is acquired. Year of Chargeability (1)The reserve is used for other purpose than the specific purpose within 8 years The amount so utilised is chargeable to tax in the year of utilisation. (2)Reserve is not used for acquiring ship within 8 years The amount will be taxed in the year immediately following the period of 8 years. (3)The new ship acquired is transferred within a period of 8 years other than in any scheme of demerger. The amount utilised for acquiring ship will be charged to tax in the year in which the ship is transferred. 10. We have gone through the rival submissions and considered the material available on record, the Assessing Officer never dealt with this novel issue and he has never gone into the aspect of eligibility of the assessee based on the reserve created from the profits derived from the business of operation of ships including the profit and sale of ships and other qualifying income and the reserve so created was utilised as per the conditions laid down in the relevant provisions and the CIT(A) sitting in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A). Under the above facts and circumstances, we reject this ground of the revenue also. 12. Ground No. 7 relates to the direction of the CIT(A) to allow depreciation on the cost of fees paid to the Registrar of Companies. The CIT(A) allowed the claim based on the Tribunal order for the earlier years and the Department has accepted it, is the observation of the CIT(A). The concession has to be allowed. Hence we are declined to interfere with the order of the CIT(A). So this ground of the revenue is also dismissed. 13. Coming to the 8th Ground, which is the disallowance of claim under section 80-IB, the Assessing Officer rejected this claim on the observation that there is no storage activity carried out by the assessee, but this was clarified before the CIT(A) and even before us that the copies of the invoices produced relating to the Food Corporation of India clearly shows that it is not for handling foodgrains, but also for storing the foodgrains as directed by the Food Corporation of India. The Food Corporation of India is a Government Body and there is no other material to rebut the conditions of the invoice. The Food Corporation of India contract related to not only han ..... X X X X Extracts X X X X X X X X Extracts X X X X
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