TMI Blog2012 (4) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Rain Commodities Ltd. (2010 - TMI - 203366 - ITAT HYDERABAD) - provisions of section 115JB have an overriding effect upon other provisions of the Act and, therefore, the method of computation of book profit provided in the Explanation to section 115JB should be followed while computing the book profit and the normal provisions of computation of profit under any head of the Act shall not be applicable – in favour of revenue. - IT APPEAL NO. 2191 (Mum.) OF 2009 - - - Dated:- 25-1-2012 - P. M. JAGTAP, V. DURGA RAO, JJ. K. Shivaram and Rahul Hakani for the Appellant. A.K. Nayak for the Respondent. ORDER P.M. Jagtap, Accountant Member This appeal filed by the assessee is directed against the order of Ld. CIT (A)-V, Mumbai dated 13.1.2009 and the grievance of the assessee is projected therein by way of following grounds: "1. The Learned Commissioner of Income Tax (Appeals)-V, Mumbai (CIT(A) erred in holding that the profit on 'sale of ships' - Rs. 1,82,23,140/- is not an income derived from the activities of a tonnage tax company referred to in Section 115 V-I i.e., the profit is not attributable to the core activities defined for a tonnage tax compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company was carrying on only one activity of operation of ships and therefore, its entire income from whatever sources was fully and exclusively attributable to the said activity. It was contended that the entire income relating to ships as recorded in the profit loss account was to be taken as profit derived from the activities of tonnage tax company and the same was to be reduced from the book profit for the purpose of sec.115JB. It was contended that income from sale of ships could not be treated as income from non-shipping business and since the said income was a part and parcel of shipping business, the same was rightly included in the come of the activity of tonnage tax company as computed u/s 115VI. Without prejudice to this main argument and as an alternative, it was submitted on behalf of the assessee that the income from sale of ship was in the nature of capital receipt and the same therefore, could not be included in the book profit to be computed u/s 115JB. 4. The submissions made on behalf of the assessee as above did not find favour with the Ld. CIT (A) who proceeded to confirm the addition made by the AO in the book profit computed u/s 115JB for the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 115V-I of the Income-tax Act which is to be excluded while computing the book profit of the appellant for the purpose of section 115JB of the Income-tax Act. The appellant is further claiming that since the receipts of the appellant on the sale of ship is a capital receipt; it should not be taken into account while computing the book profit. The appellant has relied on the decision of ITAT Mumbai Bench in the case of ITO v. Frigsales (India) Pvt. Limited. The appellant has shown the profit on the sale of ships itself in the profit and loss account and the appellant filed no evidence that its book profit is not in accordance with the Companies Act. Further, to the book profit so computed only the permissible adjustments as per section 115JB and section 115VO of the income tax act can be made. No adjustment on other accounts are permissible. This is in view of the judgment of the Supreme Court in the case of Apollo Tyres Limited 255 ITR 273and also in its later judgment in the case of CIT v. HCL Comnet Systems and Services Ltd. 305 ITR 409. The Supreme Court observed as under : "While resorting to the provisions of section 115JA of the Income-tax Act, 1961, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then invited our attention to clause (i) of sub-section (2) of section 115VI which stipulates that the core activities of a tonnage tax company shall, inter alia , be "its activity from operating qualifying ships". He contended that the said expression used in clause (i) of sub-section (2) of section 115VI is wide enough to cover profit on sale of ship which very much forms part of core activities of a tonnage tax company. He also relied on the provisions of section 115VN to contend that profit on sale of ships being capital gain chargeable to tax u/s 50, the same cannot be included in the shipping income of a tonnage tax company. 7. The learned DR, on the other hand, contended that sale of old ships cannot be treated as part of activities from qualifying ships and the profit arising from such sale cannot be treated as shipping income of a tonnage tax company within the provisions of section 115VI that is liable to be excluded from the book profit of the company for the purposes of section 115JB as per the provisions of section 115VO. In support of this contention, he relied on the decision of Mumbai Bench of the Tribunal in the case of The Shipping Corpn. of India Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on board; ( ii ) slot charters, space charters, joint charters, feeder services, container box leasing of container shipping." The learned counsel for the assessee has contended that the profits on sale of old ships are covered by clause (i) of sub-section (2) of section 115VI. We are unable to accept this contention of the learned counsel for the assessee. As per the provisions of clause (i) of sub-section (1) of section 115VI, the profits from core activities as referred to in sub-section (2) forms part of a shipping income of a tonnage tax company and as per clause (i) of sub-section (2) of section 115VI, core activities of a tonnage tax company mean, inter alia , its activities from operating qualifying ships. In our opinion, the activity of sale of old ships cannot be regarded as an activity from operating qualifying ships since it does not form part of activities which are linked to operation of the qualifying ships. It is not an activity arising from or related to operation of qualifying ships so as to say that the same is a core activity of a tonnage tax company within the meaning of clause (i) of sub-section (2) of section 115VI. We, therefore, find no merit in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2007]. 10. The learned DR, on the other hand, submitted that the provisions of section 115JB are overriding provisions and the provisions of sub-section (5) of section 115JB are only saving provisions which provide that save as otherwise provided in the section, all other provisions of the Act shall apply to every company covered by the provisions of section 115JB. He contended that the said provisions, therefore, cannot be relied upon by the assessee to argue that profit on sale of old ships being chargeable to tax u/s 50, the same cannot be included in the book profit for the purpose of section 115JB. He contended that what is to be excluded for the purpose of computing book profit u/s 115JB has been specifically provided in Explanation 1 to section 115JB(2) and the same does not cover capital gain or capital receipt. In support of this contention, he relied on the decision of Hyderabad Special Bench of the Tribunal in the case of Rain Commodities Ltd. v. Dy. CIT [2010] 40 SOT 265. (Hyd.)(SB). 11. We have considered the rival submissions and also perused the relevant material on record. As regards the contention of the learned counsel for the assessee that the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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