TMI Blog2012 (8) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Act to get away from the tax liability. Period of Limitation - as notice issued within the time limit but served after expiry of the time limitation cannot be held to be invalid - the Assessing Officer had valid reasons for reopening the assessment, as the income chargeable to tax had escaped assessment - against assessee. - ITA Nos.145 to 148/Mds/2012 - - - Dated:- 29-6-2012 - SHRI ABRAHAM P.GEORGE, AND SHRI VIKAS AWASTHY, JJ. Appellant by : Mr. Arvind P.Datar, Sr. Advocate Mr. R.Vijayaraghavan, Advocate Respondent by : Dr. S.Moharana, CIT DR O R D E R PER BENCH: The present set of appeals i.e. ITA Nos.145 to 148/Mds/2012 relevant to the assessment years 2002-03, 2003-04, 2004-05 2006-07 respectively are filed by the assessee against the order of CIT(A)-IV, Chennai dated 01.11.2011. 2. The assessee is a State Government Undertaking established exclusively to transport coal from various Ports in India required for various thermal stations of TNEB (now known as Tamil Nadu Generation Distribution Company Ltd.) . The assessee is having its own vessels for transportation of coal. Apart from its own vessels, the assessee is also hiring ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed by foreign shipping companies in Indian Coastal Waters, therefore income arises in India or deemed to arise/accrue in India as per the provisions of section 9 of the Act. The Assessing Officer further held that the income of the foreign companies would be chargeable in India for the reason that foreign vessels were being put to use by the assessee for transportation of coal between Indian ports for which payment was made by the assessee and finally, the Assessing Officer while making additions held that since the assessee had not deducted withholding tax on hire charges paid to foreign shipping companies, the assessee has been treated as representative assessee under section 163 of the Act. 5. Aggrieved against the order of the Assessing Officer, the assessee preferred appeal before the CIT(A). The CIT(A) upheld the order of the Assessing Officer and dismissed the appeals of the assessee for all the relevant assessment years. Now, the assessee is in second appeal before the Tribunal impugning the order of the CIT(A) for the assessment years 2002-03, 2003-04, 2004-05 2006-07. Since similar issues were involved in these appeals, they are taken up together and decided by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Assessing Officer has treated the assessee company as an assessee in default u/s.201(1) for non-deduction of tax u/s.195 and hence treating the assessee as an agent u/s.163 of the Act would amount to double taxation. 7. Mr. R.Vijayaraghavan, counsel appearing on behalf of the assessee submitted that assessee hire ships from foreign shipping companies for transportation of coal. An agreement between the assessee and the ship owner is that of time charter agreement, according to which ship is leased with crew. The assessee is only getting ship for transportation and it has no control over the crew of the ship. He submitted that where the character of the agreement is time charter, then the said agreement is outside the purview of section 9(1)(iv)(a). The consideration paid by the assessee is not for the use of the ship but for the services hired by the assessee for transportation of coal. He contended that the authorities below have erred in coming to the conclusion that agreement is bare charter agreement. In order to support his contention, the counsel for the assessee pointed out that main features of time charter agreement are i) The possession of the ship is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents entered into by the assessee company with various foreign companies are of in a standard time charter Government Form which is approved by the New York Products Exchange. On perusal of these agreements, it can be seen that the nature of payments of foreign companies is only for hiring of ships and it is similar to hiring of a car along with a chauffeur. The clauses in the time charter agreements can be gone through as mentioned by the Assessing Officer. Clause 77 of the time charter agreement says that the captain of the ship who is appointed by the owner of the ship shall be under the orders and of the characters as regards employment and agency. Clause 145 says that the vessel has to work night and day, if required by the characters and all the cranes should be at the disposal of characters during loading and discharging the steamer. Clause 18 says that the vessel should be placed at the disposal of charter till disposal of goods. All these clauses show that the assessee company has got control over the ship owner/capital as far as transportation and delivery of its goods. Hence, there is Principal to Agent relationship between the assessee company and the ship owner but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by his servants and crew to carry the goods which are put on board his ship by the time-charterer. Certain phrases surviving in the printed form now used are only pertinent to the older form of demise charter-party. Those phrases are, as in the present case, the owners agree to let the steamer, and the charterers agreed to hire the steamer. There is no letting or hiring of the steamer, or anything of the sort, here. Then, at the end of the period, it was solemnly provided that the vessel should be redelivered by the time charterers to the shipowners. Redelivery is only a pertinent expression if there has been a delivery or handing over by the shipowners, to the charterers. There never has been anything of that sort here. The ship has at all times been in the possession of the shipowners and they simply undertook to do services with their crew in carrying the goods of the characters. 12. Thus, it can be said that in case of time charter agreement which is not chartered by device neither legal ownership nor beneficial ownership or equitable ownership is given in the hands of the charterer. The charterer has only contractual right to his services of ship. A charterparty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty . The payment was made for the use of ship by its owner in rendering service to the assessee. Therefore, the payment made in the present case would not constitute royalty for the use of industrial or commercial or scientific equipments. Thus, the provisions of section 9(1)(vi) of the Act are not attracted. 15. Although the assessee cannot be treated as representative assessee , under the provisions of section 193 of the Act, however, the assessee is liable to deduct tax on the payments made to foreign shipping companies under the provisions of section 195 of the Act. In the instant case, the assessee is liable to deduct tax on the hire charges paid to foreign shipping companies. The counsel for the assessee submitted that proceedings has been initiated against the assessee under the provisions of section 201 of the Act for non-deduction of tax at source. Against which the assessee has approached the Hon ble Madras High Court. The Hon ble Madras High Court has granted stay in the matter relevant to the assessment year 2002-03 to 2004-05. The assessee is assailing the order of the CIT(A) on the ground that the assessee cannot be considered as assessee represent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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