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2015 (6) TMI 709 - ITAT AHMEDABAD

2015 (6) TMI 709 - ITAT AHMEDABAD - TMI - Invoking the provisions of Section 172 r.w.s. 163 - non affording any opportunity of hearing - Held that:- Scheme of taxation 172 lays emphasis the tax object, i.e. the activity which is to be taxed, and not the tax subject, i.e. the person who is to be taxed. Therefore, when a person assumes liability, by filing return under section 172(3) in respect of tax liability under section 172(2), such a liability is qua the taxability of income in respect of th .....

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e for the tax liability of the owner, and not the charterer, is only to be stated and rejected. Having said that, we may also point out that the Assessing Officer himself has assessed the UK based company, i.e. owner of the ship and not the charterer of the ship. By implication, thus, he accepts that the income was earned by the UK based company, and, if that be so, the provisions of Article 9(1) of the Indo UK tax treaty unambiguously provides that "income of an enterprise of a Contracting Stat .....

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e upheld.

what would constitute a reasonable time limit? - Held that:- Subsequently with effect from 1st April 2007, the statute itself has considered the period of nine months from the end of the financial year, in which return under section 172(3) is filed, as reasonable time limit within which assessment order under section 172(4) is to be framed. When this time limit is statutorily treated as a reasonable time limit for the returns filed after 1st April, 2007, in our considered vi .....

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eed in this appeal. - Decided in favour of assessee. - IT Appeal No. 1049 (Ahd.) of 2006 - Dated:- 1-5-2015 - PRAMOD KUMAR AND S.S. GODARA, JJ. Tushar P. Hemani for the Appellant Dinesh Singh for the Respondent ORDER Pramod Kumar, Accountant Member - By way of this appeal, the assessee appellant has challenged correctness of the order dated 20th February 2006, passed by the CIT(A) in the matter of assessment under section 172(4) of the Income Tax Act, 1961, for the assessment year 2001-02. 2. Gr .....

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llant craves leave to add, alter or amend any grounds of appeal at the time of hearing." 3. Vide petition dated 24th February 2014, the assessee has filed additional grounds of appeal by stating as follows: "The appellant, through oversight and inadvertently, could not raise in the original appeal memo, the following additional grounds of appeal, and, therefore, the appellant now craves the leave to raise these additional grounds of appeal before this Hon'ble ITAT. The appellant al .....

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law and on the facts of the case in not appreciating the fact that the learned Assessing Officer had already passed the order under section 172(6) of the Act on 23/10/2001 granting port clearance certificate, after satisfying due compliance of the provisions under section 172(3) of the Act, and, therefore, the learned AO could not have passed order under section 172(4) of the Act on 29/03/2005. In any case, the order passed by the learned AO under section 172(4) of the Act on 29/03/2005 is barr .....

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l on record, are as follows. The assessee before us is a company engaged in the business of rendering services, in respect of port and income tax clearances, to the foreign vessels touching various ports of call in Gujarat. As the assessee states, in the statement of facts before the first appellate authority, "On 23.10.2001, your appellant (i.e. the assessee) had requested the Tax Recovery Officer, Bhavnagar Range-1, Bhavnagar, for the issuance of income tax clearance certificate in respec .....

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ouble taxation avoidance agreement, providing for non taxation of shipping income in India, the assessee was not entitled to any relief under section 90 of the Act. It was in this backdrop that the assessee was required to show cause as to why the relief granted under section 90, on the basis of Indo UK Double Taxation Avoidance Agreement, not be withdrawn by the assessee. In reply to this notice, the assessee, inter alia, submitted (i) that "the exemption under the double taxation avoidanc .....

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ance agreement with Norway, and thus, from the point of view of flag, there is no avoidance to tax". 6. None of these submissions, however, impressed the Assessing Officer. It was noted by the Assessing Officer that, under the charter party agreement, the taxes were payable by the charterer i.e. HC Trading International Inc, Nassau, Bahamas. As for the assessee's submission that by way of a subsequent amendment, the responsibility of paying taxes was assigned to the Tramp Shipping Limit .....

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computed under section 172(4). Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us. 7. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 8. In our considered view, it was wholly erroneous on the part of the authorities below to determine the eligibility of treaty benefits on the basis of the .....

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ans "any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature". Clearly, therefore, it is the fact of taxability under a statute, rather than contractual liability under a business agreement, which determines the eligibility for treaty benefits. In any event, it is only elementary that a statutory liability cannot be shifted or avoided on the ground that the person, wh .....

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erence and as it exists today, is reproduced below: "Section 172 - Shipping business of non-residents.- (1) The provisions of this section shall, notwithstanding anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India 1631[* * *]. (2) Where such a ship carries passengers, livestock, mail or g .....

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n of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of the carriage of all passengers, livestock, mail or goods shipped at that port since the last arrival of the ship thereat : Provided that where the 1632a[Assessing Officer] is satisfied that it is not possible for the master of the ship to furnish the return required by this sub-section before the departure of the ship from the port and provided the master of the ship has made satisfactory ar .....

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or rates in force] applicable to the total income of a company which has not made the arrangement referred to in section 194 and such sum shall be payable by the master of the ship. 1633a[(4A) No order assessing the income and determining the sum of tax payable thereon shall be made under sub-section (4) after the expiry of nine months from the end of the financial year in which the return under sub-section (3) is furnished: Provided that where the return under sub-section (3) has been furnished .....

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actory arrangements have been made for the payment thereof. (7) Nothing in this section shall be deemed to prevent the owner or charterer of a ship from claiming before the expiry of the assessment year relevant to the previous year in which the date of departure of the ship from the Indian port falls, that an assessment be made of his total income of the previous year and the tax payable on the basis thereof be determined in accordance with the other provisions of this Act, and if he so claims, .....

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the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.] 1631. The words "unless the Income-tax Officer is satisfied that there is an agent of the non-resident from whom the tax will be recoverable under the other provisions of this Act" omitted by Finance Act, 1975, s. 19 (w.e.f. 1-6-1975). 1632. Subs. for "one-sixth" by Finance Act, 1975, s. 19 (w.e.f. 1-6-1975). 1633. Subs. by Finance (No. 2) Act, 1967, s. 29 (w.e.f. .....

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, etc., shall neither be liable to pay interest under sections 234B and 234C nor entitled to interest under section 244A, in respect of their income attributable only to the business of such carriage of passengers and goods, etc. 1633d. Ins. by Finance Act, 1997, s. 45 (retrospectively w.e.f. 1-4-1976)." 9. As evident from a plain reading of Section 172(1), which highlights the fact that the provisions of Section 172 apply "for the purpose of the levy and recovery of tax in the case of .....

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. What is thus clear is that the scheme of taxation 172 lays emphasis the tax object, i.e. the activity which is to be taxed, and not the tax subject, i.e. the person who is to be taxed. Therefore, when a person assumes liability, by filing return under section 172(3) in respect of tax liability under section 172(2), such a liability is qua the taxability of income in respect of the amount paid or payable on account of carriage of passengers, livestock, mail or goods on the ship. The scheme of t .....

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o point out that the Assessing Officer himself has assessed the UK based company, i.e. owner of the ship and not the charterer of the ship. By implication, thus, he accepts that the income was earned by the UK based company, and, if that be so, the provisions of Article 9(1) of the Indo UK tax treaty unambiguously provides that "income of an enterprise of a Contracting State (i.e. Tramp Shipping Ltd. UK) from the operation of ships in international traffic shall be taxable only in that Stat .....

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the learned counsel. We have noted that, as pointed out by Shri Hemani, the assessment under section 172(4) was framed on 29th March 2005, whereas the ship had left Indian port on 29th October 2001. The assessment was thus framed almost three years after the end of the relevant previous year. Undoubtedly, as at the relevant point of time, there was no time prescribed under the statute for framing the assessment under section 172(4) and the provisions of Section 172(4A), which set this time limit .....

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