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Deputy Commissioner of Income Tax, Central Circle-III, Kolkata Versus Apeejay Shipping Ltd.

2015 (12) TMI 1112 - ITAT KOLKATA

Revision u/s 263 - determination of book profits u/s.115JB - Held that:- We are of the view that in the order u/s. 263 of the Act the issue that was considered was the question of reserve u/s.115VT of the Act. It had nothing to do with the determination of book profits u/s.115JB of the Act. The directions in the order u/s. 263 of the Act had the effect of obliterating the order of the AO dated 26.12.2007 only to the extent of determination of book profits u/s.115JB of the Act and not the entire .....

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u/s.154 of the Act could have been exercised. We are of the view that the conclusion of the CIT(A) in the impugned order that the order of assessment dated 26.12.2007 was set aside in entirety in the order u/s.263 of the Act is not correct and accordingly the order of the CIT(A) is set aside. The other issues with regard to the other objections raised by the assessee with regard to exercise of power u/s.154 of the Act in the facts and circumstances of the case, are remanded to the CIT(A) for fre .....

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under which the above appeal of the revenue arises for consideration are as follows: The Assessee is a company. During the previous year its source of income was from providing services to the shippers/receivers/charterers by operating and maintaining a fleet of dry bulk carriers of various sizes. For AY 2005-06, the Assessee filed return of income declaring total income of ₹ 3,33,95,577/- consisting of business income of ₹ 1,18,57,063 and income from other sources of ₹ 2,46,55 .....

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s accepted in the assessment completed u/s.143(3) of the Act by order dated 26.12.2007. In the said order an addition was made to the total income consequent to addition made under the head income from other sources. The Assessee filed appeal against such addition and the CIT(A) dismissed the appeal of the Assessee by his order dated 10.2.2009. 3. The CIT in exercise of his powers u/s.263 of the Act was of the view that the order dated 26.12.2007 passed by the AO u/s.143(3) of the Act for AY 200 .....

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after in this section referred to as the Tonnage Tax Reserve Account) an amount not less than twenty per cent of the book profit derived from the activities referred to in clauses (i) and (ii) of sub-section (1) of section 115V-I in each previous year to be utilised in the manner laid down in sub-section (3): Provided that a tonnage tax company may transfer a sum in excess of twenty per cent of the book profit and such excess sum transferred shall also be utilised in the manner laid down in sub- .....

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t;I have considered the oral as well as written submission made by Shri Manish Tewari. It is fact that the issue of Tonnage Tax liability of the assessee has been considered by the Assessing Officer. However, no questions are seen to have been raised at the time of hearing regarding the issue under consideration i.e. the adequateness of the creation of the Tonnage Tax Reserve. It is also not the assessee's case that such a question has been raised. The adjustment to be made under S. 115JB, w .....

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ther, the Assessing Officer has also not gone into the issues of the amount of Tonnage Tax to be considered in relation to which the Tonnage Tax Reserve is to be created. This action of the Assessing Officer in not going into a very relevant issue has also led to the passing of an order which is prejudicial to the interest of revenue. In view of the above the order passed is prejudicial to the interests of revenue and is therefore set aside with a direction to compute the tax liability of the as .....

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Profit for charging of MAT u/s 115JB read with section 115VO of the Act. The assessee was specifically requested to furnish the auditor s report in Form 29B for calculation of MAT u/s 115JB read with section 115VO of the Act. It was also requested to explain whether the book profit computed here included the profit on sale of ship amounting to ₹ 52,25,39,585/- credited to the profit & loss account." The explanation with regard to creation of Tonnage Tax reserve u/s.115VT of the Ac .....

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uot;The Audit report u/s. 115JB of the Income Tax Act, /961 was not obtained as the Company opted for computation of Income from the Shipping Business under Chapter X11 - G- "Special provisions relating to Income 0/ Shipping Companies" introduced for the first time in the Act from this Assessment year. The Company is under the bonafide belie/ that "Special provisions Relating To Certain Companies" as per Chapter XII-B for payment of Minimum Alternative Tax on Book Profits are .....

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MAT u/s. 115.1B read with section 115VO could not be considered under the present proceeding of giving effect to the order u/s. 263 passed by the Ld. CIT. 6.2. The above submissions in respect of levy of MAT u/s.l ] 5JB read with section 115VO of the Act been carefully considered but the same was not found tenable in the eyes of law. The assessee carried on the business of operating of ships and it had opted for Tonnage Tax System w.e.f. 01/04/2005 for a period of 10-years. The approval was gran .....

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n Book Pro/its are not applicable to the Company - is not correct in view of the specific provisions of section 115VO of the Act. For the sake of convenience, the provisions of Section 115VO of the Act is reproduced below: "The book profit or loss derived from the activities of a tonnage tax company, referred to in sub-section (1) of section 1l5V-I, shall be excluded from the book profit of the company for the purposes of section 115 JB. " In other words, in computing the book profit u .....

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audited accounts for the year ending 31.03.2005 was ₹ 57.15,88,402/-. Hence, according to the provisions of section 115VO the assessee was indeed liable to pay MAT u/s. 115J8. 6.4. In spite of the clear finding given above regarding applicability of MAT u/s. 115JB, the second argument of the Ld. A/R - that the calculation of Book Profit for charging of MAT u/s 115JB did not Emanate from the order passed u/s. 263 on 21.01.2010 - is taken into consideration. It is a fact that the issue of l .....

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of total income of the Assessee u/s.115JB of the Act. In response to the said notice the Assessee submitted a reply contending as follows: (i) "That non application of section 115JB in the order u/.s 143(3) presupposes that tax payable on total income is higher and hence the detailed working was not spelt out. (ii) That Book profit u/s 115JB was not computed as the company opted for Tonnage Tax Scheme, that there is no reference to computation of Book Profit in the assessment order. (iii) D .....

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ct of some other issue unconnected with the issue of determination of books profits u/s.115JB of the Act. The AO ultimately determined book profit u/s.115JB of the Act in substitution to the income determined under Chapter XIIG of the Act as the tax payable on book profit u/s.115JB of the Act was more. The AO passed the order u/s.154 of the Act on 28.2.2011. 9. Aggrieved by the said order dated 28.2.2011, the Assessee preferred appeal before the CIT(A) reiterating the objections that were made b .....

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tions of the CIT(A) in the impugned order: "5. I have perused the relevant orders and the material placed on record. I find merit in the submission that the assessment order dated 26-12-2007 was not in existence as the same had already been set aside by the CIT vide his order u/s 263. The operational portion of the order u/s 263 reads: In view of the above the order passed is prejudicial to the interests of revenue and is therefore set aside with a direction to compute the tax liability of .....

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that the order u/ s 263 was issue based, and so, the assessment order dated 26-12-2007 could be rectified u/s 154. The order u/s 263 no doubt directed the AO to compute the tax liability of the assessee as per law after considering the issue of creation of the correct amount of Tonnage Tax Reserve. But then, it cannot be said that the assessment order was set aside for limited purpose of deciding a particular issue. On the contrary, the entire assessment order was set aside u/s 263 and the AO wa .....

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considered view that the order u/s 154 passed by the AO is not sustainable in law. Ground no 1 is allowed. In ground no 2, the assessee has contended that the issue was beyond the scope of section 154. Ground no 3 relates to the merit of the issue. As the appeal has been allowed on technical ground, I am not inclined to adjudicate these grounds. Ground no 4 relates to the charging of interest u/s 234B which is consequential. Ground no 5 is general in nature." 10. Aggrieved by the order of .....

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very specifically accepted this stand of the Assessee and has thereafter resorted to proceedings u/s.154 of the Act. He therefore submitted that the order of the AO is erroneous and deserves to be set aside. The learned AR relied on the order of the CIT(A). 11. After considering the rival submissions, we are of the view that in the order u/s.263 of the Act the issue that was considered was the question of reserve u/s.115VT of the Act. It had nothing to do with the determination of book profits u .....

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