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TMI Blog2011 (10) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... , coal handing, windmill. b. Marketing of building materials and vehicle, coal and governors. c. Uncured coffee and minor produce, palm oil, specially chemicals. d. Manufacturing of auto components, comprising construction of property and development, boat building, refractoring bricks, drums and flexible shaft, etc. 2.1 The assessment was completed vide order dated 24.12.2009 in which various additions were made, which are reproduced below, for ready reference, from the computation part of the assessment order, as under: I. Income from business or profession : Rs.(42,07,34,059) Add: 1. Excess Depreciation as per IT Act Disallowed on foreign cars : 9,335 2. Provision for warranty disallowed : 5,83,000 3. Club payments : 3,13,560 4. Pooja expenses : 3,68,023 5. Expenses on dividend income : 4,19,38,000 6. New product development cost disallowed : 7,21,072 7. Bad debts disallowed : 52,74,395 8. Addition under agricultural produce : Sale of timber : 11,48,573 9.Disallowance u/s 40(a)(i) : 5,94,98,541 10. Income of wholly owned subsidiary : 5,91,34,782 Brought f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fair market value as on 01.04.1981, the Assessing Officer obtained guideline value from the Sub-Registrar's office, vide letter dated 03.08.2009. According to this letter, fair market value of this property as on 01.04.1981, could be between Rs. 15,000/- to Rs. 50,000/-, per acre. The assessee objected to adoption of such vague report and with the contention that the guideline value is stamp-duty specific and invariably the fair market value cannot be derived from the guideline value of the Sub-Registrar office. But the Assessing Officer has proceeded to rework the fair market value of this land as on 01.04.1981 at Rs. 3,25,861/- and has worked out the long term capital gains at Rs. 98,68,58,048/- resulting in an addition of Rs. 18,41,57,238/-. 6. On the contrary, the ld. CIT(A) has adopted average rate of guideline value and value estimated by the registered valuer and has directed the Assessing Officer to recompute the cost of acquisition taking the average rate of Rs. 20,04,172/- (36,65,143 + 43,200 = 40,08,343/2 = 20,04,172/-) per acre as fair market value as on 01.04.1981. Now both the parties are aggrieved. 7. We have heard rival submissions and have perused the entire reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar would have quoted a fixed amount only. The guideline value for the purpose of stamp duty is always a fixed amount and not in variables. The SubRegistrar has no option but to adopt stamp duty valuation as per his discretion, but has to go by a specific and definite guideline value fixed in this regard. Moreover, the fair market value depends on various factors like, the situation of the land, proximity to road, distance from city, nearness with either residential colony or industrial estate et al. It seems that there were no comparable instances of sales during that particular period, otherwise, the Sub-Registrar's office would have given the same and the Assessing Officer would have ascertained from him. Even in case of comparable case to ascertain the fair market value as on 01.04.1981, each and every transaction is to be critically examined and analyzed before accepting the same as a base evidence regarding market value of the land in question. In this case, it is an undisputed fact that the land is situated on the national highway and falls in the industrial estate/area as against which, the registered value has given detailed reasons for arriving at his conclusion. We have g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have accepted the report of the chartered engineer as correct and rejected the vague report of the Sub-Registrar, who has made an estimate regarding the fair market value as on 01.04.1981. The Sub-Registrar cannot do that. He can only tell about a guideline value on a given date. But, astonishingly, he has given two distantly divergent values and arrived at an Arithmetic Mean, which is not in his domain. Moreover, it is a common factor that the guideline values were not updated in earlier period. The valuer's report has taken into account all the relevant factors. Therefore, we left with no option but to accept the valuer's report. The Assessing Officer could confront the chartered valuer, if he was not satisfied with the valuer's report. The Assessing Officer has not done anything in this direction and has simply rejected the report without any reasons and rhymes. To our great chagrin, when the fair market value has to be ascertained on the date of sale, the Department itself refused to rely on guideline value and it is only when the cost of asset (land) is being ascertained, the Assessing Officer usually try to take shelter under the guideline value. On the contrary, the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall accompany the vessel and see that the voyages are prosecuted with utmost dispatch. 145) Vessel to work night and day, if required by charterers, and all cranes to be at charterers disposal during loading and discharging steamer ..." 10.2 The Assessing Officer has concluded that the entire payment to the foreign companies is like payment made while hiring of car with Chauffeur. The Assessing Officer has invoked section 9(1)(vi) to say that the term 'Royalty' includes payment for use of Commercial and Industrial Equipment and agreed to his term equipment also includes a ship. So, he has treated the payment for the use of the ship as royalty and has opined that TDS is deductible on gross amount paid to the foreign company and the same is liable to be disallowed under section 40(a)(i). the case of the assessee is explained by following version: "The assessee submitted that "the income of the foreign company is chargeable under section 172 of the IT Act, 1961. It is well settled law that the provisions of section 172 are a complete code by itself covering all aspects of taxation and its recovery including identification of subject of the levy. Reliance is placed on the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that the facts of this year is entirely different from the facts of the earlier year, and that decision is not applicable because in that case, the decision of the Hon'ble Supreme Court was not considered, and so also the decision of the Hon'ble Delhi High Court in the case of Asia Satellite Telecommunication Co. Ltd. vs. DCIT reported in 332 ITR 340. 13. We have heard rival submissions and have perused the entire record available before us. The assessee had hired vessels from Foreign Shipping Companies (FSC) for the transportation of coal for Karanataka Power Corporation Limited; based on the availability of cargo and vessels. The vessels were hired, admittedly, on a time charter basis. The assessee paid the time charter hire charges as agreed by the vessel owner. The Captain/Master of the vessel, crew and other staff of the ship are controlled by the ship owner, namely FSC only. The assessee company would intimate the availability of the cargo and from where to where the cargo has to be moved. The repairs and maintenance of the ship are all done and born by the owner of the ship. The vessel is also to be insured by the owner. The cargo was being transported between Parad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession over the vessels. The Captain/Master and the crew is instructed, directed and controlled by the ship owner only and not by the assessee. The assessee simply informs the description of the cargo to be carried on and from which port to which port the cargo has to be transported. Thus, it becomes clear that the assessee neither has control nor the possession over the vessel in question. The decision of the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Limited and others vs. UOI (2006) 282 ITR 273 (SC), of which the ld. AR has placed reliance, the Hon'ble Apex Court has laid down the significance to hold license required to be operated in question. It is only a person but holds requisite license as required by the statute, who can be stated to operate, use and control the equipment whatever it may be. In this case, the requisite approvals have to be obtained from Maritime Authorities to hold and operate the vessels. It is not the case that anybody or everybody can operate a vessel. The powers of charterer (in this case this assessee) under the time charter agreement is extremely limited like the charterer cannot dry-dock the vessel and the vessel is operated by i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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