TMI Blog2021 (4) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... d the order of learned CIT(A). Hence, this appeal by the assessee for A.Y. 2001-02 stands dismissed. Rectification of mistake u/s 154 - re-computing the deduction allowable u/s. 33AC - whether the impugned amount represents profit earned on account of freight paid to the subsidiary company is to be considered as shipping business income for the purpose of computation of deduction u/s. 33AC or not? - in the assessment order under section 143(3) of the Act, the AO has denied this claim by holding that 19.62% comprises the freight attributed by the assessee company to the Singapore based associate companies and that income earned through hiring of vessels belonging to others cannot be said to be the income derived from operation of ships - HELD THAT:- The ownership by the assessee is not criteria for deduction under section 33AC. The issue raised is squarely covered by the above said case law referred by the assessee's counsel. No contrary decision has been produced. While adjudicating this issue learned CIT(A) originally has mentioned that the case laws relied upon by the Assessing Officer are very much applicable. We find that as a matter of fact, the Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of CIT Vs. M/s. Manali Investment [ 2013 (12) TMI 333 - BOMBAY HIGH COURT] Accordingly, the alternate ground No. 5 is decided in favour of the assessee. While deciding the alternate ground we have noted that though this issue is being raised for the first time but it is a legal issue. Moreover, even in the case of Goetz India Ltd. Vs. CIT [ 2006 (3) TMI 75 - SUPREME COURT] has accepted the jurisdiction of the ITAT in considering a ground not raised earlier even without filing revised return. Accordingly, the alternate ground as above stands allowed. Computing the Book Profit u/s. 115JB - considered deduction u/s. 33AC amounting to ₹ 40,19,96,248 instead of the amount credited to reserve u/s. 33AC and debited to Profit and Loss Account amounting to ₹ 46,00,00,000 - HELD THAT:- We note that the assessee is raising a legal issue. We note that it is settled law that book profit shown by the assessee has to be as per the profit shown in the profit and loss account subject to only those adjustments as provided in the Act. As mandated in the case of Apollo Tyres Ltd. Vs. CIT [ 2002 (5) TMI 5 - SUPREME COURT] no tinkering with the book profit as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of RADHASOAMI SATSANG VS. CIT 193 ITR 321. 4. Brief facts on this issue are that the assessee has earned dividend income of ₹ 39,68,141/- which was claimed exempt under section 10(33) of the I.T. Act. The Assessing Officer found that the assessee-company has debited an interest expenses of ₹ 15,24,00,244/- in the profit and loss account but has not attributed any expenditure towards earning of such exempt income. The assessee argued before the AO that investments in shares and units of mutual funds have been made out of own funds and therefore there is no reason for portion of interest to be disallowed. However, the AO rejected the claim of the assessee observing that the assessee has failed to prove any nexus between the deployment of own funds and its utilisation for investments, income from which is claimed exempt. Thus the AO apportioned an amount of ₹ 2,29,93,962/- as interest expenditure relatable to investment, which was disallowed u/s. 14A and added back to the total income of the assessee. 5. Upon assessee's appeal learned CIT(A) found the assessee's contention appropriate that the assessee had sufficient interest free funds. In this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's contention that due to technicality there is infirmity in the direction of learned CIT(A) as the Assessing Officer initially has not proposed any such disallowance . Hence, we uphold the order of learned CIT(A). Hence, this appeal by the assessee for A.Y. 2001-02 stands dismissed. A.Y. 2004-05: 8. This appeal by the assessee is directed against the order of learned CIT(A) dated 29.8.2018 and pertains to A.Y. 2004-05. This order of learned CIT(A) is a combined order against the order of A.O. dated 24.2.2014 and another order of the Assessing Officer under section 154 of the I.T. Act dated 20.11.2015. The assessee has filed summary of grounds of appeal as under:- Ground Nos. 1 and 2 1. The sum of ₹ 9,81,23,493/- representing 19.62% of the profit earned on account of freight paid to subsidiary company to be considered shipping business income for the purpose of computation of deduction u/s. 33AC. Ground No. 3 2. The sum of ₹ 3,96,81,035/- should be considered as shipping business income for the purpose of allowing deduction u/s. 33AC. Ground No. 4 4. The sum of ₹ 13,86,926/- on account of interest u/s. 244A same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the deduction allowable u/s. 33AC of the Act, at ₹ 46,00,00,000/- and reducing the assessed income to ₹ 47,67,42,540/-. In both these orders, unabsorbed depreciation was not allowed to be carried forward, as there remained no unabsorbed depreciation for carry forward as per the assessment order for A.Y. 2003-04 completed earlier on 29/03/2006. 12. Consequent upon the CIT(A)'s order dated 14/11/2007 for A.Y. 2003-04, an order giving effect was passed on 18/01/2008 whereby the unabsorbed depreciation allowed for carry forward for set off, was determined at ₹ 17,91,84,264/-. Consequent to the order giving effect to the appellate order for A.Y. 2003-04, a rectification order dated 30/01/2008 was passed to compute the total income for the A.Y. 2004-05 to set off the unabsorbed depreciation of ₹ 17,91,84,264/- brought forward from earlier years and the total income was determined at ₹ 37,86,79,900/-. Thereafter, pursuant to an appeal against the assessment order passed u/s. 143(3), the CIT(A) passed an order dated 30/01/2009 and granted partial relief to the assessee. An order giving effect was passed on 23/03/2009. 13. Subsequently, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against both the assessment order the learned CIT(A) proceeded to treat and adjudicate the ground as arising in a single appeal. 16. Thereafter the learned CIT(A) as regards the impugned ground noted that the assessee has challenged the exclusion of ₹ 9,81,23,493/- representing 19.62% of the profit earned on behalf of the subsidiary while computing income from operations of ships for the business for determining the deduction allowable under section 33AC of the Act. Learned CIT(A) did not go into the merits of the issues raised. He was of the opinion that instant appeal is directed against the order of the Assessing Officer, pursuant to the directions of learned CIT(A) to grant partial relief to the assessee vide order dated 4.10.2013 directing the Assessing Officer to rectify the mistake and compute the interest under section 220(2) of the Act by speaking order after giving effect to the directions given in the learned CIT(A)'s order, credit of TDS and taxes paid by the assessee. Hence, learned CIT(A) was of the opinion that the Assessing Officer was correct in not taking care of this issue. He declined to adjudicate merits of the issues raised. He referred to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. No. Voyage No. Rate of freight received from Govt. Concerns on the voyage (USD) Rate of freight paid to the subsidiary company on the voyage (USD) a) PG01 11.45 11.45 b) PG02 14.85 14.85 c) PG 10 20.00 20.00 d) PPN271 11.45 11.45 e) PPN 272 13.75 13.75 f) PG06 14.50 14.50 g) PG08 14.50 14.50 h) PPR05 14.50 14.50 i) PPR02 14.50 14.50 The Learned CIT(A) erred in not considering the profit earned on shipping freight even though shippi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of the Act dated 09.02.2007 by the A.O. wherein dividend income, interest earned, management fee and profit on sale of assets which were already deducted in the computation of income but again reduced by the A.O. have been added back and deduction u/s. 33AC has been increased to the extent of reserve created of ₹ 46,00,00,000/-. Hence the appellant is not entitled to any further deduction. but the Learned A.O. has reduced the deduction u/s. 33AC to ₹ 40,19,96,24/- vide Order dated 24.02.2014 instead of deduction u/s. 33AC 46,00,00,000/-. The Hon'ble ITAT is entitled to consider the same as information is available in the records of the Department and Hon'ble ITAT is final fact finding body. 22. Furthermore, learned Counsel of the assessee contended that this issue is squarely covered by the following case laws:- Mercator Lines Ltd. vs. DCIT 17 SOT 54 (Mum) Dolphin Offshore vs. ACIT 38 SOT 404 (Mum) GAL Offshore vs. CIT 175 Taxmann 485 (Bom) Shipping Corporation of India Ltd. vs. Ad din CIT 15 Taxmann.com 141 (Mum) DCIT vs. Mercator Lines Ltd. 28 Taxmann.com 256 (Mum) Dredging Corporation of India Ltd. vs. ACIT 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents and they are : (i) ownership issue; and (ii) the activity of operation of running and maintaining the barges. [Para 11] The owning a ship/barge is different from the application of the earning of the business of operation of ships/barges. The provisions of section 33AC(1) refer to the conditions of: (i) status; (ii) object of the business of the company; (iii) eligibility of profits and the application of the same; and (iv) credit to the shipping reserve account. These conditions do not refer to the ownership of the ships/barges. What is needed is the 'carrying on the business of operation of ships' and not the 'owning of the ships/barges' and the intention of deduction may be to generate internal resources to augment the fleet, which the assessee in any case would be doing by complying with the conditions (iii) and (iv) above. Under these circumstances, the owning the ships/barges is not a condition for availing of the benefits of section 33AC. In other words, the ships/barges owned by the third party, i.e., JNPT in the instant case when they were operated in the assessee's business, the assessee was entitled to the deduction. 26. Similarly in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the ownership of ship a precondition at the threshold level for claiming deduction under section 33AC. Even in the circulars issued by the Central Board of Direct Taxes, namely, Circular No. 554 of February 13, 1990, and No. 636 of August 31, 1992, wherein certain amendments of section 33AC have been explained, the Board has been silent about the ownership of ship by the assesses at the threshold level. Unlike in section 36(I)(viii), in section 33AC there is a licence given to the assessee to utilise the amount credited to the reserve for the general purpose of the business till the assessee acquires a ship. There is no restriction in section 33AC to the number of assessees who could claim such deduction and further the deduction under section 33AC is with reference to the profit or income of each and every assessee and not linked to any particular turnover like in section 80HHC. (iii) That the phrase running and maintenance is nothing but operation of ships , as envisaged by section 33AC. The nomenclature found in the agreement, namely technical manager , could not change the nature of the business done by the assessee-company in the operation of ships. So long as the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ships and does not confine only for operation of ships and sales of scrap by the assessee was certainly generated during course of business of operation of ships and as such eligible for deduction under section 33AC of the Act. In the case of Dolphin Offshore Vs. ACIT (38 sot 404), it was held that:- the assessee, a public company, was owner of a shipping vessel-during relevant assessment years, assessee earned income from shipping operations-assessee's claim for deduction under section 33AC was rejected by revenue authorities on ground that shipping was not core business of assessee - On instant appeal, it was seen that no other activity had been done by assessee except operations of ships and income earned from said operation had been shown as charter hire fees - It was also noted that reserve account had been maintained by assessee and surplus amount, as per conditions of section 33AC, had been transferred to reserve account-Whether, on facts, revenue authorities were not justified in rejecting assessee's claim - held Yes. In the case of Gal Offshore Services Ltd. Vs. CIT (175 Taxman 485), Hon'ble Bombay High Court has held that:- Section 33AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 45, of the Income-tax Act, 1961-Shipping business-Computation of profits and gains from business of operating qualifying ships - Assessment year 2007-08 - Assessee earned certain income from sale of ships - Revenue authorities brought to tax said income under head 'capital gains' - It was undisputed that even though income was from core activity nevertheless, it was taxable under head 'Capital Gains' and did not fall within ambit of sections 28 to 43C - Whether in view of above, receipt in question could not be considered as turnover as per provisions of section 115VA and, thus, it was out of purview of Chapter-XII-G of Act - Held, yes - Whether, consequently, authorities below were justified in making separate addition in respect of income arising from sale of ships - Held, yes [In favour of revenue] In the case of DCIT Vs. Mercator Lines Ltd. (28 taxmann.com 256) it was held by the Tribunal that:- Section 33AC of the Income-tax Act, 1961 - Shipping Business - Reserves for-Computation of deduction - Assessment year 2003-04 - Assessee claimed deduction under section 33AC on insurance claim amount received towards repairs carried out in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld, yes [Partly in favour of assessee] 30. Thus it is amply evident that these items rejected by the Assessing Officer have been considered and accepted as business income for the purpose of determining deduction allowable under section 33AC of the Act in the above case laws. 31. Respectfully following the precedents, we set aside the order of learned CIT(A) and decide this issue in favour of the assessee. Apropos ground No. 4 32. In this regard we note that learned CIT(A) was considering the assessee's challenge to ground relating to allowability of interest under section 244A of the Act on the excess amount of tax paid by the assessee. Learned CIT(A) directed that the Assessing Officer should grant interest under section 244A of the Act as provided under the Act. In the absence of any further detail furnished by the assessee, we find that there is no infirmity in the direction to grant interest under section 244A of the Act as per provisions of the Act. We find that learned CIT(A) has already directed the Assessing Officer to follow the prescription of the Act. Hence, no separate adjudication is required. Hence, we uphold the order of learned CIT(A). This grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and transformers on which it had claimed depreciation. On sale, the respondent assessee claimed long term capital gains and sought to set off the same against its carried forward long term capital loss in terms of Section 74 of the Income Tax Act, 1961. The assessing officer disallowed the claim and held that in view of Section 50 of the Act, the gain is in the nature of short term capital gain. 3. On further appeal, the Tribunal by the impugned order has allowed the claim of the respondent assessee to set off its long term losses in terms of Section 74 of the Act against the long term capital gains on sale of transformers and meters. In the case of Ace Builders Limited, this Court held that by virtue of Section 50 of the Act only the capital gains is to be computed in terms thereof and be deemed to be short term capital gains. This deeming fiction is restricted only for the purposes of Section 50 of the Act and the benefit under Section 54E of the Act which is available only to long term capital gains was extended. Further, an identical issue with regard to set off against long term capital loss arose in an appeal filed by the Revenue in the matter of Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered u/s. 154 as mistake apparent on record. 38. Upon hearing both the parties and perusing the records, we find that learned CIT(A) has adjudicated the issue by elaborately referring to the scheme of the Act and explanatory note. He has decided the issue as under:- Tax credit in respect of tax paid on deemed income relating to certain companies. (i) Where any amount of tax is paid under sub-section (1) of section 115JA by an assessee being a company for any assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section. (1A) Where any amount of tax is paid under sub-section (1) of section 115JB by an assessee, being a company for the assessment year commencing on the 1st day of April, 2006 and any subsequent assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section. 7.6 The relevant para of Explanatory Notes to the Finance Act, 2005, (Circular No. 003 of 2006 dt. 27th February, 2006) which explains the intention behind the insertion of the new provision, reads as follow; 3.23 Allowing tax credit for MAT paid u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid, the above grounds of appeal are rejected. 40. Upon careful consideration, we find that learned CIT(A) has passed reasonable order and it does not require any interference from our part. Hence, we uphold the order of learned CIT(A). This ground raised by the assessee stands dismissed. Apropos additional ground:- 41. Additional grounds raised read as under:- In the Profit and Loss Account the Appellant created reserve u/s. 33AC amounting to ₹ 46,00,00,000. However, in the Rectification Order passed u/s. 154 dated 20.11.2015 and the Order dated 24.02.2014 giving effect to CIT(A)'s Order, the Learned A.O. has while computing the Book Profit u/s. 115JB has considered deduction u/s. 33AC amounting to ₹ 40,19,96,248 instead of the amount credited to reserve u/s. 33AC and debited to Profit and Loss Account amounting to ₹ 46,00,00,000. In the original appeal filed before CIT(A) and the Hon'ble ITAT the above grounds of appeal remained to be included. The Appellant therefore has filed the additional grounds of appeal raising the above ground. As the facts of the case and details are available with the Assessing Authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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