TMI Blog2022 (9) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... s may be incidental business income but the same is not the profit from core activities or incidental activities which have been defined in the Act. They are not directly received from the shipping activity but are compensatory in nature collected from the contractors for failure to execute contract. Therefore, liquidated damages cannot be held to be from the core activity of the shipping and does not form part for computation in tonnage tax. No infirmity in the orders passed by the lower authorities and respectfully following the decision laid down by the Hon ble Tribunal in assessee s own case for the previous relevant assessment years [ 2018 (10) TMI 497 - ITAT VISAKHAPATNAM] we uphold the order of the lower authorities and dismiss the appeal of the assessee on this ground. Nature of receipts - receipts on account of sale of scrap, sale of empties, sale of waste oil, exchange difference and machinery scrap sales - AO treated the receipts from the above activities as non core receipts and accordingly brought to tax - HELD THAT:- It is evident that the Tribunal in assessee s own case [ 2018 (10) TMI 497 - ITAT VISAKHAPATNAM] decided the issue against the revenue on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the following amounts as not received from core activity of dredging / shipping of the appellant company and assessing these incomes separately. a. Rs.3,30,665 received towards recovery towards leased quarters . b. Rs.61,500 received towards staff car recoveries . c. Rs.2,94,250 received towards sale of tender documents d. Rs.2,21,31,709 received towards liquidated damages . e. Rs.1,49,292 received towards rent on hiring of quarters / offices . f. Rs.10,09,086.65 towards miscellaneous income . 3. Without prejudice to the above, the appellant submits that if the learned Commissioner of Income Tax (Appeals) is of the view that the above said amounts are not eligible for exemption under tonnage tax scheme then he ought to have directed the assessing officer to allow the deduction for the expenditure incurred for earning the above amounts. 4. Any other grounds may be urged at the time of hearing. 5. Ground No.1, 3 and 4 are general in nature which does not require specific adjudication. 6. Ground Nos.2(a) to 2(f) are related to disallowance of other operating revenue claimed by the assessee as exempt income. The AO observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) is not justified in sustaining the addition made by the AO by disallowing exemption under Tonnage Tax Scheme by treating the amounts as not received from core activity of dredging / shipping of the assessee company. Therefore, pleaded to set aside the orders passed by the lower authorities and allow the appeal of the assessee on this ground. 9. On the other hand, the Ld.DR relied on the orders passed by the lower authorities and pleaded to uphold the orders passed and dismiss the appeal of the assessee on this ground. 10. We have heard both the parties and perused the material placed on record. It is evident that the Tribunal in I.T.A.No.437/Viz/2017 and I.T..A No.464/Viz/2017 dated 05.10.2018, dismissed the appeal of the assessee on this ground, relying on the decision of the coordinate bench of the Tribunal in the assessee s own case in I.T.A No.78-80/Viz/2014 dated 25.10.2007 holding that the income from the receipts cannot be considered to be connected with dredging activity. For the sake of clarity and convenience, we extract relevant part of the order of the Tribunal as follows : 19. The Ld.CIT(A) has followed the order of this Tribunal in assessee s own case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 25.10.2017 and upheld the addition made by the AO with regard to the receipt of liquidated damages. For the sake of clarify and convenience, we extract relevant part of the order of this Tribunal in para Nos. 4.3. to 4.4 which reads as under : 4.3 We have heard both the parties and perused the material placed on record. In the earlier order the coordinate bench interpreted the word used in shipping income u/s 115VI Income from holding that it is akin to the term derived from since both the Ld. A.R. and the Ld. D.R. agreed that the term derived from is akin to Income from . However, in the present appeals, the Ld. D.R. vehemently opposed and argued that there is no reason to interpret the Income from since the shipping income and the incidental income is clearly defined in section 115 VI and Rule 11R. We have carefully considered the argument of the Ld. D.R. and the Ld. A.R. and also gone through the orders of the Hon ble ITAT. Since the Ld. D.R. disagreed, we are of the considered view that section 115VI and Rule 11R defined the income from shipping and incidental activities very clearly and there is no ambiguity in the Act and there is no need for separate interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny activity referred to in clause (ii) of sub-section (2) or prescribe the limit up to which such activities shall be included in the core activities for the purposes of this section. (4) Every notification issued under this Chapter shall be laid, as soon as may be after it is issued, before each House of Parliament, while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification, or both Houses agree that the notification should not be issued, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification. (5) The incidental activities shall be the activities which are incidental to the core activities and which may be prescribed4 for the purpose. (6) Where a tonnage tax company operates any ship, which is not a qualifying ship, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the corresponding Form No. 66) referred to in sub-section (5) of section 115V-I shall be the following, namely :- (i) maritime consultancy charges; (ii) income from loading or unloading of cargo; (iii) ship management fees or remuneration received for managed vessels; and (iv) maritime education or recruitment fees. 4.4. The liquidated damages collected from various contractors do not cover any of the receipts in section 115VI or within the scope of Rule 11R of I.T. Act. There is no dispute that the assessee had opted for tonnage tax scheme and the income has to be computed as per section 115VI and Rule 11R of I.T. Act. Under the tonnage tax scheme, only the receipts from core activities and receipts from incidental activities are included, which means that core activities and incidental activities should be the source of profit to be included under tonnage scheme. As regards the liquidated damages the source of such income is payment for failure to execute the contract works within the stipulated time and not the shipping activity either core or incidental. Though the liquidated damages may be incidental business income but the same is not the profit f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental activities which have been defined in the Act. They are not directly received from the shipping activity but are compensatory in nature collected from the contractors for failure to execute contract. Therefore, liquidated damages cannot be held to be from the core activity of the shipping and does not form part for computation in tonnage tax. We, therefore, find no infirmity in the orders passed by the lower authorities and respectfully following the decision laid down by the Hon ble Tribunal in assessee s own case for the previous relevant assessment years, we uphold the order of the lower authorities and dismiss the appeal of the assessee on this ground. I.T.A.No.54/Viz/2021, A.Y.2015-16 11. The revenue has raised the following grounds of appeal : 1. The order of the Ld.CIT(A) is erroneous both on facts and in law. 2. The Ld.CIT(A) erred in holding income from sale of scrap, sale of empties, sale of waste oil, exchange difference and machinery scrap sales as part of income from core business, as they are not falling in the purview of provision of incidental to the core business. 3. The appellant craves leave to add or delete or amend or substitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of sale of scrap, exchange difference, insurance claim are having direct nexus with the dredging activity and such receipts are required to be considered as income from core activity. The Ld.CIT(A) followed the order of this Tribunal in assessee s own case for the assessment year 2006-07 to 2008- 09 supra. The Ld.CIT(A) also applied the ratio of the decision of Hon ble Apex Court in the case of Pandian Chemicals Ltd. Vs. CIT(2003) (262 ITR 278). 26. Against the order of theLd.CIT(A), the revenue has filed appeal before this Tribunal. 27. We have heard both the parties and perused the material placed on record. The issue is squarely covered against the revenue in the assessee s own case for the assessment year 2009-10 to 2011-12 in I.T.A. Nos.555/Viz/2013, 602/Viz/2013, 78-80/Viz/2014 and 167/Viz/2016. For the sake of clarity, we extract para No.12 of the order which reads as under : 12. We have heard both the parties and perused material placed on record. The Hon ble ITAT, Visakhapatnam in ITA No. 6 to 8 and 15 to 17/Vizag/2011 dated 25.7.2007 in assessee s own case allowed the appeal of the assessee holding that the income from the above receipts forms part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and dismiss the appeal of the revenue for the above assessment years. 28. Since the facts are identical, respectfully following the view taken by the coordinate bench of this Tribunal, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue. On careful perusal of the orders of the lower authorities and the decision of the Tribunal in assessee s own case, we find no infirmity in the order passed by the Ld.CIT(A) and therefore uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue on this ground. CO No.48/Viz/2021 17. The assessee filed the following cross objections in support of the order of the Ld.CIT(A) : 1. The learned Commissioner of Income Tax (Appeals) is justified in directing the assessing officer to treat the following income as received from core activity of dredging / shipping of the respondent company. Nature of Income Rs. i) Sale of scrap : 3,49,99,784 ii) Sale of empties : 8,65,345 iii ..... X X X X Extracts X X X X X X X X Extracts X X X X
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