UNITED ARAB SHIPPING COMPANY LTD.(FORMERLY KNOWN AS UNITED ARAB SHIPPING COMPANY (S.A.G)),MUMBAI vs. DCIT (IT)- 4(3)(1), MUMBAI

The assessee has raised the following grounds of appeal. General 1. erred in assessing the total income of the Appellant at Rs. 4,30,76,773/- as against an income of Rs. Nil as claimed by the Appellant In the revised computation of Income submitted during the assessment proceedings;

The brief facts of the case are that the assesee is a global shipping company established in July , 1976 and is a tax resident of Kuwait. The assessee is engaged in the business of operation of ships in international waters. The assesee is a non-resident company and does not have a place of business in India. Therefore, it has not maintained any books of account in India, as per section 44AA of the I.T.Act, 1961. Further, the assessee is a tax resident of Kuwait within the meaning of Article 4 of the India-Kuwait DTAA (Tax Treaty) and is as such entitled to the beneficial provision of the tax treaty as per section 90(2) of the I.T.Act, 1961. As per Article, 8 of the tax treaty, profit arising to a enterprise, which is resident of Kuwait, from the operation of ships in international traffic, which United Arab Shipping Company Limited taxable only in Kuwait, but not in India. Accordingly, while filing return of income for the year under consideration, the assessee has claimed the benefit of Article 8 of the tax treaty, in respect of amount received from carriage of goods in international traffic by operation of ships which are owned / chartered by the assessee. Further, insofar as, amount received from carriage of goods in international traffic on vessels belonging to other operators, but taken under slot chartering/ feeder arraignments, the assessee has included the receipts for taxation in India. During the course of assessment proceedings before the Ld. AO, the assessee, vide its letter dated 15/12/2016, filed a revised computation of income for claiming the benefit Article 8 on shipping income from carriage of goods in international traffic on vessels belonging to other operators, but taken under slot chartering/ feeder arrangements, which was inadvertently not claimed in the original return of income. The assesee could not filed revised return under the provision of section 139(5), because the original return was filed belatedly. The Ld. AO rejected the claim of the assessee towards benefit of Article 8 of the tax treaty, in respect of shipping income from carriage of goods in international traffic on vessels beloging to other operators, but taken under slot chartering/feeder arrangements mainly on the ground that any fresh claim can be made only by way of revised return of income, but not by filing revised statement of total income by following the decision of Hon’ble Supreme Court, in the case of Goetze(India Pvt.Ltd). vs CIT 284 ITR 323. The Ld. AO, further held that Articles of the DTAA would apply in a case, where the shipping company itself derived traffic from transportation by sea of passengers etc., by the owner and to claim the benefit, it is the freee condition that the assessee should operate its own or chartered vessels in the international

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assesee reiterated its submission made before the Ld. AO to argue that the restrictions imposed by the Hon’ble Supreme court in the case of Goetze(India Pvt.Ltd) vs CIT (supra) is applicable only to the AO, but not to the appellate authorities and accordingly, requested to admit the claim of the assessee regarding revision of income, in respect of amount received from shipping income on vessels belonging to others, but taken on slot arrangements. The Ld.CIT(A) after considering relevant submission of the assesee and also, by relied upon various judicial precedents rejected the claim of the assessee on the ground that the adoption of appeal root to circumvent ineligible claim is not acceptable and legally impermissible, because the law is very clear in respect of filing of return as per which any claim can be made only by filing a return or revised return within the prescribed time allowed under the Act. Further, in case, the claim made without filing revised return, the same cannot be admitted and accordingly rejected claim of the assesee. Aggrieved by the Ld.CIT(A) order, the assessee is in appeal before us.

The Ld. AR for the assessee submitted that the Ld.CIT(A) was erred in rejection of claim of the assessee towards, the benefit of Article 8 of the tax treaty, in respect of income received from shipping business, even though the Hon’ble Supreme Court clearly held that the restriction imposed an admission of additional clam without filing a revised return is applicable only to the Ld. AO, but not to the appellate authorities in the case of Goetz (Ind.Ltd.) vs CIT(supra). The Ld. AR, further submitted that if the claim of the assesee is admitted, then the issue is squarely covered in favor of the assesee by the decision of Hon’ble jurisdictional High Court of Bombay, where it was held that the benefit of Article 8 of the tax treaty is equally applicable to shipping income derived from chartered/slot arrangements from other ships operated by different operators, but in connection with international shipping. Therefore, he argued that the additional claim of the assesee may be admitted and the issue may be set aside to the file of the ld.CIT(A) for adjudicating the issue on the merit.

The Ld. DR, on the other hand, strongly supported order of the Ld.CIT(A).

We have heard both the parties, perused the material available on record and gone through orders of the authorities below. It is an admitted fact that the Ld. AO is prevented from admitting any additional claim without filing a revised return as per the provision of the Act. The said legal proposition has been explained by the Hon’ble Supreme Court, in the case of Goetz (Ind.Ltd.) vs CIT supra). However, the restriction imposed for admission of additional claim without filing a revised return of income is not applicable to United Arab Shipping Company Limited appellate authorities, because the Hon’ble Supreme Court has made it very clear in the said judgment that there is no restriction on the appellate authorities to admit any legal/additional issue and such admission is solely on the discretion of the appellate authorities. The Hon’ble Bombay High court in the case of CIT vs. Pruthvi brokers and shareholders Pvt.Ltd. 349 ITR 336 had also held that the assesee entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled raise additional claims before them. The court, further, held that the Hon’ble Suprem court did not laid down that a claim not made before the Ld. AO cannot be made before the appellate authorities. The jurisdiction of appellate authorities to entertain such a claim has not been negated by Hon’ble Supreme Court in this judgment. In this case, the Ld.CIT(A) has rejected the claim of the assesee only on the basis of decision of Hon’ble Supreme Court in the case of CIT vs Goetz (Ind.Ltd.) (supra), even though, there is no such restrictions is imposed by the Hon’ble Supreme court on appellate authorities. Further, the issue involved on merit as per the assesee is squarely covered in its favor by the decision of various high courts. Therefore, when an issue is covered in favor of the assesee by the decision of jurisdiction high court or any other high courts, then not admitting said claim on technical grounds would certainly clause un-due hardship to the assessee because, the authorities concerned are expected to determine true and correct income of the assesee in accordance with law. Therefore, considering the fact that there is no restrictions on the appellate authorities for entertaining additional claim, even though said claim was not made before the Ld. AO by filing revised return of income and also, taken note of the fact that the Ld.CIT(A) has not decided the issue on merits, we are of the United Arab Shipping Company Limited considered view that the issue needs to go back to the file of the Ld.CIT(A) for adjudication of the issue on merits. Hence, we direct the Ld.CIT(A) to admit the claim of the assesee and decide the issue involved on merits in accordance with law without influenced by any of our observations given hereinabove in preceding paragraphs.

In the result, appeal filed by the assesee is treated as allowed for statistical purpose.