DCIT CORPORATE CIRCLE 2(1), CHENNAI vs. EAST COAST TERMINAL OPERATIONS & PORT SERVICES LIMITED, CHENNAI

आदेश / O R D E R

PER BENCH:

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4. In regard to Ground Nos.2.1 to 2.5 were against the action of the Ld.CIT(A) in holding that the ship M.V.Gem of Ennore was qualifying ship according to Sec.115VD of the Act and was entitled to the benefit of Tonnage Tax Scheme. It was submitted by the Ld.AR that the issue was squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case for the immediately preceding AY in dated 30.03.2017 for the AY 2012-13 wherein Para No.4 it has been held as follows:

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5. The next ground of appeal raised by the Revenue is that Commissioner of Income Tax (Appeals) erred in deleting the disallowance under section 14A of the Act. The Assessing Officer while completing the assessment made disallowance under section 14A of the Act. On appeal, the Commissioner of Income Tax (Appeals) deleted the disallowance made under section 14A of the Act holding that once assessee’s income is computed as per tonnage tax scheme then further disallowance under section 14A cannot be made following the decision of the Mumbai Bench of the Tribunal in the case of Varun Shipping Co. Ltd. Vs. Addl.CIT (134 ITD 339). The Revenue is in appeal before us.

6. Departmental Representative supports the order of the Assessing Officer and the counsel for the assessee relies on the order of the Commissioner of Income Tax (Appeals) and the decision of the Mumbai Bench of this Tribunal in the case of Varun Shipping Co.Ltd. (supra).

“ 7. We have considered the rival submissions and also perused the relevant material on record. It is observed that the assessee is mainly engaged in the business of operation of ships and its income from the said business was declared and assessed as per the special provisions contained in Chapter XIIG which lay down tonnage tax scheme. As per the provisions of section 115VA contained in Chapter XIIG, the income from the business of operating qualifying ships can be computed at the option of the assessee in accordance with the provisions of Chapter XIIG and once this option is exercised by the assessee, the income so computed shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and Gains of business or profession” notwithstanding anything to the contrary contained in section 28 to 43C. It, therefore, follows that when the income of the assessee from the business of operating ships is computed as per the special provisions contained in Chapter XIIG, only the expenses incurred by the assessee for earning income of the said business are deemed to be allowed and nothing else. It, therefore, cannot be said that when the income of the assessee from the business of operating ships is computed as per the special provisions of Chapter XIIG, any expenditure other than the expenditure incurred for the purpose of the said business has been allowed and consequently no addition to income so computed can be made by way of disallowance u/s 14A on account of expenditure incurred by the assessee in relation to earning of exempt dividend income. We, therefore, find merit in the contention of the learned counsel for the assessee that the income of the assessee from the business of operating ships having been computed in accordance with the provisions of Chapter XIIG, only the expenses incurred for the said business are deemed to have been allowed and no addition to such income can be made by way of disallowance u/s 14A on account of any expenditure incurred in relation to earning of exempt dividend income. In our opinion, if at all the assessee has claimed any such expenditure in computation of profit of business of shipping, the same are to be taken as disallowed when the income of the said business is finally computed in accordance with the provisions of Chapter XIIG and no separate disallowance on account of such expenditure u/s 14A can be made. We, therefore, delete the disallowance made by the AO u/s 14A and confirmed by the learned CIT(Appeals) and allow ground no.1 of the assessee’s appeal.”

8. Respectfully following the above decision, we uphold the order of the Commissioner of Income Tax (Appeals) on this issue and reject the grounds of appeal raised by the Revenue.”

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5. As contended by the ld. DR that against the order of the Tribunal, the Department has filed an appeal before the Hon’ble Madras, cannot be a ground to take a different view. Thus, respectfully following the decision of the Coordinate Benches of the Tribunal, we sustain the order of the ld. CIT(A), holding that the assessee is entitled for the benefit of tonnage tax scheme provided under Chapter XII C of the Act.

7. In regard to Ground No.3, it was a submission that the issue was against the action of the Ld.CIT(A) in deleting the disallowance made u/s.14A of the Act. It was submitted by the Ld.AR that the issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case referred to supra for the immediately preceding assessment years wherein Para No.6 which has been held as follows:

6. Further, with regard to issue of disallowance under section 14A read with Rule 8D, the ld. CIT(A) followed the decision of the Mumbai Benches of the Tribunal in the case of Varun Shipping Corporation Ltd. v. ACIT (supra) and deleted the disallowance made under section 14A of the Act as the assessee is eligible for tonnage tax. Under the above facts and circumstances, we find no reason to interfere with the orders of the ld. CIT(A) and both the grounds raised in the appeal of the Revenue are dismissed.

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Order pronounced in the Open Court on September 13, 2017, at Chennai.