Income Tax Appellate Tribunal - Mumbai
Galleon Shipping Limited,Mumbai vs Income Tax Officer 5 (1) (1), Aayakar ... on 16 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"G" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT
AND
SHRI JAGADISH, ACCOUNTANT MEMBER
ITA No. 4659/Mum/2025
Assessment Year: 2017-18
Galleon Shipping Limited Vs. Income Tax Officer 5(1)(1)
1120 One BKC C-1120, 11th Room No.568, 5th Floor, Aayakar
Floor, Bandra Kurla Complex, Bhavan, MK Road, New Marine
Mumbai-400051 Lines, Mumbai-400020
PAN: AABCG3239R
(Appellant) (Respondent)
Assessee by Shri Yogesh Malpani
Department by Shri Swapnil Choudhari (SR. DR.)
Date of Hearing 21.01.2026
Date of Pronouncement 16.03.2026
ORDER
Per: SHRI JAGADISH, A.M.:
1. This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), NFAC dated 26.06.2025 for the assessment year 2017-18.
2. The assessee has raised the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in taxing interest from fixed deposits amounting to ₹55,72,743/- under the head "Income from Other Sources".ITA No.4659/M/2025
Galleon Shipping Limited
2. Without prejudice to Ground No.1, the Assessing Officer has erred in computing tax under section 115JB of the Act ignoring the provisions of Chapter XII-G of the Act, particularly section 115VO.
3. Ground No.1 relates to the addition of ₹55,72,743/- being interest income earned on fixed deposits which was assessed by the Assessing Officer under the head "Income from Other Sources".
4. The brief facts are that the assessee is engaged in the business of operating ships and has opted for taxation under the tonnage tax scheme as provided under Chapter XII-G of the Act. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had earned interest income on fixed deposits placed with banks. The Assessing Officer held that the said interest income was not derived from the operation of qualifying ships and therefore assessed the same under the head Income from Other Sources. The learned CIT(A) upheld the action of the Assessing Officer relying on the decision of the Tribunal in the case of Pratibha Shipping Co. Ltd.
5. Before us, the learned Authorised Representative submitted that the fixed deposits were placed with banks as security for obtaining overdraft or working capital facilities required for carrying on the shipping business and therefore the interest income has direct nexus with the business activity. The learned AR relied upon the decision of the coordinate bench of the Tribunal in the case of Shipping Corporation of India vs DCIT [2025] 173 taxmann.com 190 (Mumbai Tribunal).
6. The learned Departmental Representative, on the other hand, relied upon the decision of the Tribunal in the case of Pratibha Shipping 2 ITA No.4659/M/2025 Galleon Shipping Limited Co. Ltd. vs DCIT (2012) 21 taxmann.com 434 (Mumbai) and supported the orders of the lower authorities.
7. We have heard the rival submissions and perused the material available on record. The assessee is a tonnage tax company engaged in the business of operating ships and has opted for taxation under Chapter XII-G of the Act. The Assessing Officer assessed the interest income of ₹55,72,743/- earned on fixed deposits under the head "Income from Other Sources" on the ground that the same was not derived from the operation of qualifying ships. The learned AR submitted that the fixed deposits were placed with the bank as security for obtaining overdraft required for the shipping business of the assessee and therefore the interest income has a direct nexus with the business activity. Reliance was placed on the decision of the coordinate bench of the Tribunal in the case of Shipping Corporation of India vs DCIT [2025] 173 taxmann.com 190 (Mumbai Tribunal). We notice that the Tribunal in para 11 page 8 has observed that where the assessee had borrowed funds for business purposes and earned interest on the unutilised portion of such borrowings, such interest income would partake the character of business income. In this background, it becomes necessary to examine whether the fixed deposits in the present case were placed as a business necessity linked with obtaining working capital or overdraft facilities for the shipping operations of the assessee or whether they were independent investments having no nexus with the core business activity.
8. We further note that the assessee itself in its submission before the Assessing Officer dated 10.12.2019 had stated that interest income of ₹65,701/- relates to fixed deposits which were not kept against any overdraft facility and that the same may be taxed under the head Income from Other Sources. However, the Assessing Officer has not 3 ITA No.4659/M/2025 Galleon Shipping Limited examined the said submission while completing the assessment. The tribunal in the case of Pratibha Shipping Co. Ltd. (supra) holds that where the fixed deposits are not connected with the shipping activity, the interest income cannot be treated as shipping income under the tonnage tax scheme.
9. In view of the above facts and legal position, we are of the considered opinion that the issue requires factual verification to ascertain whether the fixed deposits were placed for obtaining banking facilities required for carrying on the shipping business of the assessee or whether the same were independent investments. Accordingly, we restore this issue to the file of the Assessing Officer with a direction to examine the nature and purpose of the fixed deposits in the light of the decision of the Tribunal in the case of Shipping Corporation of India (supra) and other judicial precedents. The Assessing Officer shall also consider the assessee's submission regarding interest of ₹65,701/- relating to FDs not linked with overdraft facility. Needless to say, the Assessing Officer shall afford adequate opportunity of being heard to the assessee before deciding the issue.
10. Accordingly, Ground No.1 raised by the assessee is allowed for statistical purposes.
11. Ground No.2 relates to computation of tax under section 115JB of the Act. The learned Authorised Representative submitted that the assessee is a tonnage tax company governed by Chapter XII-G and therefore in view of section 115VO, the provisions of section 115JB are not applicable.
12. We have considered the submissions and perused the material available on record. Section 115VO clearly provides that the provisions of section 115JB shall not apply to a tonnage tax company. Since the 4 ITA No.4659/M/2025 Galleon Shipping Limited assessee is admittedly assessed under the tonnage tax scheme during the year under consideration, the Assessing Officer was not justified in computing tax under section 115JB.
13. Accordingly, Ground No.2 raised by the assessee is allowed.
14. The assessee has also raised an additional ground challenging the validity of the assessment on the ground that the notice issued under section 143(2) of the Act is not in the prescribed format. Since we have restored the substantive issue involved in the appeal to the file of the Assessing Officer for fresh adjudication, the additional ground raised by the assessee is kept open.
15. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 16/03/2026.
Sd/- Sd/-
(SAKTIJIT DEY) (JAGADISH)
Vice President Accountant Member
Mumbai, Dated: 16/03/2026
Ashwani Rao
Sr. Private Secretary
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ITA No.4659/M/2025
Galleon Shipping Limited
Copy of the order forwarded to:
1. Appellant
2. Respondent
3. The CIT
4. The CIT (Appeals)
5. The DR, I.T.A.T.
By order
(Assistant Registrar)
ITAT, Mumbai
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