Income Tax Appellate Tribunal - Delhi
Assistant Commissioner Of Income-Tax vs Interocean Shipping (I) (P.) Ltd. on 24 February, 1997
Equivalent citations: [1997]62ITD61(DELHI)
ORDER
R.K. Gupta, Judicial Member
1. The department has moved an application under Section 254(2) praying that the order dated 30th Sep.'94 be recalled as no opportunity was afforded to the department to make its submission, whether the ship in question was a 'ship' or not. It has been contended by the applicant that in its order, the Tribunal has held that the ship hired by the non-resident is not a 'ship' but is a specially designed vessel of the nature of machinery, which would ply in the ocean and assist in the construction of off-shore platforms that are used for the exploration of mineral oil. It has been submitted that the assessee never made a case before the authorities below that the ship in question was not a 'ship' and, on the contrary, the assessee's case was that the hire charges were exempt under Article 9 of the Double Taxation Agreement between India and the U.K., which article provides that income of an enterprise or a contracting State from the operation of ships in international traffic shall be taxable only in that State. According to the Departmental Representative, the assessee's case, therefore, was that the ship in question was a 'ship'. This issue, whether the ship in question was a 'ship' or not within the meaning of Article 9 of DTA, was never raised either by the assessee or by the department. The Tribunal has made out a totally new case, which is not permissible in law. It is further submitted that the finding recorded by the Tribunal that the ship in question was not a 'ship' is very vital for deciding the department's appeal and that the department should have been given reasonable opportunity to advance the argument on this issue.
2. On the other hand, Shri Dastur, the learned counsel for the assessee has contended that the case of the Department was that Article 9 of the DTA was inapplicable on the facts and in the circumstances of the case, which plea has been accepted by the Tribunal though on a different process of reasoning. The Tribunal has dismissed the Department's appeal by accepting the submission that the hire charges paid to the non-resident would be liable to be taxed in U.K. in view of the provisions contained in Article 7 DTA, inasmuch as it was not the case of the department that the non-resident had any permanent establishment in India. He has submitted that even if the contention of the department is accepted, the final outcome will remain unchanged.
3. We have considered the rival submissions carefully. The Department's plea was that Article 9 of the DTA was not applicable not because the ship was not a 'ship', but because the said ship did not operate in the international traffic. The issue, whether the ship in question was a 'ship' or not, was not raised before this Tribunal. Be that as it may, the Tribunal has recorded a finding that the ship in question was not a 'ship'. To this extent, there is a mistake apparent in the record of the Tribunal. The Tribunal has held that Article 9 of the DTA was not applicable, not because the ship did not operate in International traffic, as contended by the department, but because of its finding that the ship in question was not a 'ship'. The Department's plea that the ship did not operate in International traffic, therefore, remains unanswered. For deciding this Misc. Application of the Department, all that is required to be seen is, whether there is a mistake apparent from the record in the order of the Tribunal and if it is found that there is such a mistake apparent from the record, then the fact that the final outcome will remain unchanged, is immaterial. The Tribunal being the final fact-finding authority, it is required to ascertain the full facts on the basis of the pleas raised, give its finding thereon, without caring for the final outcome based on those findings. In our view, there is merit in the department's application, which is hereby allowed and our order dated 30th September, 1994 is hereby recalled. Let the case be fixed for hearing in the normal course.
4. In the result, this Misc. Application is allowed.
R.M. Mehta, Accountant Member
5. After perusing the order passed by my learned Brother, the Judicial Member, I find myself in dis-agreement with the conclusions arrived at and the ultimate view expressed by him. He has categorically observed that even if the stand of the Department were to be accepted then the "final outcome will remain unchanged". This means that the decision already arrived at by the Tribunal would remain the same.
6. Under the aforesaid circumstances, I cannot subscribe to the view that the order of the Tribunal be recalled for a hearing de novo.
7. Further I am of the view that there is no mistake apparent from the record within the meaning of Section 254(2) and even if the observations of the Tribunal referred to by the Department in the miscellaneous application are deleted from the order there would be no change in the conclusion and decision already arrived at. There are various other grounds with reference to the relevant provisions of the law as also relevant articles of the Double Taxation Agreement between India and U.K. which have been invoked by the Tribunal in taking the view that the hire charges are not subject to tax in India and, therefore, the question of deducting tax at source does not arise. In the final analysis, I hold that the misc. application filed by the Department is misconceived and de-void of merit and alternatively even if the same were to be accepted it would not lead to any change in the ultimate conclusion already arrived at by the Tribunal. In other words the recall of the order of the Tribunal is not at all justified as is the view expressed by the learned Judicial Member.
8. In the result, the miscellaneous application is rejected.
ORDER UNDER SECTION : 255(4):
As there has been a difference of opinion between the Members who heard the present misc. application, the same is required to be resolved by the Third Member to be nominated by the Hon'ble President of the Tribunal. The following points of difference are referred :
1. Whether, on the facts and circumstances of the case it could be held that there was mistake apparent from the record within the meaning of Section 254(1) of the Income-tax Act, 1961 in the order passed by the Tribunal ?
2. If the answer to the aforesaid question is in the affirmative then whether the order passed by the Tribunal was required to be recalled especially when there would be no change in the ultimate conclusion and decision arrived at by the Tribunal ?
ORDER
1. The Hon'ble president on account of difference of opinion between the learned Accountant Member and the learned Judicial Member has referred this case to me for disposal in terms of Section 255(4) of the Income-tax Act.
2. The facts in brief are that the Revenue had filed appeal against order dated 11-5-1993 of the learned CIT (Appeals) allowing assessee's appeal against order dated 20-4-1993 under Section 195(2) of the Act, as passed by the Assessing Officer. The assessee is a private limited company and is engaged in the business of ship chartering, Port Agents and management of ships of ONGC (vessels). The assessee applied to the Assessing Officer for issuing a No objection Certificate, as required by the Reserve Bank of India for allowing remittances out of India, being US $ 1,04,642.10 to M/s. Drake Maritime S.A. London. The Assessing Officer directed the assessee in his order under Section 195(2) that the amount is chargeable to Income-tax in India and, therefore, after deducting tax @ 65%, the balance may be remitted to Non-Resident. The assessed stated that ONGC has contracted with Mazgoan Dock Ltd. (for short MDL) in connection with its activities of exploring/development of mineral oil in Bombay Off-Shore Area, which in turn entered into a contract with the assessee for the provision of ship on hire and accordingly it had entered into chartered party agreement with M/s. Drake Maritime S.A. London for hire of a ship M.V. Pelican w.e.f. 7-12-1992. The assessee filed the agreement and various correspondence with MDL, as also Director General of Shipping before the Assessing Officer and further stated that MDL required the Anchor Handling Tug for toeing of off-shore services, as detailed in the Charter Party Agreement. It was claimed that as per technical specification the ship, i.e., Pelican as supplied by N.R. is not a ship meant for passenger or cargo or a trailor vessel and could be used only to assist in the construction of off-shore platform for oil exploration/extraction, as stipulated in the agreement and as such resulted in business income for the Non-Resident. The Assessing Officer however, did not accept the submissions of the assessee leading to his order under Section 195(2).
3. The matter was, thus, taken in appeal before the learned CIT (Appeals), who on a consideration of relevant facts and circumstances as also keeping in view the provisions of Double Taxation Avoidance Agreement (for Short DTA) with U.K. came to the conclusion that the place of the contract being at U.K. the hire charges were exempt under Article 9 of the DTA with U.K. He also concluded that the Assessing Officer was wrong in holding that the assessee was not entitled to the benefit of Section 44BB of the Income-tax Act. He, thus, held that the assessee was not only entitled to the benefits under Section 44BB of the Act, it was also right in pleading by virtue of Section 90 of the Income-tax Act that DTA was enforceable. He, therefore, cancelled the order of the Assessing Officer.
4. Being aggrieved the Revenue came in appeal before the Tribunal and raised the issue whether the assessee was liable to deduct tax under Section 195 in respect of hire charges paid to non-resident, M/s Drake Maritime S.A. in view of the provisions of DTA between India and U.K. The Department contended before the Tribunal that Article 9 of the DTA deals with "International Traffic" and as such was not applicable since the vessel was plying within the territorial waters of India and also Article 7 was not applicable to the facts of the case. The assessee, on the other hand, submitted that the vessel was plying in International water and further if Article 9 was not applicable, then Article 7 would be applicable. It was also submitted that it was undisputed that Non-Resident has no permanent establishment in India. The Tribunal after referring to the paper book and also keeping in view submissions made came to the conclusion that the vessel was not a ship being used only for the specific purpose of assisting in the construction of an off-shore platform, thereby performing the function of a machinery on account of its technical viability and also being a specially designed vessel for the specified purpose. The Tribunal, therefore, accepted the alternative contention of the assessee that Article 7 would be applicable in this case and the hire charges paid to non-resident would be liable to be taxed in U.K. The Tribunal accordingly upheld the order of the learned CIT (Appeals) in view of the fact that under Article 7 of the DTA, the hire charges are not subjected to Indian taxation and, therefore, question of TDS thereon did not arise.
5. The Department filed this Miscellaneous Application and prayed that order of the Tribunal may be recalled, as no opportunity has been accorded to the Department to argue that ship in question was not a ship and according to the Revenue this is very vital for deciding the appeal and as such the department should have been given reasonable opportunity to meet the arguments as advanced. The case of the Department in brief is : (a) that the finding of the Tribunal that the vessel was not a "Ship" but a specially designed vessel assisting in the construction of off-shore platform used for exploration of mineral oil is a new case made out by the Tribunal on its own and the department was not given necessary opportunity to meet this case; (b) the finding of the Tribunal that vessel was not a ship was very vital to decide the appeal entitling the department to make specific submissions; and (c) if the vessel was a "Ship", then the rental charges would not be exempt under Article 9 of the DTA and if Article 9 applied, Article 7 could not apply.
6. The Tribunal heard the Misc. Application of the Revenue and while the ld. Judicial Member took the view that the order dated 30-9-1994 of the Tribunal required to be recalled, the learned Accountant Member took the view that there is no mistake apparent from record within the meaning of Section 254(2) and even if the observations of the Tribunal, referred to by the department in the Misc. Application, are deleted from the order there would be no change in the conclusion and decision already arrived at, since by looking into various articles of DTA and applicability thereof on facts of the case, the Tribunal has taken the view that the hire charges are not subject to tax in India and as such question of TDS thereon did not arise.
7. On account of difference of opinion in the view of two learned Members, the Hon'ble President has referred this case to me for decision. As a matter of fact even in the matter of framing of question there has not been unanimity between the learned Accountant Member and the learned Judicial Member inasmuch as while the learned A.M. proposed the following two questions, the learned J.M., on the other hand proposed only question No. 1, as framed by the learned A.M.:
1. Whether, on the facts and circumstances of the case it could be held that there was a mistake apparent from the record within the meaning of Section 254(2) of the Income-tax Act, 1961 in the order passed by the Tribunal ?
2. If the answer to the aforesaid question is in the affirmative then whether the order passed by the Tribunal was required to be recalled especially when there would be no change in the ultimate conclusion and decision arrived at by the Tribunal.
7A. Necessary opportunity of being heard has been allowed when the assessee has made written submissions. The Department in turn has submitted that "In reply the department apart from relying on its earlier arguments prays that the case may be decided on merits".
8. Having gone through the records as also the written submissions made by the appellant, I am of the view that the Misc. Application moved by the department has been rendered infructuous by the department itself, inasmuch as the contention of the appellant that freight charges paid to Non-Resident are not taxable in India stands accepted by the Department itself as per order dated 8-2-1996 passed by the learned Commissioner of Income-tax, Delhi-I, New Delhi in the case of the non-resident i.e., M/s. Drake Maritime S.A. under Section 263 of the Income-tax Act accepting the assessment order passed by the Assessing Officer on the basis of order of the Tribunal which is sought to be rectified. This apart, I am of the view that the order of the Tribunal contains no mistake apparent from record, as is sought to be rectified by way of this miscellaneous application, the finding of the Tribunal neither being incorrect nor contrary to the facts on record. The order of the Tribunal is based on appreciation of facts and evidence on record, including the paper book submitted and submissions made. The Tribunal has also referred to arguments of both the parties regarding applicability of Article 7 of DTA dealing with business income and having looked into other provisions of the DTA, the Tribunal recorded a finding of fact that the hire charges are not taxable since facts of the case entirely come within the purview of Article 7 of DTA. Further, as the Tribunal accepted the department's contention regarding non-applicability of Article 9 of the DTA, the Department cannot have any grievance on this count, as is made out in the Misc. Application. There is no challenge to the correctness of the finding that the vessel in question was not a ship in the normal sense but was a specialised item of machinery assisting in the construction of offshore platform for oil exploration and extraction. Therefore, even if the claim of the Revenue were to be accepted it would not lead to any change in the conclusion arrived at by the Tribunal. Therefore, I am of the view that in this Miscellaneous Application what the Department seeks is a review on merits of Tribunal's decision, which is not within the ambit of Section 254(2). As pointed out above the order of the Tribunal sought to be rectified already stands accepted by the learned Commissioner in his order dated 8-2-1996 under Section 263 of the Income-tax Act. Even if a finding was given that the vessel did not operate in international waters, the same would be immaterial since Article 9 is not applicable and, therefore, the matter is required to be studied in the light of Article 7 of the DTA. The Department is seized of the fact that the Non-resident has no office in India and in the assessment of the non-resident itself, the learned CIT, Delhi-I in proceedings under Section 263 has held that the income is not taxable in India, there being no office of the Non-Resident in India.
9. In view of the above, I agree with the view taken by the learned Accountant Member and hold that order of the Tribunal dated 30-9-1994 contains no mistake apparent from record capable of being rectified under Section 254(2). The Misc. Application is accordingly dismissed.
10. The matter should now be placed before the regular Bench for passing an appropriate order in accordance with the majority view.
ORDER R.M. Mehta, Accountant Member
1. There was a difference of opinion between the Members of Division Bench who originally heard this miscellaneous application, the Judicial Member being of the view that the application was to be accepted and the order-passed by the Tribunal required to be recalled whereas the Accountant Member expressed an opinion to the contrary rejecting the application. On the difference being referred to a Third Member, the parties were heard and an order dated 15th January, 1997 passed whereby the Third Member concurred with the view expressed by the Accountant Member earlier to reject the application filed by the department. In accordance with the majority opinion, the miscellaneous application of the revenue is rejected.