Income Tax Appellate Tribunal - Pune
B.G. Shirke Construction Technology P. ... vs Acit Cir 1(1), Pune on 13 March, 2020
आयकर अपीऱीय अधिकरण "ए" न्यायपीठ पण
ु े में ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, PUNE
BEFORE SHRI D. KARUNAKARA RAO, AM
AND
SHRI PARTHA SARATHI CHAUDHURY, JM
आयकर अपीऱ सं. / ITA No.342/Mum/2016
नििाारण वषा / Assessment Year : 2011-12
B.G. Shirke Construction Technology Pvt. Ltd.
(Being the amalgamated company in which
the erstwhile Five Stars Bulkcarriers Pvt. Ltd.
has merged into w.e.f. 01.04.2015)
Unit No.3, Brady Gladys Plaza,
Senapati Bapat Road,
Lower Parel,
Mumbai - 400013
PAN: AAACF7393J
.......अऩीऱाथी / Appellant
बिाम / V/s.
The Asst. Commissioner of Income Tax,
Circle 1(1), Pune
......प्रत्यथी / Respondent
Assessee by : Shri Nikhil Pathak
Revenue by : Shri Alok Malviya
सुनवाई की तारीख / Date of Hearing : 12.03.2020
घोषणा की तारीख / Date of Pronouncement : 13.03.2020
आदे श / ORDER
PER D. KARUNAKARA RAO, AM :
This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-10, Mumbai, dated 21.10.2015 for the Assessment Year 2011-12.
2ITA No.342/Mum/2016
B.G. Shirke Construction Technology Pvt. Ltd.
2. Briefly stated the relevant facts include that Five Star Bulk-Carriers Ltd. is a company engaged in the activity of owning and operating dry bulk- carriers. The said company got amalgamated with the B.G. Shirke Construction Technology Pvt. Ltd. The assessee filed return of income for the year under consideration on 29.09.2011 declaring total income at Rs.1,20,88,361/-. The assessee company has opted for presumptive taxation under Chapter XII-G, being special provisions relating to income of shipping companies namely Tonnage Tax Scheme as per the provisions of section 115VP of the Act. Notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) was issued and served on the assessee. Thereafter, the Assessing Officer completed the assessment determining the total income of Rs.1,76,98,000/-. In the assessment, the Assessing Officer added the interest income earned on the fixed deposits with the banks and taxed the same as „Income from other sources‟.
3. In the first appellate proceedings, the ld. CIT(A), after considering the submissions made by the assessee, upheld the order of Assessing Officer.
4. Aggrieved with the order of the CIT(A), the assessee is in appeal before us and has raised the following grounds:-
On facts and in law, 1.1 The learned CIT(A) erred in not appreciating that the interest on Escrow Accounts of Rs. 56,09,640/- was not chargeable to tax as non-tonnage income because the interest on Escrow Accounts was inextricably linked to the loans taken from banks for shipping activity and hence was part of shipping income of a tonnage tax company.
1.1.1 The learned CIT(A) erred in not appreciating that the interest of Rs.56,09,640/- is not earned on parking of surplus funds but is income from core activity of tonnage tax company. He erred in not following the decision of Mumbai Tribunal in the case of The Shipping Corporation of India Ltd V Addl. CIT (2011) 133 ITD 0290 (Mum) 3 ITA No.342/Mum/2016 B.G. Shirke Construction Technology Pvt. Ltd.
1.3 Without prejudice to above, the above interest income had to be netted out against interest paid on shipping loans.
2. The Appellant Company craves leave Jo add to, alter, amend, modify and/or delete any or all of the above Grounds of Appeal.
5. Before us, ld. Counsel mentioned that the appeal pertains to the amalgamated company i.e. Five Stars Bulkcarriers Pvt. Ltd. Mentioning that the said company was now amalgamated with the B.G. Shirke Construction Technology Pvt. Ltd., ld. Counsel submitted that the appeal in the case of Five Stars Bulkcarriers Pvt. Ltd. was originally filed before the Mumbai Benches of the Tribunal and now the said appeal stands transferred to Pune Benches. Mentioning that the said assessee is a shipping company, ld. AR mentioned that the income of the said companies is required to be assessed in accordance with the deemed provisions provided in sections 115V to 115VZC of the Income-tax Act. Further, ld. Counsel mentioned that all the business expenditure stands considered when the net income or deemed income is calculated to tax.
6. Further, mentioning that the assessee received loan from banks for purchase of five ships, ld. Counsel mentioned that the assessee is under contractual obligation to keep certain amount of money in Bank Accounts in the form of deposits, which yields interest income. For the year under consideration, the assessee earned interest income of Rs.56,09,640/-. Further, ld. Counsel also mentioned that the assessee received similar interest income in the preceding A.Y. 2010-11 as well (Rs.6,12,860/-). Ignoring the deemed provisions specific to the shipping companies, the Assessing Officer treated the said interest income as „Income from other sources‟ instead of treating it as shipping business expenditure. For the said A.Y. 2010-11, similar issue travelled to the Tribunal vide ITA 4 ITA No.342/Mum/2016 B.G. Shirke Construction Technology Pvt. Ltd.
No.590/MUM/2015 and Tribunal allowed the claim vide its order dated 16.10.2019. Bringing our attention to ground 2.1 of the said appeal, ld. Counsel mentioned that the said ground is identical to that of present ground of appeal. Bringing our attention to paras 6 to 7, ld. Counsel read out the relevant lines and mentioned that para 8 constitutes the operational para and the decision is in favour of the assessee.
7. Ld. DR relied on the orders of Assessing Officer and CIT(A).
8. On hearing both the sides on this limited issue, we find relevant to extract para 8 of the order of Pune Bench of Tribunal in ITA No.590/MUM/2015 (supra) and the same is as under:-
"8. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to considering the amount earned on interest as income from other sources and therefore held by the AO to be as income earned from non-tonnage activity and accordingly taxable at normal income. Before us, at the outset, Ld.A.R. submitted that as far as interest from income tax refund of Rs.4,64,641/- is concerned, he does not dispute the action of AO and Ld.CIT(A). The only dispute is with respect to the interest received of Rs.6,12,860/- from the bank. It is assessee's contention that assessee had availed loan from Bank of India for purchase of vessel "Maha Padmaja" and as per the terms and conditions, the assessee was required to maintain a minimum balance of 0.186 mln USD throughout the tenure of the loan. On such balance maintained by the assessee it had earned interest of Rs.6,12,860/-. It is also a fact that assessee had paid interest of Rs.6,42,99,091/- on loan for purchase of vessels and which has been claimed as expenditure in the Profit and Loss account. It is a fact that if the interest paid and earned are considered in totality, the assessee has paid net interest. Further considering the fact that the assessee was required to maintain the deposits as per the sanction terms of the bank and in view of the facts cited hereinabove, we are of the view that AO was not justified in considering the interest of Rs.6,12,860/- to be non tonnage activity. We therefore set aside the order of AO and direct the AO to consider it as income from shipping business and thus, the grounds of assessee are partly allowed."
9. From the above, it is evident that the Tribunal categorically gave a decision stating that the said interest earned by the assessee on FDs with bank constitutes the income from the shipping activity. On considering the same as well as the similarity of the facts, we find that the issue now stands 5 ITA No.342/Mum/2016 B.G. Shirke Construction Technology Pvt. Ltd.
covered in favour of assessee. Therefore, the interest income earned on the FDs with the banks made in connection with the grant of loan for purchase of ships i.e. business assets of shipping business, constitutes the shipping income and not income from other sources. Accordingly, we direct the Assessing Officer to consider the said interest as income from shipping business. Thus, grounds raised by assessee are allowed.
10. In the result, the appeal of assessee is allowed.
Order pronounced in the open Court on 13th March, 2020.
Sd/- Sd/-
PARTHA SARATHI CHAUDHURY D. KARUNAKARA RAO
JUDICIAL MEMBER ACCOUNTANT MEMBER
ऩण
ु े / Pune; ददनाांक / Dated : 13th March, 2020.
GCVSR
आदे श की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to :
1. अऩीऱाथी / The Appellant.
2. प्रत्यथी / The Respondent
3. The CIT (Appeals)-10, Mumbai.
4. The Pr. CIT-5, Mumbai.
5. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, "ए" बेंच,, ऩुणे / DR, ITAT, "A" Bench, Pune.
6. गार्ड फ़ाइऱ / Guard File.
आदे शानुसार / BY ORDER, //सत्यावऩत प्रतत// True Copy// वररष्ठ तनजी सधचव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune