IN THE ITAT RAJKOT BENCH
Income-tax Officer, (International Taxation)
versus
CMA CGM Agencies (India) (P.) Ltd.
IT APPEAL NOS. 151 TO 190 (RAJ) OF 2012
[ASSESSMENT YEAR 2010-11]
AUGUST 31, 2012
ORDER
1. All the 40 appeals filed by the Department were earlier split by the Registry into 3 bunches of 15 appeals, 15 appeals and 10 appeals and listed for hearing on 27th, 30th, and 31st July 2012 respectively. Factual matrix and grounds of appeal in the present bunch of appeals are identical. A common order has been passed u/s 172(4) of the Income-tax Act by the AO giving rise to the present bunch of appeals. On appeal before the CIT(A), a common appellate order has been passed by the CIT(A) against which the present bunch of appeals has been filed before this Tribunal. A request was received from the ld. authorized representative for the assessee that he would not be available on the aforesaid dates of hearing and therefore he sought preponement of hearing of the entire bunch of appeals after clubbing them together, on 20.7.2012. Both parties agreed to argue the matter on 20.7.2012. The entire bunch of appeals was accordingly heard on 20.7.2012.
2. As already stated earlier, the grounds taken in all the appeals are identical. They read as under:
“(i) The ld. CIT(A) has erred in law and on facts in holding that the order of the AO is null and void and that the assessee is assessable u/s 172(7) of the Act.
(ii) The Ld. CIT(A) has further erred in law and on facts in not directing the jurisdictional AO to tax the income of the assessee from the business of handling cargo transportation (including slot chartering business), as per normal provisions of the Act, while holding that the order passed u/s 172(4) is null and void.”
3. Facts of the case, in brief, in so far as they are relevant for disposal of the present bunch of appeals are that the Respondent-company, namely, M/s CMA CGM Agencies (India) Pvt. Ltd., acts as agent for the freight beneficiary, namely, M/s CMA CGM SA France. In the assessment year under appeal also, it acted as agent of the said freight beneficiary. The freight beneficiary, i.e., M/s CMA CGM SA France, is engaged in the business of transportation of goods by sea. The principal company, i.e., freight beneficiary, is registered in France and resident of France. In the year under appeal, the principal company operated 40 voyages arriving at Mundra Port. The respondent-company, acting as agent of the freight beneficiary, filed voyage returns in respect of the aforesaid 40 voyages before the Assessing Officer at Gandhidham as required by section 172(3) of the Income-tax Act. Instead of passing 40 orders u/s 172(4) separately to dispose of each of the aforesaid 40 voyage returns filed by the Respondent u/s 172(3) before him, the Assessing Officer passed, for the sake of convenience, a composite order u/s 172(4) on 29.12.2010 disposing of all the 40 voyage returns filed by the Respondent-company for the assessment year under appeal as the factual matrix and the issues in all of them were identical. He has worked out taxable income in respect of each voyage covered by each return filed by the respondent-company u/s 172(3) separately in the order passed by him u/s 172(4). Perusal of assessment order shows that the AO has assessed the taxable income u/s 172(4) in respect of all the 40 voyages at Rs. 2,09,67,176/-, being 7.5% of total amount of freight (Rs. 27,95,62,354/-). The benefit of DTAA between India and France, as claimed by the respondent-company, was denied by the AO on the ground that the freight beneficiary was only a slot charterer and not owner or charterer of the ship.
4. Aggrieved by the composite order passed by the AO u/s 172(4), the respondent-company filed appeal before the CIT(A). The ld. CIT(A) has quashed the composite order passed by the AO u/s 172(4) with the following, amongst others, observations:
“….I have perused the submission made by the appellant and am of the opinion that the appellant is in regular shipping business and not in occasional shipping business. I have considered the judgments cited. Once a person claims that it is not engaged in occasional shipping business and wants to go out of the ambit of section 172; the recourse is provided in section 172 (7) only and for that it has to opt for filling return u/s 139 (1). It has also approached its regular assessing officer to get DIT relief from DDIT Mumbai to the financial year showing its intent to be taxed there. The appellant has been filling returns at Mumbai for many years (its case for assessment year 2002 -03 went up to the Hon. ITAT, Mumbai and is a reported case, 24 DTR 37) and had filed the return for the assessment year under question much before the 172 (4) order was passed.
Since, the appellant has opted for the option to be assessed u/s 172(7) by filing return of income u/s 139(1); it is established that the appellant is in regular shipping business and liable to be assessed under other provisions of the Act including 44B; and not u/s 172(4). Thus, the combined order passed u/s 172(4) by the Income Tax Officer is null and void as assessee’s claim that it is not engaged in occasional shipping business is backed by its taking the alternate recourse provided in section 172(7) itself. It is liable to be assessed on the basis of return filed u/s 139(1) for its entire income.
One more aspect here is that once the AO says that the appellant is not owner/charter of the vessel; then he could not have taken recourse to section 172 itself as the section applies to freight income paid/payable to the owner/character only (or any person on its behalf). The subsection (1) reads as under:
“172. (1) The provisions of this section shall, notwithstanding anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, main or goods shipped at a port in India”
In addition, the relevant part of subsection (3) reads as under:-
172 (3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Assessing Officer a return of the full amount paid or payable to the owner or charter or any person on his behalf, on account of the carriage of all passengers, livestock, mail or goods shipped (emphasis supplied) at that port since the last arrival of the ship thereat.
Therefore, the section applies only for freight received/receivable by owner/charter (or any person on its behalf). However, whether the appellant is owner/charter or not on the facts of the case is not adjudicated here, because even in case of it is, it has to be assessed as per option exercised u/s. 172(7). Therefore, ground 5 (for all the 40 appeals) is decided in appellant’s favour.”
5. Aggrieved by the order passed by the CIT(A), the Department is now in appeal before this Tribunal.
6. At the time of hearing before us, the ld. authorized representative for the respondent-company raised a preliminary objection as to the maintainability of 30 out of 40 appeals on the ground that the tax effect in respect of disputed issues under appeal is less than three lakhs of rupees in each of the aforesaid thirty appeals. In this connection, he referred to the instructions (Instruction No. 3/2011 dated 9.2.2011) issued by the Central Board of Direct Taxes and submitted that the said instructions prohibited the Department from filing appeal before this Tribunal in cases where tax effect with reference to disputed issues in a case was less than three lakhs of rupees. He further submitted that the AO himself has worked out tax effect at less Rs. 3 lakhs in the appeal memo itself in each of the thirty appeals filed by him. He contended that each voyage return filed by the Respondent-company was a case and that was the reason why the Department has filed 40 appeals treating each of the voyage returns as a separate case. Referring to Para 3 of the aforesaid instructions, he submitted that the issue of tax effect has to be seen with reference to disputed issue in each case. According to him, tax effect in each case/appeal was less than Rs. 3 lakhs and hence 30 out of 40 appeals filed by the Department were not maintainable as they have been filed in contravention of the aforesaid instructions issued by the CBDT.
7. Per contra, the ld. CIT-DR referred to Para 5 of the aforesaid instructions and submitted that tax effect has to be seen with reference to each case which, according to him, referred to an assessee. His second submission was that the issue under appeal was common in all the appeals and therefore tax effect should be seen with reference to the disputed issue under appeal in the case of the assessee and not with reference to each of the appeals. According to him, all the 40 appeals filed by the Department were strictly in conformity with the aforesaid instructions and therefore they were maintainable.
8. As regards the issues taken by the Department in its Grounds of appeal, the ld. CIT-DR submitted that the ld. CIT(A) has brought no foundational fact on record to support his view that the respondent-company has already filed its return of income u/s 139(1) and therefore the ld. CIT(A) was not justified in invoking the provisions of section 172(7) for quashing the order passed by the AO u/s 172(4). He submitted that the ld. CIT(A) ought to have confirmed the action of the AO unless there was material on record to indicate that the Respondent-company had exercised its option in terms of section 172(7). According to him, the ld. CIT(A) ought to have verified as to whether the respondent-company had included the income from 40 voyages which was taxed by the AO in the order under appeal, in its return of income filed u/s 139(1). He urged that the order passed by the CIT(A) should therefore be vacated or alternatively the AO be given the option to verify the facts and thereafter tax the income from 40 voyages in accordance with law.
9. In reply, the ld. ld. authorized representative for the Respondent-company supported the order passed by the CIT(A). His submissions were three-fold: One, the appellant and the freight beneficiary are engaged in regular shipping business and not in occasional shipping business and therefore the provisions of section 172 are inapplicable to them. In this connection, he referred to the finding recorded by the CIT(A) and submitted that the Department has placed no material on record to rebut the finding recorded by the CIT(A) in this behalf. Two, the fact that the freight beneficiary was engaged in regular shipping business was also apparent from the fact that the respondent has regularly, as observed by the CIT(A), been filing its return of income on behalf of the freight beneficiary at Mumbai. In support of his submissions, he filed a copy of acknowledgment of return, which shows that the Respondent had filed return of income in ITR-VI before the ADIT (1)(2) at Mumbai on 7.10.2010 returning total income at Rs. 91,96,88,751/-. Three, the Income-tax Act does not stipulate multiple assessments against the same assessee simultaneously u/s 172(4) and also under the normal provisions of the said Act. He contended that the ld. CIT(A) has therefore rightly quashed the order passed by the AO u/s 172(4).
10. We have heard both the parties. We shall first take up the preliminary objection raised by the ld. authorized representative for the respondent-company that tax effect in all the appeals, barring 10 appeals bearing ITA Nos. 154-157, 162, 164, 167, 172, and 189-190, is less than Rs. 3 lakhs and hence all 30 of them are not maintainable in view of the instructions issued by the Central Board of Direct Taxes. The case of the Revenue, on the other hand, is that the tax effect is more than Rs. 3 lakhs with reference to the disputed issue in the case of the Respondent-company in the assessment year under appeal and therefore all the aforesaid appeals are maintainable in terms of the aforesaid instructions of the Board. Paragraphs 2-5 of Instruction No. 3/2011 dated 9.2.2011 issued by the CBDT are relevant for adjudicating upon the issue under consideration. They read as under:
“2. In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on merits before Appellate Tribunal, High Courts and Supreme Court keeping in view the monetary limits and conditions specified below.
3. Henceforth appeals shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:-
