Tolani Shipping Co. Ltd. Vs DCIT (ITAT Mumbai)
The issue under consideration is whether the assessee is seeking change in Income Tax Return by way of raising additional grounds of appeal in front of the tribunal and not filing Revised return will be entertained by the Tribunal?
ITAT states that, in additional grounds of appeal, the assessee is seeking exclusion of all the above stated items while computing book profits u/s 115JB. So far as all these grounds are concerned, they find that lower authorities refused to admit the assessee’s revised computation of income in terms of ratio of Hon’ble Apex Court rendered in Goetz India Ltd. V/s CIT 284 ITR 323 which mandate the assessee to claim deduction by filing a revised return only. No findings on merits have been rendered by lower authorities on any of these issues. It is settled law that there is no bar on the appellate authorities to entertain the same. Further, equity demands that correct income of the assessee be ascertained. Therefore, without delving much deeper, keeping all the issues open, ITAT direct Ld.AO to consider all these claims and remit the matter back to the file of Ld. AO. The Ld. AO is directed to adjudicate the same in the light of the submissions made by the assessee that the aforesaid items would constitute business income for the assessee and secondly, these arises out of shipping business being carried out by the assessee. These grounds stand allowed for statistical purposes.
FULL TEXT OF THE ITAT JUDGEMENT
1.1 The captioned cross-appeals for Assessment Years (AY) 2011-12 and 2012-13 contest common order of Ld. Commissioner of Income Tax (Appeals)-10 [in short CIT(A)], Mumbai, Appeal Nos. CIT(A)-10/DCIT-5(3)(2)/278 & 279/2015-16 dated 10/04/2017. It is admitted position that adjudication in any one year shall apply to other years also. First, we take up cross-appeals for AY 2011-12.
Cross-Appeals for AY 2011-12
1.2 The grounds raised by the assessee read as under: –
1. DISALLOWANCE UNDER RULE 8D(2)(iii) READ WITH SECTION 14A
The Learned CIT(A) has erred in confirming addition of the sum of Rs.97,26,004/-under Rule 8D(2)(iii) read with Section 14A overlooking that Assessee is covered by Tonnage Tax Scheme where Shipping Business Income is computed on the basis of deemed income under Chapter XIIG and no expense has been claimed nor allowed while computing TONNAGE TAX INCOME as BUSINESS INCOME of shipping business.
2. The Learned CIT(A) erred in not following the judgement of Hon’ble MUMBAI ITAT in the case of VARUN SHIPPING CO. LTD. VS. ADDL. CIT (2012) 17 ITR (TRIB.) 587 MUMBAI ‘F’ BENCH wherein it is held that “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 XII-G and no separate disallowance on account of such expenditure u/s 14A can be made” (Page 592 Para 7 last 8 lines) and the judgement of jurisdictional ITAT is binding on lower authorities till the judgement is overruled by higher authorities, and, not following the same, amounts to CONTEMPT OF THE HON’BLE ITAT.
3. The Learned CIT(A) has erred in making addition of Rs.97,26,004/- applying provisions of Section 14A overlooking that no expense has been claimed as a deduction while computing Taxable Income under any heads of Income and therefore when no expense has been claimed as deduction under any heads of Income, the question of disallowing the expenses u/s.14A does not arise.
4. The Learned CIT(A) erred in not following the judgement of Hon’ble MUMBAI ITAT in the case of TAG OFFSHORE LTD. VS. ASST. CIT (2014) 49 TAXMANN.COM 209 wherein it is held that “no disallowance under section 14A is warranted in his case when the assessee has admittedly not claimed any expenditure, towards taxable income i.e. it has not claimed any deduction of expenditure debited in the Profit & Loss account while computing the total income ” (Page 7 Para 13 last 5 lines) and the judgement of jurisdictional ITAT is binding on lower authorities till the judgement is overruled by higher authorities, and, not following the same, amounts to CONTEMPT OF THE HON’BLE ITAT.
5. The Learned CIT(A) erred in confirming addition of Rs.97,26,004/- in Taxable Income u/s.14A overlooking the PROVISIONS of Section 14A(1) which provides that for the purposes of computing Total Income under Chapter IV no deduction shall be allowed in respect of expenditure incurred by the Assessee in relation to income which does not form part of the Total Income under this Act OVERLOOKING that CHAPTER IV {Section 14 to 59} is not applicable to Assessee Company which is a TONNAGE TAX COMPANY and therefore income is COMPUTED UNDER CHAPTER XIIG (Section 115V to 115VZB)and hence question of disallowance of EXPENDITURE u/s.14A under Chapter IV does not arise.
6. The Learned CIT(A) erred in confirming the addition u/s.l4A to the TONNAGE TAX INCOME computed by Appellant in Return of Income under Chapter XIIG of the Act overlooking that TONNAGE TAX INCOME is computed on deemed income basis on the TONNAGE CAPACITY of the SHIP irrespective of the shipping income earned or the shipping expenditure incurred and therefore while making computation of Tonnage Income no expenses have been claimed and therefore the question of disallowance of expenditure u/s.14A (Chapter IV) does not arise.
7. ALTERNATIVELY, without prejudice, the Learned CIT(A) erred in considering investments yielding taxable income i.e. (a) Debentures (Unquoted) of Rs.5,000/-(b) investment in Immovable Properties of Rs.2,06,78,520/- (c) investment in Mutual Funds (Growth) of Rs. 1,10,45,954/- for the purpose of computation of disallowance u/s.14A. (Ref: Hon’ble Mumbai ITAT judgement in the case of Manugraph India Ltd. vs. DCIT (ITA No.4761/Mum / 2013 dated 25.3.2015 and Delhi High Court in the case of ACB India Pvt. Ltd. vs. ACIT, ITA 615/2014 dated 24.3.2015 have held that while computing the “average value of investment” for the purpose of for Section 14A & Rule 8D(2)(iii), only investments yielding non-taxable income have to be considered and not all investments).
8. ALTERNATIVELY, without prejudice, the Learned CIT(A) erred in considering investment in shares of SUBSIDIARY companies amounting to Rs.25,85,83,446/-which made by the Appellant as strategic investments and accordingly no expenditure was incurred for the same and therefore the same cannot should not have been included while computing disallowance of expenditure @ 0.5% of the average cost of investment under Rule 8D (Ref: Mumbai ITAT in the case of J.M. Financial Ltd. – ITA No. 4521/Mumbai/2012 dated 26.3.2014).
9. The Learned CIT(A) erred in confirming addition of Rs.97,26,0047- being disallowance u/s. 14A while computing Book Profit u/s.115JB.
10. The Learned CIT(A) has erred in not considering the claim of the Appellant in the revised statement of income filed vide letter dated 23.2.2015 claiming that INCOME FROM HOUSE PROPERTY of Rs.1,66,400/- on account of rent received from Managing Director should be considered as shipping business income and cannot be taxed separately as Income from House Property u/s.22 of the Act.
11. The Learned CIT(A) has erred in not considering the claim of the Appellant in the revised statement of income vide letter dated 23.2.2015 that interest received on INCOME-TAX REFUND u/s.244A amounting to Rs.2,26,98,013/- for A.Y.2008-09 allowed vide Intimation Order dated 17.3.2010 passed u/s. 143(1) and rectification Order u/s.154 dated 10.5.2010 which were later withdrawn vide Assessment Order dated 31.1.2012 passed u/s.143(3) and therefore interest of Rs.2,26,98,013/- cannot be considered as taxable income under Income from Other Sources.
12. The Learned CIT(A) has erred in not considering the claim of the Appellant in the revised statement of income vide letter dated 23.2.2015 that total interest of Rs.3,96,34,147/- taken as Interest Income included tax-free interest income of Rs.13,70,000/- received from 6.85% IIFCL Tax-free Bonds which is exempt u/s. 10(15)(iv)(h) of the Income-tax Act, 1961 and therefore the same is not taxable.
13. The Learned CIT(A) has erred in not considering the claim of the Appellant in the revised statement of total income vide letter dated 23.2.2015 that interest income of Rs.24,505/- received from Fixed Deposits placed with Corporation Bank on account of Bank Guarantees provided to Custom Authorities in connection with shipping business and therefore, the same cannot be included as Taxable income under Income from Other Sources.
14. The Learned CIT(A) has erred in not considering the claim of the Appellant in the revised statement of total income vide letter dated 23.2.2015 that interest income of Rs.5,2287- received from Fixed Deposits placed with ICICI Bank (on account of fractional payments to be made to shareholders of Tolani Bulk Carriers Ltd. due to restriction of Companies Act w.e.f. 1.7.2003, pursuant to the scheme of demerger approved by Hon’ble Bombay High Court) and since the Fixed deposits placed are on account of business expediency, the interest income earned on account of such Fixed Deposits is income from shipping business and therefore the same cannot be included as Taxable income under Income from Other Sources.
15. The Learned CIT(A) has erred in not considering the claim of the Appellant in the revised statement of total income vide letter dated 23.2.2015 that interest of Rs.3,68,234/-on account of loans advanced to staff for purchase of house as business income as held by Hon’ble Mumbai ITAT in the case of Shipping Corp. of India vs. Addl. CIT (2012) 20 ITR (Trib.) 332 (Para 10 Page 338 & Para 32 and 33 of Page 349).
16. The Learned CIT(A) has erred in not considering the claim of the Appellant in the revised statement of total income vide letter dated 23.2.2015 that interest of Rs.55,29,200/-(on account of delayed payment by M/s. SURYA PAPER UDYOG to TOLANI BULK CARRIERS LTD., the Company whose shipping division is merged with the Assessee Company) is business income and the same cannot be included as taxable income under Income from Other Sources.
17. The Learned CIT(A) has erred in not considering the claim of the Appellant in the revised statement of total income that letter dated 23.2.2015 that bad debt of Rs.34,73,324/-written off in earlier years as business expenditure which is received during the Assessment Year 2011-12 under consideration is shipping business income and the same cannot be included as taxable income under Income from Other Sources.
18. The Learned CIT(A) has erred in not considering the claim of the Appellant in the revised statement of total income that letter dated 23.2.2015 that the amount received on account of sale of Old Magazines and Old Newspapers amounting to Rs.2,377/- is business income and the same cannot be included as taxable income under Income from Other Sources.
1.3 The assessee, vide letter dated 03/10/2019 has filed additional ground of appeal and pleaded for admission of the same in terms of decision of Hon’ble Supreme Court in National Thermal Power Corporation (229 ITR 383). The said ground read as under: –
The Deputy Commissioner of Income-tax, Circle – 5(3)(2) (hereinafter referred to as the Assessing Officer) erred in applying the provisions of section 115JB to the incomes mentioned below –
