Case Law Details
Nan Lian Ship Management LLC Vs ACIT (Int. Tax) (ITAT Mumbai)
The aforesaid appeal has been filed by the assessee against the final assessment order dated 27.05.2022, passed by Ld. AO u/s 143(3) r.w.s. 144C(13) for the AY 2019-20 in pursuance of direction given by Ld. DRP vide order dated 18.05.2022 u/s 144C(5).
2. In the grounds of appeal, assessee has challenged the direction of Ld. DRP in treating the amount of Rs. 20,28,98,639/-received by the assessee on account of Time Charter of its ship as „royalty‟ and taxing the same u/s 9(1)(vi) of the Act.
3. The facts in brief are that, assessee is a company incorporated in and tax resident of UAE and is engaged in the business of shipping operation. It has entered into Time Charter contract with M/s Poompuhar Shipping Corp. Ltd. (PSCL) dated 18.04.2018 for transporting coal from Paradeep port to Tutucorine in Tamil Nadu, through its ship ‘MV Eastern View’. The said contract was a period of 13 months. The assessee in turn has chartered the vessel ‘MV Eastern View’ from M/s Power Overseas Investment LLC, again on Time Charter Basis. The assessee has disclosed the receipts of transporting coal from port to port from (PSCL) as shipping business and offered to tax u/s 44B of the Act, i.e. @ 7.5% of the gross receipt attributable to shipping operations carried out in India.
4. Ld. AO after analyzing the contract between the assessee and M/s PSCL, deduced that assessee is simply letting out the vessel and PSCL has hired the vessels for the period of 13 months for carrying out coal from Paradip port to Tuticorin, Tamil Nadu. He held that PSCL is paying the assessee for the use/right to use by way of leasing or letting out the vessel and therefore, the same is to be taxed under ‘royalty’ u/s 9(1)(vi). AO observed that assessee is being paid fixed amount irrespective of fact, whether the vessel is being used by the charter or not. He held that assessee is not being paid for transporting coal form one port to another within India territory albeit for leasing the vessel. Therefore, it cannot be taxed u/s 44B of the Act. Thus, on these facts he strongly relied upon the judgment of Hon’ble Madras High Court in the case of M/s Poompuhar Shipping Corp. Ltd. vs. ITO (360 ITR 257) and held that the amount received by the assessee is liable to tax under the head ‘Royalty’.
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