Case Law Details
Brief of the Case:
It was held in the case of the income derived from slot charter operations of a tonnage tax company is not liable to be excluded while determining the tonnage income under the tonnage tax scheme on the ground that such operations are carried on in ships which are not qualifying ships in terms of the provisions of Chapter XII G of the Act.
Facts of the Case:
The assessee is a “qualifying company” in terms of Section 111VC of the Income Tax Act an that it owns at least one “Qualifying Ship” as defined in Section 115VD is not in dispute. The assessee operated its “Qualifying Ship” and had also “Slot Charter” arrangements in other ships . The assessee has filed return computing its shipping Income under Chapter XII G of the Act reckoning the deemed tonnage in relation to its activities through slot charter arrangements.
Question of Law:
Whether slot charter arrangements carried out through non qualifying ships are eligible for deemed tonnage as specified in Section 115VG of the Income Tax Act, 1961?
Contention of the Assessee:
The assessee has drawn reference to the Sections 115VA, 115VB and 115VG (4) of the Act and Rule 11Q of the Rules and Form No.66 under the Rules. It was pointed out by assessee that there is no need to mention in the Form (supra) the name of ship, income from which is computed on deemed tonnage basis. The forms and relevant rule never permit an interpretation to hold that to include the income derived from slot charter arrangements, such operations must be carried out through qualifying ship. It was also contended that the relevant provisions of the rules also include the tonnage of slot charter in the form of deeming provisions. It was accordingly argued that it is necessary to assume all those facts on which alone the fiction can operate and a construction which defeats the very object sought to be achieved by the Legislature ought to be avoided.
Contention of the Tribunal:
It was contended by the Tribunal that in order to avail the benefit of the provisions of Chapter XII G in relation to “ Slot Charter” arrangements, it is necessary to show that such operations are carried out through “ Qualifying Ships” and that such operation has to be evidenced by producing valid certificate in terms of Section 115VX(1)(b) of the Act, in relation to each such ship.
Contention of the High Court:
It was contended by the High Court that assessee has submitted all the relevant certificated which is required to be produced as per the requirements of the law. Computation of tonnage income is governed by provisions of Section 115VG of the Act. Sub section 4 of that sections says that
“ For the Purpose of Chapter XII G, the tonnage shall mean the tonnage of a ship indicated in the certificate referred to in section 115VX and includes the deemed tonnage. Deemed tonnage shall be the tonnage in respect of an arrangement of purchase of slots, slot charter and an arrangement of sharing of break-bulk vessel. Further rule 11Q(1) deals with the manner of computation of deemed tonnage in respect of an arrangement of purchase of slot and slot charters. Further, the Format of Audit report i.e Form No. 66 make specific reference to the rules and the illustrative formula for calculating deemed tonnage which converts the slots hired into net tonnage. Further as per Section, 115VB, 115VC and 115VD, it can be seen that apart from owning at least one qualifying ship, operation ships may be either owned or chartered by the company and included slot charter, space charter or joint charter. Thus it can be concluded from the above that income derived from slot charter operations of a tonnage tax company shall be included to determine tonnage income of a tonnage tax company even if such operations are carried on in ships which are not qualifying ships in terms of provisions of Chapter XII G of the Act. In result, the impugned orders of the ITAT and CIT are set aside and AO is directed to modify the assessment orders concerned in conformity with the law as stated above.
