Commissioner Of Income-Tax, Chennai. Appellant v. M/S. Navix Lines, Chennai. Respondent

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 15.12.2009 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal) No.526 of 2004 Commissioner of Income-tax,Chennai.Appellantv.M/s. Navix Lines, Chennai.Respondent Tax Case Appeal filed under section 260A of the Income Tax Actagainst the order of the Income Tax Appellate Tribunal, Madras 'B'Bench dated 17.07.2003 made in ITA No.872/Mds/1996, as against theorder passed by the Commissioner of Income Tax (Appeals)-V,Madras-34, dated 12.1.96 and made in ITA No.351/94-95 for theassessment year 1993-1994 as against the order passed by the DeputyCommissioner of Income Tax, Special Range VI, Madras-34, dated22.12.94 and made in PAN.GIR NO.11-000-CX-6094 for the assessmentyear 1993-94. For appellant:Mr.K.Subramanian,Standing Counsel for Income Tax DepartmentFor respondent :Mr.J.Balakrishnan, for Mr.S.Sridhar (Judgment of the Court was deliveredby K.RAVIRAJA PANDIAN, J.) The revenue is on appeal against the order of the Income TaxAppellate Tribunal dated 17.07.2003 made in ITA No.872/Mds/1996relating to the assessment year 1993-94. 2. The appeal was admitted on the following substantialquestion of law : "Whether on the facts and circumstances of the case,the Tribunal was right in holding that the demurrage chargesreceived by the assessee does not form part of its income?" https://hcservices.ecourts.gov.in/hcservices/ 3. The facts are : The assessee, a non resident company filedits return of income relating to the assessment year 1993-94 on31.12.1993 admitting an income of Rs.4,74,83,480/-. The return hasbeen processed under section 143(1)(a) of the Act and intimation tothat effect was sent to the assessee on 31.01.1994. Consequentlynotice under section 143(2) of the Act was issued to the assesseeposting the case for hearing. The assessee has claimed thatdemurrage earned is not taxable as has been decided by the IncomeTax Appellate Tribunal, Madras in the assessee's own case forearlier years, but that has not been accepted by the department onthe ground that the reference application has been taken out to theHigh Court and is pending finalisation and as such the demurrageearned is included in freight earnings and assessment was made.The Commissioner of Income Tax (Appeals), on appeal has acceptedthe stand of the assessee and deleted the demurrage charges. Therevenue carried the matter on appeal to the Tribunal, which alsoheld that the demurrage is not includible in the total income. Thecorrectness of the same is canvassed in this appeal. 4. An identical question of law came up for considerationbefore this Court in the case of Commissioner of Income Tax v.Japan Lines Ltd., (2003) 260 ITR 656, wherein the Division Benchanswered the question in favour of the revenue by holding thatExplanation to section 44B inserted with retrospective effect fromApril 1, 1976, was applicable and the demurrage charges admittedlyreceived in India had to be included in the assessee's income, byobserving as follows :"Section 44B of the Act, which is a special provision forcomputing profits and gains of shipping business in thecase of non-residents, under the Explanation that was addedby the Finance Act, 1997 with effect from April 1, 1976,expressly provides that demurrage charges or handlingcharges or any other amount of similar nature shall beregarded as the part of the amount paid or payable to theperson engaged in the business of operation of ships onaccount of the carriage of passengers, livestock, mail orgoods shipped at any port in India." 5. Following the above said judgment the question of law isanswered in favour of the revenue and against the assessee. Theappeal stands allowed. No costs. Sd/Asst.Registrar /true copy/ Sub Asst.Registrar To 1. The Income Tax Appellate Tribunal, Madras 'B' Bench, Madras. 2. The Commissioner of Income Tax (Appeals)V, Madras-34. Madras-34. 5. Following the above said judgment the question of law isanswered in favour of the revenue and against the assessee. Theappeal stands allowed. No costs. Sd/Asst.Registrar /true copy/ Sub Asst.Registrar To 1. The Income Tax Appellate Tribunal, Madras 'B' Bench, Madras. 2. The Commissioner of Income Tax (Appeals)V, Madras-34. Madras-34. 3. The Deputy Commissioner of Income Tax, Special Ranage-VI, Madras-34. Special Ranage-VI, Madras-34. + One cc to Mr.K.Subramaniam, Advocate, SR 68854 T.C. (A) No.526 of 2004 PUR (CO)RH (23.12.09)