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2025 Supreme(Online)(ITAT) 4104
INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)
Shri S.R. Raghunatha, AM, Shri George George K, VP
Shri. T. Banusekar – Appellant
Versus
Mr. ARV Sreenivasan – Respondent
IT(TP)A No.:108/Chny/2024
For the Appellants/Petitioners:Shri. T. Banusekar, Advocate
For the Respondents: Mr. ARV Sreenivasan, CIT
Transfer Pricing provisions are inapplicable to tonnage tax companies, as income computation adheres to tonnage capacity, not profit.
Headnote:The Income Tax Appellate Tribunal addressed the applicability of the Transfer Pricing provisions under Chapter X in relation to a company opting for the Tonnage Tax Scheme under Chapter XII-G. The court found that since the assessee's income is calculated based on tonnage capacity rather than profit under the normal provisions, the Transfer Pricing rules do not apply. The crux of the dispute involved upward adjustments made by the Transfer Pricing Officer (TPO) concerning charter hire charges and the sale of a vessel, both of which the court deemed irrelevant to tax computations under the Tonnage Tax Scheme. The matter was resolved by ruling against the application of Transfer Pricing adjustments for the case at hand, acknowledging the independent computation principles of the Tonnage Tax Scheme.
| Table of Content |
|---|
| 1. overview of assessment and upward adjustments (Para 3 , 4 , 5 , 6 , 7 , 8 , 9) |
| 2. arguments on tonnage tax scheme applicability (Para 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23) |
| 3. evidence and disputes regarding adjustments (Para 28 , 29 , 30 , 31 , 32 , 33) |
| 4. court's conclusions on transfer pricing and tonnage tax scheme (Para 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52) |
| 5. final decision on appeal outcome (Para 53 , 54) |
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM :
This appeal of the assessee arises from the order of assessment passed u/s.143(3) r.w.s.144C(13) r.w.s.144B of the Income Tax Act, 1961 (in short ‘the Act’) dated 24.10.2024 by the Assessment Unit, Income Tax Department for the A.Y.2021-22 passed in compliance to directions of Dispute Resolution Panel-2, Bengaluru vide order dated 11.05.2017.
2. The grounds raised by the assessee are as follows:
Legal / General Grounds
For that the reference made to the Transfer Pricing Officer was not in accordance with law, conferring no jurisdiction on the Transfer Pricing Officer and consequently rendering the entire proceedings void ab initio.
Provisions of Chapter X not applicable
For that the provisions of Chapter X (Transfer Pricing) are not applicable in computing the income of the appellant which is chargeable to tax as per Chapter XII-G under the Tonnage Tax Scheme.
Issue of upward adjustment towards Charter Hire Charges
For that the Dispute Resolution Panel and consequently the Assessing Officer erred in making an upward adjustment towards Charter Hire Charges to the tune of Rs.1,54,07,156/-.
Issue of upward adjustment in respect of transaction of sale of vessel
For that the Dispute Resolution Panel and consequently the Assessing Officer erred in making an upward adjustment towards transaction of sale of vessel “M.V.Ganesh” to the tune of Rs.7,49,00,991/-
Income determined as per intimation u/s.143(1) ought not have been adopted
For that the Assessing Officer ought not to have adopted the income determined as per the intimation passed u/s.143(1) while calculating the assessed income in the assessment order passed u/s.143(3) r.w.s.144C(13) r.w.s.144B.
Upward adjustment of Rs.7,49,00,991/- by the Assessing Officer would result in double addition
For that the Assessing Officer failed to appreciate that the upward adjustment of Rs.7,49,00,991/- would result in double addition to that extent since loss on sale of vessel was already subject to disallowance u/s.37 vide intimation u/s.143(1).
Levy of interest u/s.234A, 234B and 234C
For that the appellant objects to the levy of interest u/s.234A, 234B and 234C of the Income Tax Act.
Prayer
For these grounds and such other grounds that may be raised, may be altered, amended or modified with the leave of the Hon’ble Income Tax Appellate Tribunal before or during the hearing of the appeal, it is most humbly prayed that the Hon’ble Income Tax Appellate Tribunal may be pleased to:
(a) Quash the order of the Assessing Officer and / or
(b) Delete the upward adjustment towards charter hire charges to the tune of Rs.1,54,07,156/- and / or
(c) Delete the upward adjustment in respect of transaction of sale of vessel MV Ganesh to the tune of Rs.7,49,00,991/- and / or
(d) Direct the Assessing Officer to adopt the returned income and not the income as per intimation u/s.143(1) as the starting point for the purposes of computing assessed income of the appellant and / or (e) Pass such other orders as the Hon’ble Income Tax Appellate Tribunal may deem fit.
3. The brief facts of the case are that the assessee is a marine transportation and logistics company engaged in the business of distribution of cargo across the globe. The assessee is registered under the Tonnage Tax Scheme (TTS) and has obtained a certificate u/s.115VP of the Act which is an undisputed fact. The assessee filed its return of income for the A.Y.2021-22 on 16.02.2022 declaring a total income of Rs.1,59,27,270/
