Sesa Goa Ltd. v. Commissioner of Income-tax, Panaji
[Citation -2020-LL-0203-23]

Citation 2020-LL-0203-23
Appellant Name Sesa Goa Ltd.
Respondent Name Commissioner of Income-tax, Panaji
Court HIGH COURT OF BOMBAY AT GOA
Relevant Act Income-tax
Date of Order 03/02/2020
Assessment Year 1997-98
Judgment View Judgment
Keyword Tags interest received • shipping agency • working capital • non-resident • hire charges • agency fees • written off • bad debt • gross receipt • net receipt • income from other source • write off of bad debts
Bot Summary: In so far as the substantial question of law is concerned, we feel that the same has to be divided into two parts :- Whether, in the facts and in the circumstances of the present case, the receipts by way of Shipping Agency fees and hire charges of machinery and installations have to be reduced in terms of the clause to Section 80 HHC If the aforesaid question of law is to be answered in favour of the Respondent-Revenue and against the Appellant-Assessee whether the reduction is to be of the gross receipts or the net receipts 4 txa30-07dt.03-02-20 5. Accordingly, in so far as the first part of the substantial 5 txa30-07dt.03-02-20 question of law is concerned, we hold that the receipts by way of shipping agency fees and the hire charges of machinery and installations will have to be reduced from the profits in terms of the explanation clause to Section 80 HHC. In short, this part of the substantial question of law will have to be answered in favour of the Respondent-Revenue and against the Appellant-Assessee. In so far as substantial question of law is concerned, the same is directly covered against the Appellant-Assessee and in favour of the Respondent-Revenue in Sesa Goa Ltd. vs. The Commissioner of Income Tax2. Accordingly, the substantial question 2 Tax Appeal No.53/2006 decided on 7/5/2015 3 Tax Appeal No. 57 of 2016 decided on 16/8/2017 4 Tax Appeal No.58 of 2007 decided on 20/7/2019 7 txa30-07dt.03-02-20 of law is answered in favour of the Appellant-Assessee and against the Respondent-Revenue. In so far as the substantial question of law is concerned, the same is again covered in favour of the Appellant-Assessee and against the Respondent-Revenue in the following decisions : T.R.F. Limited vs. Commissioner of Income Tax, Ranchi6; 5 Income Tax Appeal No. 989/2015 and other connected Appeals decided on 5/2/2016. 6 Civil Appeal No.5293/2003 decided on 9/2/2010 9 txa30-07dt.03-02-20 Kerala State Industrial Development Corporation Ltd. vs. CIT7 CIT Poona vs. R.B. Rungta Co.8 Accordingly, the substantial question of law is answered in favour of the Appellant-Assessee and against the Respondent-Revenue. Mr. Ramani, the learned Counsel for the Appellant quite correctly submits that in view of the decision on the substantial question of law, any decision on the substantial question of law becomes redundant.


1 txa30-07dt.03-02-20 Santosh IN HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 30 OF 2007 Sesa Goa Ltd. Having its office at Sesa Ghor Patto, Panaji, Goa. Appellant. Versus. Commissioner of Income Tax, having his office at Aayakar Bhavan, Patto Plaza, Panaji, Goa. Respondent. Mr. R. G. Ramani, with Mr. P. Kakodkar, Advocates for Appellant. Ms. S. Linhares, Standing Counsel for Respondent. Coram : M.S. Sonak & Smt. M.S. Jawalkar. Date : 3 rd February, 2020. ORAL JUDGMENT : (Per M.S. SONAK, J.) Heard Mr. R.G. Ramani for Appellant-Assessee and Ms. S. Linhares, learned Standing Counsel for Respondent-Revenue. 2. This appeal pertains to Assessment Year 1997-98. 2 txa30-07dt.03-02-20 3. This appeal was admitted on 25th June, 2007, on following substantial questions of law : A) Whether on facts and in circumstances of case, receipts by way of "Shipping Agency fees" and "hire charges of machinery and installations" have to be reduced in terms of said clause (baa); and if said receipts have to be so reduced, whether it is gross receipts that have to be reduced or it is net receipts included in profits, that have to be reduced ? B) Whether on facts and in circumstances of case, receipts under head "extraction charges" could be considered as part of "total turnover" as defined in said clause (ba), for purpose of computation of deduction under section 80 HHC of Act ? C) Whether on facts and in circumstances of case, interest received from subsidiary companies on loans lent to them to meet their working capital requirements, and claimed by Appellant as forming part of income from "Profits and gains of business" could be considered as assessable as "Income from other sources"? D) Whether on facts and in circumstances of case, receipts in Appellant's accounts under heads (i) proceeds of services; (ii) hire of Ship/transhippers; (iii) hire of barges; and (iv) repairs of vessels by Shipyards, which receipts have substantial costs, and arise from main business activity of Appellant, would have to be reduced in terms of said clause (baa)? E) Whether on facts and in circumstances of case, demurrage payable to non-resident Ship owners/charterers of vessels, on which tax was not 3 txa30-07dt.03-02-20 deductible as found by Tribunal,could be considered as disallowable under section 40(a)(i)? F) Whether on facts and in circumstances of case, bad debt actually written off as irrecoverable in accounts of Appellant, on basis of authorisation by Board of Directors at meeting held to approve accounts after close of year, could be disallowed on ground that writing off of such bad debt did not take place in relevant previous year ? G) Whether on facts and in circumstances of case, in computing deducting under section 80 HHC, interest credited in accounts, which formed part of bad debt written off as irrecoverable, was not to be netted off from total interest assessed as income from "Profits and gains of business" while reducing 90% of interest receipts in accordance with said clause (baa) in arriving at "profits of business"? 4. In so far as substantial question of law (A) is concerned, we feel that same has to be divided into two parts :- (i) Whether, in facts and in circumstances of present case, receipts by way of "Shipping Agency fees" and "hire charges of machinery and installations" have to be reduced in terms of clause (baa) to Section 80 HHC ? (ii) If aforesaid question of law is to be answered in favour of Respondent-Revenue and against Appellant-Assessee, then, whether reduction is to be of gross receipts or net receipts ? 4 txa30-07dt.03-02-20 5. In so far as "hire charges of machinery and installations" are concerned, this question has been squarely answered against Appellant-Assessee and in favour of Respondent-Revenue in Tax Appeal No.53/2006 decided on 7th May, 2005. Incidentally, this was also appeal instituted by this very Appellant in relation to Assessment Year 1996-97. Applying reasoning therein, it will, therefore, have to be held that hire charges of machinery and installations will have to be reduced in terms of clause (baa) to Section 80 HHC. 6. In so far as shipping agency fees are concerned, again, we note that for previous assessment year, as also for assessment year with which we are concerned in present Appeal, fact finding authorities have held that shipping agency fees have no nexus as such with export and, therefore, reduction of even these receipts is warranted in terms of explanation (baa) to Section 80 HHC. Since this appeal is on substantial question of law and further, since no perversity as such has been pointed out in findings of fact recorded by fact finding authorities, we hold that even shipping agency fees are required to be reduced from profits in terms of clause (baa) to Section 80 HHC. 7. Accordingly, in so far as first part of substantial 5 txa30-07dt.03-02-20 question of law (A) is concerned, we hold that receipts by way of shipping agency fees and hire charges of machinery and installations will have to be reduced from profits in terms of explanation clause (baa) to Section 80 HHC. In short, this part of substantial question of law will have to be answered in favour of Respondent-Revenue and against Appellant-Assessee. 8. In so far as second part of substantial question of law (A) is concerned, according to us, this is covered by decision of Hon'ble Supreme Court in ACG Associated Capsule (P) Ltd. vs. Commissioner of Income-tax1. In fact, this decision was followed by us in Commissioner of Income Tax vs. Sesa Goa Ltd., Tax Appeal No. 81/2006 decided on 7th May, 2015 and thereafter, in V.M. Salgaoncar & Brother Private Limited vs. Commissioner of Income Tax, Tax Appeal No. 21of 2011, decided on 22nd November, 2019. In terms of these rulings, reduction has to be made not on gross basis, but on net basis only. Accordingly, we hold that though receipts by way of shipping agency fees and higher charges for machinery and installation will have to be reduced in terms of explanation (baa) to Section 80 HHC, such receipts will have to be computed on net basis and not on gross basis. Accordingly, reduction will also have to be effected only on net basis and not on gross basis. This part of substantial question of law (A) will, 1 (2012) 18 Taxman.com 137 (SC) 6 txa30-07dt.03-02-20 therefore, have to be answered in favour of Appellant-Assessee and against Respondent-Revenue. 9. Accordingly, we answer substantial question of law at (A) by holding that receipts by way of shipping agency fees and higher charges of machinery and installation will have to be reduced in terms of explanation (baa) to Section 80 HHC of Income Tax Act. However, such reduction will have to be on net basis and not on gross basis. 10. In so far as substantial question of law (B) is concerned, same is directly covered against Appellant-Assessee and in favour of Respondent-Revenue in Sesa Goa Ltd. vs. Commissioner of Income Tax2. Accordingly, this substantial question of law is decided against Appellant-Assessee and in favour of Respondent-Revenue. 11. In so far as substantial question of law (C) is concerned, this issue is covered in favour of Appellant-Assessee and against Respondent-Revenue in Principal Commissioner of Income Tax vs. Sesa Resources Ltd.3 and in Commissioner of Income Tax vs. V.S. Dempo & Co. Pvt. Ltd.4 . Accordingly, substantial question 2 Tax Appeal No.53/2006 decided on 7/5/2015 3 Tax Appeal No. 57 of 2016 decided on 16/8/2017 4 Tax Appeal No.58 of 2007 decided on 20/7/2019 7 txa30-07dt.03-02-20 of law (C) is answered in favour of Appellant-Assessee and against Respondent-Revenue. 12. In so far as substantial question of law (D) is concerned, we have to again fall back upon decision of this Court in Sesa Goa Ltd. (supra). In said decision, this Court has held that in so far as hire of ship/transhipper and hire of barges is concerned, receipts are covered under explanation (baa) to Section 80 HHC and, therefore, such receipts will have to be reduced from out of profits. To that extent, this substantial question of law will have to be answered against Appellant-Assessee and in favour of Respondent-Revenue. 13. However, when it comes to proceeds of services and repairs of vessels by shipyards, it is held in Sesa Goa Ltd. (supra) that such receipts will not be covered under explanation (baa) to Section 80 HHC and, therefore, there is no question of reduction of such receipts from out of profits. To that extent, therefore, this substantial question of law will have to be answered in favour of Appellant-Assessee and against Respondent-Revenue. substantial question of law (D) is, therefore answered by holding that receipts towards hire of ships/transhippers and hire charges of barges will have have to be reduced in terms of explanation (baa) to Section 80 HHC. However, receipts towards proceeds of 8 txa30-07dt.03-02-20 services and repairs of vessels by shipyards have not been covered under explanation (baa) to Section 80 HHC, will have to be reduced from out of profits. Further, we add that in matters of such reductions, computation will have to be on net basis and not on gross basis. 14. In so far as substantial question of law (E) is concerned, same is covered in favour of Appellant-Assessee and against Respondent-Revenue in decision of Full Bench of this Court in Commissioner of Income Tax vs. V.S. Dempo & Co. Pvt. Ltd.5. Incidentally, three of connected Appeals i.e. Tax Appeals No. 948/2015, 957/2015 and 978 of 2015 were Appeals instituted by this very Appellant-Assessee. Accordingly, substantial question of law (E) is answered in favour of Appellant- Assessee and against Respondent-Revenue. 15. In so far as substantial question of law (F) is concerned, same is again covered in favour of Appellant-Assessee and against Respondent-Revenue in following decisions : (i) T.R.F. Limited vs. Commissioner of Income Tax, Ranchi6; 5 Income Tax Appeal No. 989/2015 and other connected Appeals decided on 5/2/2016. 6 Civil Appeal No.5293/2003 decided on 9/2/2010 9 txa30-07dt.03-02-20 (ii) Kerala State Industrial Development Corporation Ltd. vs. CIT7 (iii) CIT Poona vs. R.B. Rungta & Co.8 Accordingly, substantial question of law (F) is answered in favour of Appellant-Assessee and against Respondent-Revenue. 16. Mr. Ramani, learned Counsel for Appellant quite correctly submits that in view of decision on substantial question of law (F), any decision on substantial question of law (G) becomes redundant. Accordingly, substantial question of law (G) is not required to be answered in present Appeal. 17. This Appeal is, accordingly, disposed of in aforesaid terms. There shall be no order as to costs. Smt. M.S. Jawalkar, J. M.S. Sonak, J. 7 349 ITR 365 8 349 ITR 250 (Bom.) Sesa Goa Ltd. v. Commissioner of Income-tax, Panaji
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