ACIT, CHENNAI v. M/s. West Asia Maritime Ltd., CHENNAI

ITA 1195/CHNY/2010 | 2006-2007
Pronouncement Date: 01-07-2011 | Result: Dismissed

Appeal Details

RSA Number 119521714 RSA 2010
Assessee PAN AAACW1023E
Bench Chennai
Appeal Number ITA 1195/CHNY/2010
Duration Of Justice 11 month(s) 15 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. West Asia Maritime Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 01-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 17-06-2011
Date Of Final Hearing 01-07-2011
Next Hearing Date 01-07-2011
Assessment Year 2006-2007
Appeal Filed On 16-07-2010
Judgment Text
IN THE INCOMETAX APPELLATE TRIBUNAL: B-BENCHL;CHENN AI (BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE. ACCOU NTANT MEMBER) ITA NO. 1195 / MDS/10 ASST. YEAR 2006-07 THE ACIT CO.CIR.II(3) CHENNAI VS M/S WEST ASIA MARITIME LTD. BUHARI TOWERS 6 TH FLOOR NO.4 MOORES RD CHENNAI-600006 PANAAACW1023E (APPELLANT) (RESPONDENT) APPELLANT BY: RESPONDENT BY: SHRI P.B.SEKARAN CIT-DR NONE ORDER PER SHRI ABRAHAM P.GEORGE ACCOUNTANT MEMBER: THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-III CHENNAI FOR ASSESSMENT YEAR 2006-07. 2. GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) DIRE CTED THE AO TO TREAT SHIP NAMED M.V. GEM OF ENNORE AS ONE QUALIFYING FOR T ONNAGE TAX SCHEME UNDER CHAPTER XII-G OF THE INCOME-TAX ACT 1961 (THE ACT FOR SHORT). ACCORDING TO THE REVENUE THE MAIN ACTIVITY OF THIS SHIP WAS TO TRAN SPORT THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY ITS ELF AND THE PORTS FROM WHICH THE COAL WAS SHIPPED AS ALSO THE PORTS TO WHICH IT WAS SHIPPED WERE CONNECTED BY ROADS/RAIL. HENCE AS PER THE REVENUE SUCH SHIP WA S TRANSPORTING GOODS ITA NO.1195/MDS//2010. 2 NORMALLY ROUTED THROUGH LAND BY ROAD OR RAIL AND WOULD NOT COME WITHIN THE AMBIT OF A QUALIFYING SHIP FOR AVAILING OF THE TO NNAGE TAX SCEME. 3. NOTICE OF HEARING OF THE CASE WAS SENT TO THE AS SESSEE AND IN ITS REPLY LETTER DATED 08-11-2010 ASSESSEE HAS REQUESTED FO R RESCHEDULING OF THE HEARING TO 26-11-2010. SINCE 26-11-2010 IS A FRIDAY ON WHI CH DAY THIS TRIBUNAL IS TAKING UP ONLY MISC. PETITIONS IT WAS INTIMATED TO THE AS SESSEE BY LETTER DATED 01-11- 2010 THAT SUCH RESCHEDULING WAS NOT POSSIBLE. ASSES SEE WAS ALSO INTIMATED THAT THE APPEAL WOULD BE HEARD ON 23-11-2010 ITSELF. ON 22-11-2010 ASSESSEE HAS FILED AN ADJOURNMENT PETITION STATING THAT SHRI PER CY PARDIWALA WHO WAS TO APPEAR FOR IT WAS ATTENDING A MATTER AT BANGALORE HIGH COURT AND REQUESTING FOR AN ADJOURNMENT. HOWEVER WE FIND FROM RECORD THAT N O AUTHORIZATION HAS BEEN FILED BY THE ASSESSEE AUTHORIZING SHRI PERCY PARDIW ALA TO APPEAR ON ITS BEHALF. WHEN THE CASE WAS CALLED UPON FOR HEARING TODAY NO BODY APPEARED ON BEHALF OF THE ASSESSEE. HENCE WE ARE NOT INCLINED TO ACCEPT THE ADJOURNMENT PETITION FILED AND THEREFORE WE ARE PROCEEDING TO DISPOSE OF THE APPEAL OF THE REVENUE ON MERITS. 4. SHORT FACTS APROPOS ARE THAT ASSESSEE A COMPANY ENGAGED IN THE BUSINESS OF SHIPPING AND PORT SERVICES HAD FILED I TS RETURN DECLARING TONNAGE INCOME OF ` 76 85 246/- UNDER SEC.115VG OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE AO THAT OUT OF THE TEN SHIPS OPERATED BY THE ASSESSEE ONE SHIP CALLED M.V.GEM O F ENNORE WAS TRANSPORTING THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY. HE CAME TO ITA NO.1195/MDS//2010. 3 THIS CONCLUSION BASED ON A LETTER DATED 22-12-2008 SUBMITTED BY THE ASSESSEE WHEREIN IT WAS SUBMITTED AS UNDER: THE SHIP M.V.GEM OF ENNORE IS EMPLOYED WITH M/S PO OMPUHAR SHIPPING CORPORATION CHENNAI ON LONG TERM CHARTER FOR A PER IOD OF TEN YEARS FROM FEBRUARY 2002 FOR MOVING THERMAL COAL FOR TAMILNAD U ELECTRICITY BOARD FROM HALDIA PARADIP AND VIZAG TO ENNORE AND TUTICORIN. A.O WAS OF THE OPINION THAT DEFINITION OF QUALIFYI NG SHIP GIVEN IN SEC.115VD OF THE ACT SPECIFICALLY EXCLUDED A SEA GOING SHIP OR V ESSEL USED MAINLY FOR PROVISION OF GOODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LAND. ACCORDING TO THE AO COAL WAS MOVED WITHIN THE PORTS IN INDIA AND SUCH PORTS WERE CONNECTED BY RAIL AS WELL AS ROAD. AO ALSO NOTED THAT MOVEMENT OF COA L BETWEEN SUCH PORTS COULD NORMALLY BE ROUTED THROUGH LAND AND HENCE THE SHIP M.V.GEM OF ENNORE WAS NOT ELIGIBLE FOR TONNAGE TAX SCHEME. HE THEREFORE APPORTIONED THE TOTAL SHIPPING INCOME DECLARED BY THE ASSESSEE UNDER THE TONNAGE T AX SCHEME AND 1/10 TH THEREOF WAS ATTRIBUTED BY THE SHIP M.V.GEM OF ENNO RE AND DENIED THE TONNAGE TAX BENEFIT. 5. IN ITS APPEAL BEFORE THE CIT(A) ARGUMENT OF THE ASSESSEE WAS THAT THE TONNAGE TAX SCHEME WAS DRAFTED BY A CORE COMMITTEE OF WHICH ONE SHRI D.P. SENGUPTA IRS CHIEF COMMISSIONER OF INCOME-TAX (RT D.) WAS A MEMBER. RELYING ON THE OPINION GIVEN BY THE SAID SHRI D.P.SENGUPTA ASSESSEE ARGUED THAT THE AO GROSSLY ERRED IN CONSIDERING M.V.GEM OF ENNORE TO BE NOT A QUALIFYING SHIP. ACCORDING TO THE ASSESSEE CARRYING OF CARGO FROM O NE INDIAN PORT TO ANOTHER WOULD NOT DISENTITLE THE ASSESSEE FROM RETURNING TH E INCOME OF A SHIP UNDER THE TONNAGE TAX SCHEME ESPECIALLY SINCE THERE WAS NO DISABLING PROVISION IN ITA NO.1195/MDS//2010. 4 CHAPTER XIIG OF THE ACT. CONTENTION OF THE ASSESSEE WAS THAT GOODS AND SERVICES NORMALLY PROVIDED ON LAND MENTIONED IN SEC. 115VD WAS THOSE LIKE RETAIL SELLING RESTAURANTS HOTELS PRISONS RADIO STATIO NS CASINOS FINANCIAL SERVICES AND OFFICES. THEREFORE IT WAS ARGUED THAT THE ACTIVITY WHICH WAS NORMALLY PROVIDED ON LAND AND WHICH COULD BE EASILY BE SHIFTED TO A SHIP JUST FOR TAKING ADVANTAGE OF THE PREFERENTIAL TAX TREATMENT PROVIDED UNDER CHAPT ER XIIG OF THE ACT COULD ALONE BE EXCLUDED. CIT(A) WAS APPRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM AS POINTED OUT BY THE ASSESSEE CHAPTER XIIG OF THE ACT WAS BASED ON U.K. MODEL TO ALLOW THE BENEFIT OF TONNAGE TAX SCHEME AN D THAT THE STATEMENT OF PRACTICE ISSUED BY THE HMRC IN RESPECT OF TONNAGE T AX CLEARLY SUBSTANTIATED THE ARGUMENT OF THE ASSESSEE. HE HELD THAT M.V.GEM OF ENNORE WAS A SHIP WHICH WAS QUALIFIED UNDER SEC. 115VD OF THE ACT AND DIREC TED THE AO TO ALLOW SUCH SHIP BENEFIT OF TONNAGE TAX SCHEME UNDER CHAPTER XIIG OF THE ACT. 6. NOW BEFORE US THE LD. DR STRONGLY ASSAILING THE ORDER OF THE CIT(A) SUBMITTED THAT TRANSPORTATION OF COAL FROM ONE PORT TO ANOTHER WAS NORMALLY BY LORRIES OR TRAINS WHICH OPERATED ON LAND. ACCORDING TO HIM GOODS WHICH COULD BE MOVED ON SUCH MODES OF LAND TRANSPORT IF TRANSPORT ED BY OCEAN THE SHIPS TRANSPORTING SUCH GOODS AUTOMATICALLY STOOD EXCLUDE D FROM THE BENEFIT OF TONNAGE TAX SCHEME UNDER CHAPTER XIIG OF THE ACT. A S ALREADY MENTIONED BY US NOBODY APPEARED ON BEHALF OF THE ASSESSEE. 7. WE HAVE PERUSED THE ORDERS AND HEARD THE LD. D.R . THERE IS NO DISPUTE THAT IN RESPECT OF THE SHIP M.V. GEM OF ENNORE AS ALSO OTHER SHIPS OWNED BY THE ASSESSEE ALL THE CONDITIONS STIPULATED UNDER CHAPT ER XIIG PF THE ACT FOR AVAILING ITA NO.1195/MDS//2010. 5 TONNAGETAX SCHEME WERE SATISFIED EXCEPT IN THE CAS E OF THE ABOVE NAMED SHIP WHICH AS PER THE AO WAS NOT A QUALIFIED ONE UNDER SEC.115VD OF THE ACT. FOR AVAILING OF THE BENEFICIAL PROVISION OF CHAPTER XIIG OF THE ACT WHICH GIVES A FIXED METHOD OF COMPUTING INCOME BASED ON TONNAGE ONE OF THE NECESSARY CONDITION IS THAT THE RELATED SHIP SHOULD BE A QUAL IFIED ONE. SECTION 115VD OF THE ACT IS REPRODUCED HEREUNDER: 115VD. FOR THE PURPOSES OF THIS CHAPTER A SHIP IS A QUALIFYING SHIP IF (A) IT IS A SEA GOING SHIP OR VESSEL OF FIFTEEN NET TONNAGE OR MORE; (B) IT IS A SHIP REGISTERED UNDER THE MERCHANT SHIP PING ACT 1958 (44 OF 1958) OR A SHIP REG ISTRERED OUTSIDE INDIA IN RESP ECT OF WHICH A LICENCE HAS BEEN ISSUED BY THE DIRECTOR-GENERAL OF SHIPPING UNDER SEC.406 OR SEC.407 OF THE MERCHANT SHIPPING ACT 1958(44 OF 19 58); AND (C) A VALID CERTIFICATE IN RESPECT OF SUCH SHIP IND ICATING ITS NET TONNAGE IS IN FORCE BUT DOES NOT INCLUDE- (I) A SEA GOING SHIP OR VESSEL IF THE MAIN PURPOSE FOR WHICH IT IS USED IS THE PROVISION OPF GOODS OR SERVICE OF A KING NORMALLY PROVIDED ON LAND; (II) FISHING VESSELS; (III) FACTORY SHIPS; (IV) PLEASURE CRAFTS; (V) HARBOUR AND RIVER FERRIES; (VI) OFFSHORE INSTALLATIONS; (VII) DREDGERS (OMITTED W.E.F. 01-04-2006); (VIII) QUALIFYING SHIP WHICH IS USED AS A FISHING V ESSEL FOR A PERIOD OF MORE THAN THIRTY DAYS DURING A PREVIOUS YEAR. ITA NO.1195/MDS//2010. 6 8. AO HAD RELIED ON CLAUSE (I) ABOVE FOR COMING TO A CONCLUSION THAT THE SHIP M.V.GEM OF ENNORE WAS NOT ELIGIBLE FOR RETURNING INCOME BASED ON TONNAGE. THERE IS NO DISPUTE THAT THE SAID SHIP WAS TRANSPOR TING COAL FROM PORTS WITHIN INDIA TO BE MORE SPECIFIC FROM PORTS HALDIA PARA DIP AND VIZAG TO THE PORTS AT ENNORE AND TUTICORIN. THERE IS ALSO NO DISPUTE THAT THESE PLACES WERE CONNECTED BY BOTH RAIL/ROAD. THERE CANNOT ALSO BE ANY DOUBT T HAT COAL CAN BE TRANSPORTED BY ROAD AS WELL AS RAIL AND TRANSPORTATION BY RAIL IS A METHOD ADOPTED FOR MOVEMENT OF COAL. BUT THE QUESTION HERE IS WHETHER CL. (I) O F SEC. 115VD IS MEANT FOR TAKING OUT OF THE AMBIT OF CHAPTER XIIG THOSE SEA GOING S HIPS OR VESSELS WHICH WERE TRANSPORTING GOODS WHICH COULD ALSO BE TRANSPORTED THROUGH LAND. LET US TAKE AN EXAMPLE OF PETROLEUM PRODUCTS. THE SITUATION IS SIM ILAR. PETROLEUM PRODUCTS CAN ALSO BE MOVED BY LAND OR SEA. IT IS AT THIS JUNCTU RE THAT IT BECOMES NECESSARY TO VERY CAREFULLY ANALYZE CL.(I) OF SEC.115VD. THE SHI P WHICH IS EXCLUDED BY THIS CLAUSE IS ONE WHICH IS USED FOR THE PROVISION OF GO ODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LAND. PROVIDING GOODS OR SERVI CES ON LAND AND TRANSPORTING GOODS ON LAND ARE ENTIRELY DIFFERENT. GOODS OR SERV ICES HAVE BEEN USED TOGETHER WITH THE INTERJECTION OR. IT CAN IN THE NORMAL C OMMERCIAL SENSE ONLY MEAN GOODS OR SERVICES WHICH ARE PROVIDED FROM A SPECIFIC PLAC E IN LAND. IT COULD NOT BE STRETCHED TO INCLUDE TRANSPORTATION OF GOODS BETWEE N DIFFERENT PLACES ON LAND. EVEN IF WE PRESUME THAT IT WOULD INCLUDE TRANSPORTI ON OF GOODS IT WOULD NOT BE POSSIBLE TO SAY THAT TRANSPORTATION OF GOODS LIKE C OAL OR PETROLEUM ARE THOUGH A KIND OF TRANSPORT METHOD WHICH IS NORMALLY PROVIDED ON LAND ONLY. THE MODE OF TRANSPORT THAT IS TO BE USED IS A COMMERCIAL DECISI ON TO BE TAKEN BY A ITA NO.1195/MDS//2010. 7 BUSINESSMAN BASED ON THE COST FACTORS INVOLVED. IF TRANSPORTATION BY LAND IS CHEAPER NO BODY WOULD TRANSPORT THE GOODS BY SHIP. IF TRANSPORT BY SHIP IS CHEAPER THEN WE CANNOT SAY THAT SUCH GOODS WHICH A RE CHEAPER TO BE TRANSPORTED ON SEA HAS TO BE TREATED AS GOODS NORM ALLY TRANSPORTED BY LAND. IF WE LOOK AT THE BUDGET SPEECH DATED 3 RD FEBRUARY 2004 OF THE FINANCE MINISTER ON THE SCHEME OF TONNAGE TAX IT WAS MENTIONED AS UNDER: MORE THAN 90 PER CENT OF WORLD SHIPPING TONNAGE IS SUBJECT TO VERY LOW LEVELS OF TAXATION. TO PROVIDE A LEVEL PLAYING FIEL D SO THAT INDIAN SHIPPING BECOMES INTERNATIONALLY COMPETITIVE A TONNAGE TAX SCHEME WITH NOTIONAL INCOME AT A FIXED RATE ON THE BASIS OF NET REGISTE RED TONNAGE SHOULD BE CONSIDERED . 9. BEFORE INTRODUCTION OF CHAPTER XIIG OF THE ACT SHIPPING COMPANIES WERE TAXED AT A RATE OF 35 PER CENT WITH A SURCHARGE OF 2.5 PER CENT ON THE TAX DETERMINED. AN INDIAN PUBLIC LIMITED COMPANY OR A G OVERNMENT COMPANY ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS COUL D CLAIM DEDUCTION UNDER SEC. 33AC UPTO 100 PER CENT OF PROFIT DERIVED FROM THE B USINESS OF OPERATION OF SHIPS FOR THE ASST. YEARS 2001-02 TO 2005-06 BY CREDITING THE AMOUNT TO A RESERVE ACCOUNT. HOWEVER THE DEDUCTION CEASED WHEN THE AGG REGATE OF THE AMOUNTS CARRIED TO RESERVE ACCOUNT FROM TIME-TO-TIME EXCEED ED TWICE THE AGGREGATE OF THE AMOUNTS OF PAID-UP SHARE CAPITAL THE GENERAL RESER VE AND THE AMOUNT CREDITED TO SHARE PREMIUM ACCOUNT. THE AMOUNT IN RESERVE ACCOUN T WAS TO BE UTILIZED BEFORE THE EXPIRTY OF EIGHT YEARS FOR THE PURPOSE OF ACQUI SITION OF NEW SHIPS. SANCTIONS WERE PROVIDED FOR NOT COMPLYING WITH THIS CONDITION . HOWEVER WHERE THE TAXABLE PROFITS FALL BELOW THE BOOK PROFITS TAX WAS TO BE PAID ON BOOK PROFIT AT THE RATE OF 7.5 PER CENT UNDER THE MAT SCHEME. IN CONTRAST T O THESE PROVISIONS UNDER THE ITA NO.1195/MDS//2010. 8 TONNAGE TAX SCHEME INTRODUCED THROUGH CHAPTER XIIG OF THE ACT THE LIABILITY OF A SHIPPING COMPANY TOWARDS TAXATION HAS TO BE DETERM INED ON THE BASIS OF THE TONNAGE OF THE VESSEL OR A FLEET OF VESSELS OWNED OPERATED OR CHARTED (TIME CHARTER OR BARE BOAT CHARTER) BY IT INSTEAD OF PROF IT GENERATED BY COMMERCIAL OPERATIONS WHICH GENERALLY VARIED FROM YEAR-TO-YEA R. GENERALLY THIS TAX IS LEVIED ON THE BASIS OF NET REGISTERED TONNAGE (NRT). VARIO US COUNTRIES FOLLOWING THIS SYSTEM HAVE PRESCRIBED A RATE STRUCTURE WHICH MUL TIPLIED BY THE TONNAGE OF THE VESSEL GIVE THE AMOUNT OF TAX PAYABLE. SOME COUNTR IES LEVY TAX ON GROSS REGISTERED TONNAGE (GRT) AND SOME FOLLOW A MIXTURE OF GRT AND NRT. THERE ARE OTHER VARIATIONS IN THE TONNAGE TAX SCHEME ALSO SUCH AS MODIFIED TONNAGE TAX SYSTEM OPTIONAL TONNAGE TAX SYSTEM A PARALLEL TON NAGE TAX SYSTEM WITH CORPORATION TAX SYSTEM. VARIOUS COUNTRIES HAVE INCO RPORATED SEVERAL TYPICAL FEATURES IN THEIR TAX LEGISLATIONS BY WAY OF INCENT IVES TO ACHIEVE SPECIFIC NATIONAL OBJECTIONS. BUT THE BIGGEST MERIT OF TONNAGE TAX IS ITS SIMPLICITY AND THE TYPE OF INTERPRETATION THAT IS TO BE GIVEN FOR THE VARIOUS PROVISIONS UNDER CHAPTER XIIG OF THE ACT SHOULD BE TO ACCENTUATE THE PURPOSES OF INT RODUCTION OF TONNAGE TAX SCHEME AND NOT TO COMPLICATE IT. THUS IN OUR OPIN ION JUST BECAUSE A SEA GOING SHIP WAS USED TO TRANSPORT COAL BETWEEN THE PORTS W HICH WERE CONNECTED BY RAIL/ROAD WOULD NOT BE SUFFICIENT ENOUGH A REASON TO SAY THAT IT WAS NOT QUALIFIED UNDER SEC. 115VD OF THE ACT. CL. (I) OF SEC.115VD WAS NOT INTENDED FOR THAT PURPOSE BUT ONLY TO ENSURE THAT PROFITS FROM SERVIC ES AND SALE OF GOODS WHICH COULD BE EFFECTED ON LAND DID NOT GET ANY UNINTENDE D BENEFITS BY SHIFTING THE BUSINESS TO A SEA GOING SHIP JUST TO GET THE BENE FIT OF TONNAGE TAX SCHEME. WE ITA NO.1195/MDS//2010. 9 ARE THEREFORE OF THE OPINION THAT THE CIT(A) WAS VE RY WELL JUSTIFIED IN DIRECTING THE AO TO GIVE THE BENEFIT OF TONNAGE TAX SCHEME UNDER SEC. 115VD OF THE ACT TO THE ASSESSEE. NO INTERFERENCE IS CALLED FOR. 11. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON -11-201 0. (U.B.S.BEDI) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: NOVEMBER 2010 NBR CC: ASSESSEE /ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE. SEPARATE ORDER FROM PAGES 10 TO 21. SD/- (U.B.S. BEDI) JUDICIAL MEMBER ITA NO.1195/MDS//2010. 10 PER U.B.S. BEDI JUDICIAL MEMBER 12. DESPITE BEST PERSUASION OF MYSELF I HAVE NOT BEEN ABLE TO AGREE WITH THE FINDINGS AND CONCLUSION AS DRAWN BY THE LD. ACCOUNT ANT MEMBER EVEN AFTER READING HIS PROPOSED ORDER TIME AND AGAIN I PROCEE D TO WRITE MY SEPARATE ORDER AS UNDER: 13. IN THIS CASE THE DEPARTMENT HAS CHALLENGED TH E ACTION OF THE LD. CIT(A) IN DIRECTING THE ASSESSING OFFICER TO TREAT THE SHIP N AMED M.V. GEM OF ENNORE AS ONE QUALIFYING FOR TONNAGE TAX SCHEME UNDER CHAPTER XII-G OF THE INCOME TAX ACT 1961. ACCORDING TO THE DEPARTMENT THE MAIN AC TIVITY OF THE SHIP WAS TO TRANSPORT THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION SITUATED WITHIN THE COUNTRY ITSELF AND THE PORTS FROM WHERE THE COAL WA S SHIPPED HAS ALSO A PORT TO WHICH IT WAS SHIPPED ARE CONNECTED BY ROAD/RAIL I.E . BY LAND. THEREFORE AS PER THE DEPARTMENT SUCH SHIP WAS TRANSPORTING GOODS WH ICH COULD NORMALLY BE ROUTED THROUGH LAND BY ROAD OR RAIL AS SUCH WOUL D NOT COME WITHIN THE PURVIEW OF A QUALIFYING SHIP AS DEFINED UNDER SECTION 115VD (I) FOR AVAILING OF TONNAGE TAX SCHEME. 14. FACTS AS EMERGING FROM THE RECORD INDICATE THA T THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIPPING AND PORT SERVICES HAD FILED ITS RETURN DECLARING TONNAGE INCOME OF ` .76 85 246/- UNDER SECTION 115VG OF THE ACT. DURING THE ASSESSMENT PROCEEDING THE ASSESSING OFFICER NOTED THAT OUT OF TEN SHIPS OPERATED BY THE ASSESSEE ONE SHIP CALLED M.V. GEM OF ENNORE HAS TRANSPORTED THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY AND BY ITA NO.1195/MDS//2010. 11 PLACING RELIANCE ON THE LETTER OF THE ASSESSEE DAT ED 22.12.2008 FILED BY THE ASSESSEE WHEREIN IT WAS SUBMITTED AS FOLLOWS: THE SHIP M.V. GEM OF ENNORE IS EMPLOYED WITH M/S . POOMPUHAR SHIPPING CORPORATION CHENNAI ON LONG TERM CHARTER FOR A PERIOD OF TEN YEARS FROM FEBRUARY 2002 FOR MOVING THERMAL CO AL FOR TAMILNADU ELECTRICITY BOARD FROM HALDIA PARADIP AN D VIZAG TO ENNORE AND TUTICORIN THE ASSESSING OFFICER IN VIEW OF THE FACTS CIRCUM STANCES AND OTHER RELEVANT MATERIAL FORMED THE OPINION THAT THE DEFINITION OF QUALIFYING SHIP AS GIVEN IN SECTION 115VD OF THE ACT SPECIFICALLY EXCLUDES A S EA GOING SHIP OR VESSEL MAINLY USED FOR THE PROVISIONS OF GOODS OR SERVICES OF A K IND NORMALLY PROVIDED ON LAND. ACCORDING TO HIM THE COAL WAS MOVED WITHIN THE PORT S IN INDIA SUCH PORTS WERE CONNECTED BY RAIL AS WELL AS ROAD AND HE FURTHER NO TED THAT MOVEMENT OF COAL BETWEEN SUCH PORTS COULD BE ROUTED THROUGH LAND NOR MALLY AND AS SUCH SHIP M.V. GEM OF ENNORE WAS NOT LIABLE FOR TONNAGE TAX SCHEME. THEREFORE HE APPORTIONED THE TOTAL SHIPPING INCOME DECLARED BY T HE ASSESSEE UNDER TONNAGE TAX SCHEME AND HE TREATED 1/10 TH THEREOF AS ATTRIBUTED BY THE SHIP M.V. GEM OF ENNORE IN THE ABSENCE OF ANY BIFURCATION OF ACCOU NTS FOR INDIVIDUAL SHIP CONCERNED HAVING BEEN FURNISHED BY THE ASSESSEE DE NIED THE TONNAGE TAX BENEFIT TO THIS EXTENT. 15. THE ASSESSEE TOOK UP THE MATTER IN APPEAL AND CHALLENGED THE ACTION OF THE ASSESSING OFFICER BY RAISING VARIOUS GROUNDS B EFORE THE LD. CIT(A)AND ALSO RELIED UPON THE OPINION OF ONE MR. D.P. SEN GUPTA IRS EX-CHIEF COMMISSIONER OF INCOME TAX WHO IS STATED TO BE A MEMBER OF CO RE COMMITTEE WHICH DRAFTED THE TONNAGE TAX SCHEME THE ASSESSEE FURTHER ARGUED THAT THE ASSESSING ITA NO.1195/MDS//2010. 12 OFFICER GROSSLY ERRED IN TREATING THE M.V. GEM OF ENNORE AS NOT QUALIFYING SHIP WHEN ACCORDING TO THE ASSESSEE CARRYING OF CARGO FROM ONE INDIAN PORT TO ANOTHER WOULD NOT DISENTITLE THE ASSESSEE FROM GETT ING SUCH BENEFIT ESPECIALLY WHEN THERE IS NO DISABLING PROVISION IN THE CHAPTER XII-G OF THE INCOME TAX ACT AND GIVING SOME EXAMPLES OF RETAILERS IT WAS ARGUE D THAT THE ACTIVITY WHICH WAS NORMALLY PROVIDED ON LAND COULD NOT EASILY BE SHI FTED TO THE SHIP JUST FOR TAKING ADVANTAGE OF THE PREFERENTIAL TAX TREATMENT. BY ME NTIONING ABOUT THIS PROVISION BEING BASED ON U.K. MODEL AND THIS CASE NOT FALLING IN THAT EXCLUSION CATEGORY REQUESTED CIT(A) TO ALLOW THE BENEFIT OF TONNAGE TA X SCHEME . CONSIDERING AND ACCEPTING ALL THE PLEAS AS RAISED BY THE ASSESSEE THE LD. CIT(A) HAS HELD THAT M.V. GEM OF ENNORE WAS A QUALIFYING SHIP UNDER SE CTION 115VD OF THE ACT AND DIRECTED THE ASSESSING OFFICER TO ALLOW THE BENEFIT OF TONNAGE TAX SCHEME UNDER CHAPTER XII-G WITH REGARD TO THIS SHIP OF THE ASSE SSEE. THE DEPARTMENT HAS COME UP IN APPEAL AGAINST THE ORDER OF THE LD. CIT( A). 16. THE LD. DR WHILE RELYING UPON THE ORDER OF THE ASSESSING OFFICER HAS PLEADED FOR SETTING ASIDE THE ORDER OF THE LD. CIT( A) AND RESTORING THAT OF THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT TR ANSPORTATION OF COAL FROM ONE PORT TO ANOTHER PORT IN INDIA COULD NORMALLY BE DO NE THROUGH LORRIES OR TRAINS WHICH OPERATE ON LAND. ACCORDING TO HIM THE COALS WHICH COULD BE MOVED ON SUCH MODES OF LAND TRANSPORT IF TRANSPORTED BY SEA SUCH SHIPS ARE EXCLUDED FROM THE BENEFIT OF TONNAGE TAX SCHEME UNDER RELEVA NT PROVISION AS CONTAINED IN THE SAID CHAPTER OF THE ACT AND THE ASSESSING OFFIC ER WHILE CONSIDERING AND GIVING RELEVANT DETAILS HAS CAME TO A PROPER CONCLU SION THAT SHIP TRANSPORTING ITA NO.1195/MDS//2010. 13 GOODS WHICH COULD BE TRANSPORTED BY LORRIES OR TRAI N ARE EXCLUDED FROM THE BENEFIT OF TONNAGE TAX SCHEME. THE LD. DR HAS ALSO SUBMITTE D THAT THERE IS A CLEAR AND UNAMBIGUOUS STIPULATION IN THE RELEVANT PROVISION A ND NEITHER THERE IS ANY AMBIGUITY NOR ANY FLAW IN THE LANGUAGE EMPLOYED IN THE RELEVANT PROVISION OF THE STATUTE THEREFORE THERE WAS NO SCOPE FOR THE LD. CIT(A) TO INTERPRET THE CLEAR WORDS OF THE STATUTE TO GIVE ANY OTHER MEANING THAN IN THE WORDS USED. IT WAS THUS PLEADED FOR RESTORING THE ORDER OF THE ASSESSI NG OFFICER AFTER SETTING ASIDE THE IMPUGNED ORDER. 16.1 HOWEVER THERE WAS NO REPRESENTATION ON BEHALF OF THE ASSESSEE BEFORE THE TRIBUNAL AND REQUEST OF THE ASSESSEE FOR ADJOUR NMENT HAS APPROPRIATELY BEEN DISCUSSED AND ADJUDICATED TO DECLINE SUCH REQUEST A S DEALT WITH BY THE LD. A.M. IN DETAIL AND I HAVE NOTHING TO ADD BUT TO CONCUR WITH HIM IN REGARD TO DEALING WITH THE REQUEST FOR ADJOURNMENT OF THE ASSESSEE WHICH CAME TO BE REJECTED. 17. ARGUMENTS OF LD. DR IN THE LIGHT OF FACTS AND CIRCUMSTANCES OF THE CASE AND PROVISIONS OF SECTIONS 115VD AND 115VG HAVE BEE N CONSIDERED. IT IS FOUND THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE EXPLAINED TO THE ASSESSING OFFICER THAT THE ASSESSEE IS THE CO-O WNER OF THE SHIP M.V. GEM OF ENNORE WHICH WAS ENGAGED ON A LONG-TERM CHARTER FOR MOVING THERMAL COAL FOR TAMILNADU ELECTRICITY BOARD FROM HALDIA PARADIP AN D VIZAG PORTS TO ENNORE AND TUTICORIN PORTS IN TAMIL NADU. THE ASSESSING OFFICE R OBSERVED THAT ALL THE PORTS STATED ABOVE ARE LOCATED WITHIN THE COUNTRY AND ARE WELL CONNECTED BY ROAD AND RAIL. THEREFORE MOVEMENT OF COAL BETWEEN THESE POR TS CAN BE ROUTED THROUGH LAND BY ROAD OR RAIL TRANSPORT. ACCORDINGLY HE CON CLUDED THAT M.V. GEM OF ITA NO.1195/MDS//2010. 14 ENNORE IS NOT A QUALIFYING SHIP IN TERMS OF 115V D IF ANY SEA GOING SHIP OR VESSEL TRANSPORTS ANY GOODS OR SERVICES OF A KIND N ORMALLY PROVIDED ON LAND IS NOT A QUALIFIED SHIP. THE ASSESSING OFFICER THERE AFTER INVOKED PROVISIONS OF 115VI(6) AND TAXED THE INCOME OF M.V. GEM OF ENNOR E UNDER THE NORMAL PROVISIONS OF THE ACT. THE ASSESSEE TOOK UP THE MAT TER IN APPEAL AND WHILE RELYING UPON THE OPINION OF SHRI D.P. SENGUPTA IRS & EX-CHIEF COMMISSIONER OF INCOME TAX WHO IS STATED TO BE ONE OF THE MEMBERS OF THE CORE COMMITTEE WHICH DRAFTED THE TONNAGE TAX SCHEME HAS PLEADED FO R ALLOWING THE RELIEF WITH REGARD TO TONNAGE TAX SCHEME ON THE SHIP M.V. GEM OF ENNORE AND THE LD. CIT(A) ALLOWED THE BENEFIT TO THE ASSESSEE AGAINST WHICH THE DEPARTMENT HAS COME UP IN APPEAL AGAINST SUCH ACTION OF LD CIT(A) BEFORE THIS BENCH. 17.1 AFTER CONSIDERING THE ARGUMENTS OF LD DR MATE RIAL ON RECORD AS WELL AS ORDERS OF AUTHORITIES BELOW IT IS FOUND THAT THERE IS NO DISPUTE ABOUT THE SAID SHIP M.V. GEM OF ENNORE HAS TRANSPORTED COAL FROM THE PORTS IN HALDIA PARADIP AND VIZAG TO THE PORTS AT ENNORE AND TUTICORIN. THERE I S ALSO NO DISPUTE THAT THESE PLACES ARE SITUATED IN INDIA AND CONNECTED BOTH BY RAIL AND ROADS AND THERE IS ALSO NO DOUBT THAT COAL CAN BE TRANSPORTED BY ROAD AND ALSO BY RAIL FROM ONE PORT TO ANOTHER AS MENTIONED ABOVE. 17.2 FOR COMPUTATION OF PROFITS AND GAINS FROM THE BUSINESS OF OPERATING QUALIFYING SHIPS AS PROVIDED UNDER SECTION 115VA S ECTION 115VD DEFINES QUALIFYING SHIP AND RELEVANT PROVISION DEFINING QUALIFYING SHIP IS AS UNDER: 115VD. FOR THE PURPOSES OF THIS CHAPTER A SHIP IS A QUALIFYING SHIP IF (A) IT IS A SEA GOING SHIP OR VESSEL OF FIFTEEN NE T TONNAGE OR MORE; ITA NO.1195/MDS//2010. 15 (B) IT IS A SHIP REGISTERED UNDER THE MERCHANT SHI PPING ACT 1958 (44 OF 1958) OR A SHIP REGISTERED OUTSIDE INDIA IN RESPE CT OF WHICH A LICENCE HAS BEEN ISSUED BY THE DIRECTOR-GENERAL OF SHIPPIN G UNDER SECTION 406 OR SECTION 407 OF THE MERCHANT SHIPPING ACT 1958 (44 OF 1958); AND (C) A VALID CERTIFICATE IN RESPECT OF SUCH SHIP IN DICATING ITS NET TONNAGE IS IN FORCE BUT DOES NOT INCLUDE (I) A SEAGOING SHIP OR VESSEL IF THE MAIN PURPOSE F OR WHICH IT IS USED IS THE PROVISION OF GOODS OR SERVICES OF A KIND NORMAL LY PROVIDED ON LAND; (II) FISHING VESSELS; (III) FACTORY SHIPS; (IV) PLEASURE CRAFTS; (V) HARBOUR AND RIVER FERRIES; (VI) OFFSHORE INSTALLATIONS; (VII) DREDGERS; (VIII) A QUALIFYING SHIP WHICH IS USED AS A FISHING VESSEL FOR A PERIOD OF MORE THAN THIRTY DAYS DURING A PREVIOUS YEAR. 17.3 FROM THE WORDS CONTAINED IN THE RELEVANT PROVI SIONS OF CLAUSE (I) IN SECTION 115VD AS REPRODUCED ABOVE IT BECOMES CLEAR THAT T HE SEA GOING SHIP OR VESSEL IF THE MAIN PURPOSE FOR WHICH IT IS USED IS THE PRO VISION OF GOODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LAND IS CATEGORICALLY EXC LUDED FROM BEING QUALIFIED SHIP IN TERMS OF THE WORDING USED. SO FAR AS INTERPRETAT ION OF STATUTE IS CONCERNED VARIOUS HIGH COURTS AND HONBLE SUPREME COURT HAVE OPINED IN THE FOLLOWING DECISIONS AS UNDER: ITA NO.1195/MDS//2010. 16 17.3.1 THE HONBLE SUPREME COURT IN THE CASE OF (1 ) ORISSA STATE WAREHOUSING CORPORATION AND (2) RAJASTHAN STATE WAR EHOUSING CORPORATION V. CIT 237 ITR 589 HAS HELD AS UNDER: INTERPRETATION OF TAXING STATUTES - LITERAL INTERP RETATION - NATURAL AND ORDINARY MEANING MUST BE ASCRIBED TO WORDS. 17.3.2 THE HONBLE SUPREME COURT IN THE CASE OF PA DMASUNDARA RAO (DECD.) AND OTHERS V. STATE OF TAMIL NADU AND OTHER S [2002] 255 ITR 147 HAS HELD AS UNDER: THE COURT CANNOT READ ANYTHING INTO A STATUTORY P ROVISION WHICH IS PLAIN AND UNAMBIGUOUS. A STATUTE IS THE ED ICT OF THE LEGISLATURE. THE LANGUAGE EMPLOYED IN A STATUTE IS THE DETERMINATIVE FACTOR OF LEGISLATIVE INTENT. THE FIRST AND PRIMARY RULE OF CONSTRUCTION IS THAT THE INTENTION OF THE LEGISLATION MUST BE FO UND IN THE WORDS USED BY THE LEGISLATURE ITSELF. 17.3.3 FURTHER THE HONBLE SUPREME COURT IN THE C ASE OF CIT V. MADURAI MILLS CO. LTD. 89 ITR 49 HAS HELD AS UNDER: IT IS WELL-SETTLED THAT CONSIDERATIONS STEMMING FR OM LEGISLATIVE HISTORY MUST NOT BE ALLOWED TO OVERRIDE THE PLAIN WORDS OF A STATUTE. AND IN THE CASE OF CONTROLLER OF ESTATE DUTY V. R. KANAKASABAI AND OTHERS 89 ITR 251 IT WAS HELD BY THE HONBLE SUPREME COURT A S UNDER: IT IS NOT PERMISSIBLE FOR THE COURT TO READ IN TO A TAXING PROVISION ANY WORDS WHICH ARE NOT THERE OR EXCLUDE WORDS WHICH ARE THERE. THE WORDS FOUND IN THE PROVISION MUST BE GIV EN THEIR NATURAL MEANING. 17.3.4 SIMILARLY IN THE CASE OF MOHAMMAD ALI KHAN AND OTHERS V. CWT [1997] 224 ITR 672 THE HONBLE SUPREME COURT HAS H ELD AS UNDER: ITA NO.1195/MDS//2010. 17 INTENTION OF THE LEGISLATURE IS PRIMARILY TO BE GAT HERED FROM THE LANGUAGE USED. JUST AS IT IS NOT PERMISSIBLE TO ADD WORDS OR TO FILL IN A GAP OR LACUNA SIMILARLY IT IS OF UNIVERSAL APPLI CATION THAT EFFORT SHOULD BE MADE TO GIVE MEANING TO EACH AND EVERY WO RD USED BY THE LEGISLATURE. 17.3.5 THE CARDINAL PRINCIPLE OF STATUTORY INTERPR ETATION IS THAT IF THE MEANING OF THE STATUTORY INTERPRETATION IS THAT IF THE MEANING OF THE STATUTORY INTERPRETATION IS PLAIN THEN THE COURT MUST APPLY IT REGARDLESS OF THE RESULTS. IT IS WELL SETTLED LAW THAT IF THE LANGUAGE OF A STATUTE IS CLEAR AND UNAMBIGUOUS AND IF TWO INTERPRETATIONS ARE NOT REASONABLY POSSIBLE IT WOULD BE WRONG TO DISCARD THE PLAIN MEANING OF THE WORDS USED IN ORDER TO MEET A POSSIBLE INJUSTICE CIT V. T.V. SUNDRAM IYENGAR & SONS (P) LTD. (1975) 101 ITR 764(SC). 17.3.6 THE HONBLE MADRAS HIGH COURT (FULL BENCH) IN THE CASE OF CIT V. SMT. MUTHU ZULAIKHA 245 ITR 800 HAS HELD AS UNDER: THE CARDINAL LAW OF INTERPRETATION IS THAT IF THE LANGUAGE IS SIMPLE AND UNAMBIGUOUS IT IS TO BE READ KEEPING IN MIND T HE CLEAR INTENTION OF THE LEGISLATION. ANY ADDITION OR SUBTRACTION OF WORDS I S NOT PERMISSIBLE. IT IS ALSO NOT PROPER TO USE A SENSE WHICH IS DIFFERENT F ROM WHAT IT ORDINARILY CONVEYS. 17.3.7 THE HONBLE KARNATAKA HIGH COURT IN THE CAS E OF PATIL VIJAYKUMAR AND OTHERS ETC. V. CIT 151 ITR 48 HAS HELD AS UNDER : WHEN THE MEANING OF WORDS IS CLEAR AND UNAMBIGUOUS THE COURT HAS TO GIVE EFFECT TO IT WHATEVER BE THE CONSEQUENC E AS THE COURT HAS NO JURISDICTION TO MITIGATE HARSH CONSEQUENCES OF THE STATUTE IF ANY. 17.3.8 THE HONBLE KERALA HIGH COURT IN THE CASE O F CBDT V. COCHIN GOODS TRANSPORT ASSOCIATION 236 ITR 993 HAS HELD AS UNDER: ITA NO.1195/MDS//2010. 18 SO LONG AS THE LANGUAGE EMPLOYED IN THE STATUTORY PROVISION AND MORE SO IN THE FISCAL STATUTE IS CLEAR THE COURT S HOULD INTERPRET IT ON THE FACE VALUE AND THERE IS NO WARRANT TO GO BEHIND IT. NOTH ING SHOULD BE ADDED OR SUBTRACTED TO INTERPRET THE PLAIN LANGUAGE AND THE SEMANTIC VIEW ALONE SHOULD BE TAKEN. IN FISCAL MATTERS THERE IS NO RES JUDICATA AND NO ESTOPPELS. 17.3.9 THE HONBLE DELHI HIGH COURT IN THE CASE OF M.P. PODDAR (HUF) AND ANOTHER VS. APPROPRIATE AUTHORITY AND ANOTHER 2 40 ITR 372 HAS HELD AS UNDER: ..THIS IS A CLEAR MANDATE OF THE LEGISLATURE AND THERE IS NO REASON TO DEPART FROM APPLYING THE FUNDAMENTAL RULE OF CONSTRUCTION OF A TAXING STATUTE THAT THE MEANING AND INTENTION OF A STATUTE MUST BE GATHERED FROM THE PLAIN AND UNAMBIGUOUS EXPRESSION USED THER EIN RATHER THAN TO FIND OUT WHAT IS JUST OR EXPEDIENT. 17.3.10 THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. GAUTAM SARABHAI TRUST [1988] 173 ITR 216 HAS OPINED IN THE CONTEXT OF INTERPRETATION OF TAXING STATUTES WORDS TO BE GIVEN PLAIN GRAMMATICAL MEANING. 17.3.11 FURTHER THE HONBLE KERALA HIGH COURT IN TH E CASE OF R. GAO ELECTRODES LTD. V. CIT [1987] 173 ITR 351 HAS OPINE D AS UNDER: WORDS TO BE ASSIGNED THEIR ORDINARY MEANING - NO R OOM FOR INTENDMENT. 17.3.12 FROM THE ABOVE DECISIONS OF COURTS INCLUDIN G THOSE OF HONBLE SUPREME COURT AND JURISDICTIONAL HIGH COURT IT BEC OMES AMPLY CLEAR THAT NATURAL AND ORDINARY MEANING MUST BE ASCRIBED TO THE WORDS COURTS CANNOT READ INTO A STATUTORY PROVISION WHICH IS PLAIN AND UNAMBIGUOUS THE LANGUAGE EMPLOYED IS DETERMINATIVE FACTOR OF LEGISLATIVE INTENT THE CON SIDERATION STEMMING FROM ITA NO.1195/MDS//2010. 19 LEGISLATIVE HISTORY MUST NOT BE ALLOWED TO OVERRIDE THE PLAIN WORDS OF THE STATUTE IT IS NOT PERMISSIBLE FOR THE COURTS TO READ INTO A TA XING PROVISION ANY WORDS WHICH ARE NOT THERE OR EXCLUDE WORDS WHICH ARE THERE AND WORDS MUST BE GIVEN THEIR NATURAL MEANING IF LANGUAGE EMPLOYED IN THE STATUT ORY PROVISION AND MORE SO IN FISCAL STATUTE IS CLEAR THAN IT SHOULD BE INTERPRET ED ON THE FACE VALUE AND THERE IS NO WARRANT TO GO BEHIND IT WITHOUT ADDING OR SUBTRA CTING ANYTHING TO INTERPRET THE PLAIN LANGUAGE AND SEMANTIC VIEW ALONE SHOULD BE TA KEN THERE IS NO ROOM FOR INTENDMENT AND WORDS ARE TO BE GIVEN PLAIN GRAMMATI CAL MEANING. 18. IF CLAUSE (I) OF SECTION 115VD IS GONE INTO IT WOULD BE FOUND THAT THERE IS NO AMBIGUITY IN THE LANGUAGE EMPLOYED WHICH IS SIM PLE CLEAR AND UNAMBIGUOUS SO IN VIEW OF PRECEDENTS THE COURTS/TRIBUNALS HAVE TO GIVE EFFECT TO IT WHATEVER BE THE CONSEQUENCE BECAUSE THERE IS NO JURISDICTIO N TO MITIGATE HARSH CONSEQUENCES OF THE STATUTE IF ANY ALSO. 18.1 SO FAR AS AN OPINION OF ONE MR. D.P. SENGUPTA IRS AND EX-CHIEF COMMISSIONER OF INCOME TAX. STATED TO BE ONE OF TH E MEMBERS OF CORE COMMITTEE WHICH DRAFTED THE TONNAGE TAX SCHEME FOR INDIAN INCOME TAX (WHO HAS ALSO REPRESENTED THE ASSESSEE BEFORE THE LD. CI T(A) IN FIRST APPEAL PROCEEDINGS) PORTION OF WHICH HAS BEEN REPRODUCED AND HAS MAINLY BEEN RELIED UPON BY THE LD. CIT(A) IS CONCERNED IT COULD AT T HE MOST BE A SUBMISSIONS ON BEHALF OF THE ASSESSEE WHICH HAS BEEN GIVEN TO THE ASSESSEE BY THE A.R. AND THE SAME CANNOT BE TERMED OR TREATED AS PROVISIONS OF LAW IN THE ABSENCE OF HAVING BEEN BASED ON ANY SPECIFIC PROVISION OF STA TUTE OR PRECEDENT IN THIS REGARD. MOREOVER REFERENCE OF SOME U.K. MODEL PROV ISIONS AS MENTIONED BY LD ITA NO.1195/MDS//2010. 20 CIT(A) WHEN THOSE ARE NOT PART OF PROVISIONS IN RE LATION TO TONNAGE TAX SCHEME IN INDIA CANNOT BE HELD TO BE APPLICABLE. F URTHER THE INDIAN TONNAGE TAX SCHEME HAS BEEN STATED TO BE LARGELY ADOPTED F ROM UK LAW BY THE LD.CIT(A) WITHOUT DEFINING/EXPLAINING FURTHER AS TO HOW IT HA S BEEN ADOPTED HERE ESPECIALLY WHEN THE LANGUAGE EMPLOYED HERE UNDER INCOME TAX L AW IS NOT SAME AS IN THAT CONTRARY. MOREOVER THE BRITISH MODEL ON THE TONNAG E TAX REGIME WHICH ITSELF IS BASED ON THE TONNAGE TAX SCHEME IN THE NETHERLAND A ND THE LANGUAGE USED IN SUCH LEGISLATION IS NOT SIMILAR TO THE LANGUAGE USE D UNDER THE INCOME TAX LAW IN AS MUCH AS IN THEIR RESTRICTIVE PROVISION THEY HAV E INCORPORATED VARIOUS EXAMPLES OF BUSINESSES NAMED THEREIN WHICH WOULD E XCLUDE QUALIFYING SHIP FOR THE PURPOSE OF TONNAGE TAX SCHEME AND THE LIST GIVE N IS NOT EXHAUSTIVE WHEREAS IN CLAUSE (I) OF SECTION 115VD NO SUCH CLA USE FOR EXCLUSION NAMING EVEN ONE BUSINESS IS THERE. AND OTHERWISE NOWHERE IN THE STATUTE EITHER THE LANGUAGE ADOPTED IS SAME OR ENTIRE PROVISION AS CON TAINED IN UK OR THE NETHERLAND LAW IS LIFTED AND INCORPORATED IN THE TO NNAGE TAX SCHEME IN INDIA UNDER THE INCOME TAX LAW. SO PLACING RELIANCE ON TH OSE PROVISIONS OF LAW OF THE FOREIGN COUNTRIES OR TAKING AID THERE FROM IN ORDER TO INTERPRET THE RELEVANT PROVISION AS DONE BY THE LD. CIT(A) IS UNWARRANT ED AND UNCALLED FOR AS SUCH CANNOT BE JUSTIFIED. SINCE THE LANGUAGE EMPLOYED IN THE RELEVANT PROVISION HERE IS PLAIN AND SIMPLE WITHOUT ANY AMBIGUITY OR FLAW NA TURAL GRAMMATICAL MEANING HAS TO BE GIVEN THEREFORE IN MY CONSIDERED VIEW IF A SHIP THE MAIN PURPOSE OF WHICH IT IS USED IS THE PROVISION OF GOODS OR SERVI CE OF A KIND NORMALLY PROVIDED IN ITA NO.1195/MDS//2010. 21 LAND WOULD DISQUALIFY THAT SHIP FOR THE PURPOSE OF TONNAGE TAX SCHEME AS SPECIFICALLY MENTIONED IN CLAUSE (I) OF SECTION 115 VD. 18.2 THEREFORE IT IS HELD THAT THE ACTION OF THE A SSESSING OFFICER IS PROPER AND JUSTIFIED TO HOLD THAT THE SHIP M.V. GEM OF ENNORE IS NOT A QUALIFIED SHIP FOR THE BENEFIT OF TONNAGE TAX SCHEME AS ENVISAGED UNDER RE LEVANT PROVISIONS OF LAW WHEREAS THE ACTION OF THE LD. CIT(A) WHO HAS INTER PRETED THE RELEVANT PROVISIONS TO HOLD THAT THE SAID SHIP IS A QUALIFIED SHIP FOR THE PURPOSES OF TAX TONNAGE SCHEME IS NEITHER PROPER NOR JUSTIFIED IN VIEW OF FACTS CIRCUMSTANCES AND PRECEDENTS. AS SUCH ORDER OF THE LD. CIT(A) IN THIS REGARD IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 19. AS A RESULT APPEAL OF THE DEPARTMENT IS ALLOWE D. SD/- (U.B.S. BEDI) JUDICIAL MEMBER DATED THE 15.03.2011 VM/- ITA NO.1195/MDS//2010. 22 IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI B E F O R E DR. O.K.NARAYANAN VICE PRESIDENT THIRD MEMBER .. I.T.A. NO.1195(MDS)/2010 ASSESSMENT YEAR: 2006-07 THE ASSISTANT COMMISSIONER M/S.WES T ASIA MARITIME LTD. OF INCOME-TAX VS. BUHARI TOWERS (6 TH FLOOR) COMPANY CIRCLE II(3) 4 MOORES ROAD CHENNAI. CHENNAI-600 006. PAN AAACW1023E. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.B.SEKARAN C.I. T. RESPONDENT BY: S/SHRI ARVIND SONDE & NIRA J SHETH ADVOCATES O R D E R PER DR.O.K.NARAYANAN VICE-PRESIDENT: THIS APPEAL IS FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPE ALS)-III AT ITA NO.1195/MDS//2010. 23 CHENNAI DATED 21-4-2010. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T 1961. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SHIPPING/PORT SERVICES. THE COMPANY FILED ITS RETU RN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON A TONNAGE INCOME OF ` 76 85 246/-. 3. CHAPTER XII-G OF THE INCOME-TAX ACT 1961 PROVI DES FOR SPECIAL PROVISIONS RELATING TO INCOME OF SHIPPING C OMPANIES. THIS CHAPTER COMPRISES OF SECTIONS 115V TO 115VZC. SECT ION 115VA PROVIDES AN OPTION TO AN ASSESSEE CARRYING ON THE B USINESS OF OPERATING QUALIFYING SHIPS TO COMPUTE ITS SHIPPING INCOME ON A TONNAGE BASIS INSTEAD OF COMPUTING THE INCOME UNDE R THE CONVENTIONAL METHOD PROVIDED IN SECTIONS 28 TO 43C. TAX IS LEVIED UNDER THE TONNAGE SCHEME ON THE BASIS OF THE NET TO NNAGE OF EVERY QUALIFYING SHIP. IN THE CASE OF A QUALIFYING SHIP HAVING NET TONNAGE UPTO 1 000 THE DAILY INCOME PRESUMED IS ` 46/- FOR EACH 100 TONS. IN THE CASE OF A QUALIFYING SHIP HAVING NET TONNAGE IN EXCESS OF 1000 TONS BUT LESS THAN 10 000 THE DAILY INCOME WILL BE ` 460/- PLUS ` 35/- FOR EACH 100 TONS EXCEEDING 1 000 TONS. IN THE CAS E OF A QUALIFYING SHIP HAVING NET TONNAGE EXCEEDING 10 000 BUT NOT MO RE THAN 25 000 THE RATE OF INCOME IS ` 3 610/- PLUS ` 28/- FOR EACH 100 TONS ITA NO.1195/MDS//2010. 24 EXCEEDING 10 000 TONS. IN THE CASE OF QUALIFYING S HIPS HAVING NET TONNAGE EXCEEDING 25 000 TONS THE DAILY RATE OF IN COME IS ` 7 810/- PLUS ` 19/- FOR EACH 100 TONS EXCEEDING 25 000 TONS. 4. AS ALREADY STATED AN ASSESSEE ENGAGED IN THE B USINESS OF OPERATING QUALIFYING SHIPS HAS TO OPT FOR PAYMEN T OF TAXES UNDER THE TONNAGE TAX SCHEME AS PROVIDED UNDER SECTION 11 5VP. IN THE PRESENT CASE THE ASSESSEE HAS OPTED FOR TONNAGE TAX SCHEME AND HAS WORKED OUT THE SHIPPING INCOME ON TONNAGE BASIS AS PROVIDED IN SECTION 115VG. THE TONNAGE INCOME FOR A PREVIOUS Y EAR SHALL BE THE AGGREGATE OF THE TONNAGE INCOME OF EACH QUALIFYING SHIP. IT IS ON THE BASIS OF THE ABOVE PROVISIONS OF LAW THAT THE ASSES SEE HAS RETURNED A TONNAGE INCOME OF ` 76 85 246/-. 5. THE RETURN WAS INITIALLY PROCESSED UNDER SECTIO N 143(1). LATER ON THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) THROUGH THE ORDER DA TED 31-12-2008. 6. THE ASSESSEE IS A CO-OWNER OF THE SHIP M.V.GEM OF ENNORE ENGAGED ON A LONG TERM CHARTER FOR TRANSPO RTING THERMAL COAL FOR TAMIL NADU ELECTRICITY BOARD. THE COAL IS TRAN SPORTED FROM HALDIA PARADIP AND VIZAG PORTS TO ENNORE AND TUTICORIN POR TS IN TAMIL NADU. ITA NO.1195/MDS//2010. 25 THE ASSESSEE HAS EXERCISED ITS OPTION FOR TONNAGE T AX SCHEME FOR THE ABOVE SHIP M.V.GEM OF ENNORE. 7. IN ORDER TO CLAIM THE BENEFIT OF TONNAGE TAX SC HEME IT IS NECESSARY THAT THE OPERATING SHIP OF AN ASSESSEE MU ST BE QUALIFIED UNDER SECTION 115VD. THE CONDITIONS STATED THEREIN ARE THAT THE SHIP IS A SEA GOING SHIP OR VESSEL OF FIFTEEN NET TONNAG E OR MORE; THAT THE SHIP IS REGISTERED UNDER THE MERCHANT SHIPPING ACT 1958 OR A SHIP REGISTERED OUTSIDE INDIA IN RESPECT OF WHICH A LICE NCE HAS BEEN ISSUED BY THE DIRECTOR-GENERAL OF SHIPPING UNDER SECTION 4 06 OR SECTION 407 OF THE MERCHANT SHIPPING ACT 1958; HOLDING A VALID CERTIFICATE IN RESPECT OF SUCH SHIP INDICATING ITS NET TONNAGE . THE LAW HAS ALSO PROVIDED CERTAIN EXCLUSIONS UNDER THE SAME SECTION 115VD. ACCORDINGLY A SHIP CANNOT BE TREATED AS A QUALIFYIN G SHIP IF THE MAIN PURPOSE FOR WHICH IT IS USED IS THE PROVISION OF GO ODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LAND; AS FISHING VESSELS; FACTORY SHIPS; PLEASURE CRAFTS; HARBOUR AND RIVER FERRIES; OFFSHOR E INSTALLATIONS AND A QUALIFYING SHIP WHICH IS USED AS A FISHING VESSEL F OR A PERIOD OF MORE THAN THIRTY DAYS DURING A PREVIOUS YEAR. 8. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER HELD THAT THE ASSESSEES SHIP CAN NOT BE TREATED AS ITA NO.1195/MDS//2010. 26 A QUALIFYING SHIP FOR THE REASON THAT THE CASE OF T HE ASSESSEE IS HIT BY CLAUSE(I) OF SECTION 115VD. THE SAID SUB CLAUSE DES CRIBES THE FIRST ITEM OF DISQUALIFICATION WHICH HAS ALREADY BEEN ME NTIONED. THE STATUTORY EXPRESSION IS REPRODUCED BELOW:- 115VD. FOR THE PURPOSE OF THIS CHAPTER A SHIP IS A QUALIFYING SHIP IF (A) (B) (C) . BUT DOES NOT INCLUDE (I) A SEA GOING SHIP OR VESSEL IF THE MAIN PURPOSE FOR WHICH IT IS USED IS THE PROVISION OF GOODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LAND. 9 . THE ASSESSING AUTHORITY DENIED THE BENEFIT OF TONNA GE TAX SCHEME TO THE ASSESSEE IN RESPECT OF ITS OPERATING SHIP M.V.GEM OF ENNORE BY HOLDING THAT THE SHIP IS NOT A QUALIFYIN G SHIP UNDER SECTION 115VD. THE BASIS OF SUCH A FINDING IS THE OBSERVAT ION OF THE ASSESSING AUTHORITY THAT THE SHIP OPERATED BY THE A SSESSEE IS TRANSPORTING THERMAL COAL FROM HALDIA PARADIP AND VIZAG PORTS TO ITA NO.1195/MDS//2010. 27 ENNORE AND TUTICORIN PORTS IN TAMIL NADU WHERE ALL THE PORTS ARE LOCATED WITHIN THE COUNTRY AND WELL CONNECTED BY RO AD AND RAIL ON LAND. THEREFORE THE ASSESSING OFFICER HELD THAT T HE TRANSPORT OF COAL BETWEEN THESE PORTS CAN BE ROUTED THROUGH LAND EITH ER BY ROAD OR RAIL TRANSPORT. AS IT IS POSSIBLE TO TRANSPORT THE COAL THROUGH LAND BY ROAD OR RAIL TRANSPORT THE ASSESSING OFFICER HELD THAT THE OPERATING VESSEL OF THE ASSESSEE COMPANY IS USED FOR THE PROVISION O F GOODS OR SERVICES NORMALLY PROVIDED ON LAND. AS THE TRANSPO RTATION OF COAL BETWEEN THE ABOVE PORTS IS POSSIBLE BY LAND ROUTES THE ASSESSEE CANNOT CLAIM THE BENEFIT OF TONNAGE TAX SCHEME. 10. IN FIRST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE MATTER IN DETAIL. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE FACTS OF THE CASE A ND SUBMISSIONS PLACED BEFORE HIM HELD THAT THE CORE SHIPPING ACTI VITY OF CARRYING GOODS FROM PORT TO PORT IS CARRIED ON BY THE SHIP O PERATED BY THE ASSESSEE AND ONLY FOR THE REASON THAT IT IS POSSIBL E TO TRANSPORT THE COAL BETWEEN THE PLACES BY MEANS OF LAND ROUTES TH E ASSESSEE CANNOT BE DENIED THE BENEFIT OF TONNAGE TAX SCHEME. THE COMMISSIONER OF INCOME TAX (APPEALS) EXAMINED THE R ESTRICTION GIVEN IN THE STATUTE UNDER CLAUSE(I) OF SECTION 115 VD I.E. PROVISION OF ITA NO.1195/MDS//2010. 28 GOODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LA ND. ON THE BASIS OF THE DETAILS AND EXPLANATIONS AND OPINION PLACED BEFORE HIM THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE TONNAGE TAX LEGISLATION IN INDIA IS BASED ON THE BRITISH MODEL WHICH ITSELF IS BASED ON THE TONNAGE TAX REGIME IN NETHERLANDS. HE FURTH ER OBSERVED THAT THE LANGUAGE USED IN THE INDIAN LEGISLATION FOR THE RESTRICTIVE PROVISION PROVIDED IN CLAUSE(I) OF SECTION 115VD IS EXACTLY T HE SAME AS PROVIDED IN THE UNITED KINGDOM LEGISLATION. IN THE UNITED KINGDOM LEGISLATION ALSO A VESSEL IS NOT A QUALIFYING SHIP FOR THE PURPOSES OF THE SCHEME IF THE MAIN PURPOSE FOR WHICH IT IS USED IS THE PROVISION OF GOODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LA ND. THE UNITED KINGDOM LAW HAS PROVIDED EXAMPLES OF SUCH PROVISION OF GOODS OR SERVICES NORMALLY PROVIDED ON LAND. THOSE EXAMPLES ARE AS FOLLOWS:- RETAILERS(INCLUDING SHOPS AND SUPERMARKETS) RESTAURANTS HOTELS PRISONS RADIO STATIONS CASINOS ITA NO.1195/MDS//2010. 29 FINANCIAL SERVICE PROVIDERS OFFICES. IT IS ALSO STATED THAT THE LIST IS NOT EXHAUSTIVE. 11. THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE PURPOSE OF THE LEGISLATION BEING THE SAME AND T HE LANGUAGE EMPLOYED ALSO THE SAME THOSE ITEMS IN THE NATURE O F THE EXAMPLES PROVIDED UNDER THE UNITED KINGDOM LAW ALONE COULD B E CONSTRUED AS PROVISION OF GOODS OR SERVICES OF A KIND NORMALLY P ROVIDED ON LAND. HE HELD THAT THOSE EXAMPLES EQUALLY APPLY TO INDIAN CONTEXT AS WELL. HE HELD THAT THERE IS NOTHING IN THE ENABLING PROVI SION OF LAW TO STATE THAT A SHIP OPERATING IN COASTAL WATERS OF INDIA CA NNOT OPT FOR THE BENEFIT OF TONNAGE TAX SCHEME. FINALLY HE HELD THA T THE SHIP OPERATED BY THE ASSESSEE AS M.V.GEM OF ENNORE IS A QUALIFY ING SHIP UNDER SECTION 115VD AND THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX CLAIMED UNDER SECTION 115VG OF THE INCOME-TAX A CT 1961. THE COMMISSIONER OF INCOME-TAX(APPEALS) ACCEPTED THE CO NTENTION OF THE ASSESSEE ON THIS POINT. 12. AGGRIEVED BY THE ABOVE DECISION OF THE COMMISS IONER OF INCOME TAX (APPEALS) THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL AS ALREADY STATED IN ITA NO.1195(MDS)/201 0. WHEN THE ITA NO.1195/MDS//2010. 30 MATTER WAS HEARD BY THE B-BENCH OF THIS TRIBUNAL T HERE AROSE A DIFFERENCE OF OPINION BETWEEN THE TWO MEMBERS CONST ITUTING THE BENCH. THE LEARNED ACCOUNTANT MEMBER WHO AUTHORED THE ORDER FOR THE BENCH UPHELD THE ORDER OF THE COMMISSIONER(APP EALS) HOLDING THAT THE SHIP OPERATED BY THE ASSESSEE COMPANY IS A QUALIFIED SHIP AND THEREFORE THE ASSESSEE IS ENTITLED FOR THE BE NEFIT OF TONNAGE TAX SCHEME UNDER SECTION 115VG OF THE INCOME-TAX ACT 1 961. 13. ON THE OTHER HAND THE LEARNED JUDICIAL MEMBER HELD THAT THE ASSESSING OFFICER IS JUSTIFIED IN HOLDING THAT THE SHIP M.V.GEM OF ENNORE IS NOT A QUALIFIED SHIP FOR THE BENEFIT OF TONNAGE TAX SCHEME AS ENVISAGED UNDER THE RELEVANT PROVISIONS OF LAW. HE HELD THAT THE UNITED KINGDOM LAW AND THE INDIAN LAW ON THE SUBJEC T CANNOT BE CONSIDERED AS ANALOGOUS FOR THE PURPOSE OF INTERPRE TING THE STATUTORY PROVISIONS INVOLVED IN THE PRESENT APPEAL. THE LEA RNED JUDICIAL MEMBER AGREED WITH THE VIEW OF THE ASSESSING OFFICE R THAT COAL CAN BE TRANSPORTED BETWEEN THE CONCERNED PORTS BY LAND ROUTES AND THEREFORE WHAT FOR THE ASSESSEES SHIP IS USED IS FOR THE PROVISION OF GOODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LA ND AND THEREFORE IT IS NOT QUALIFIED UNDER SECTION 115VD OF THE ACT IN THE LIGHT OF SUB- ITA NO.1195/MDS//2010. 31 CLAUSE(I) OF SECTION 115VD. HE OPTED TO ALLOW THE APPEAL FILED BY THE REVENUE. 14. AS THERE WAS DIFFERENCE OF OPINION THE HONBL E MEMBERS FORMULATED AND REFERRED THE QUESTION IN RESPECT OF THE SAID DIFFERENCE OF OPINION TO THE HONBLE PRESIDENT OF THE TRIBUNAL AS PROVIDED UNDER SECTION 255(4) OF THE ACT. THE FOLLOWING IS THE QU ESTION REFERRED BY THE HONBLE MEMBERS:- WHETHER IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE SHIP NAMED M.V.GEM OF ENNORE TRANSPORTING THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY WHEN SUCH PORTS ARE CONNECTED BY RAIL/ROAD CAN BE EXCLUDED AS QUALIFYING SHIP IN TERMS OF THE EXCLUSION CLAUSE(I) OF SECTION 115VD FOR THE BENEFIT OF TONNAGE TAX SCHEME OR IT CAN BE TREATED AS QUALIFYING SHIP? 15. THE HONBLE PRESIDENT NOMINATED ME AS THE THIR D MEMBER AND IT IS HOW THE ISSUE HAS BEEN PLACED BEFO RE ME. 16. I HEARD SHRI P.B.SEKARAN THE LEARNED COMMISSI ONER OF INCOME-TAX APPEARING FOR THE REVENUE AND SHRI ARVI ND SONDE THE ITA NO.1195/MDS//2010. 32 LEARNED COUNSEL ALONGWITH SHRI NIRAJ SHETH APPEARI NG FOR THE RESPONDENT-ASSESSEE. 17. THE LEARNED COMMISSIONER OF INCOME-TAX CONTEND ED THAT THE BENEFIT OF TONNAGE TAX SCHEME IS AVAILABLE ONLY TO THE QUALIFYING SHIPS AS PROVIDED IN SECTION 115VD AND THE CONDITIO NS TO BE SATISFIED TO BECOME A QUALIFYING SHIP HAVE TO BE CONSTRUED ST RICTLY AND THERE IS NO ROOM TO ENLARGE THE SCOPE OF THE PROVISIONS CONT AINED THEREIN. HE STATED THAT THE EXCLUSION CLAUSE(I) OF SECTION 115V D SPECIFICALLY PROVIDES THAT A SEA GOING SHIP OR VESSEL CANNOT BE TREATED AS A QUALIFYING SHIP IF THE MAIN PURPOSE FOR WHICH IT IS USED IS PROVIDING OF GOODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LA ND. HE EXPLAINED THAT IN THE PRESENT CASE THERMAL COAL IS TRANSPORTE D FOR TAMIL NADU ELECTRICITY BOARD FROM PORTS LIKE HALDIA PARADIP A ND VIZAG SO AS TO UNLOAD IT AT ENNORE OR TUTICORIN PORTS IN TAMIL NAD U. ALL THESE PORTS ARE DOTTED IN THE COROMANDEL LINE OF INDIA AND WELL CONNECTED BY ROADS AND RAIL. TRANSPORTATION OF THERMAL COAL FRO M THE LOADING PORTS IS VERY MUCH POSSIBLE EITHER BY MEANS OF ROAD TRANS PORT OR RAIL TRANSPORT TO REACH AT THE DESTINATION PORTS AND THE SEA ROUTE IS ONLY AN ALTERNATE ROUTE. HE ARGUED THAT THE OPTION GIVEN T O THE ASSESSEE IS ONLY TO CHOOSE THE METHOD OF COMPUTING THE INCOME EITHER THE ITA NO.1195/MDS//2010. 33 NORMAL METHOD OR THE TONNAGE TAX SCHEME AND THERE I S NO OPTION TO CHOOSE THE ALTERNATIVES AVAILABLE FOR OPERATING THE SHIPS. IF LAND ROUTES ARE AVAILABLE THE ASSESSEE CANNOT CLAIM THE BENEFIT OF TONNAGE SCHEME. THE SHIP IS VOYAGING THROUGH INDIA N COASTAL WATERS. THE SERVICE RENDERED BY OPERATING THE SHIP COULD EQUALLY BE PROVIDED ON LAND AND THEREFORE THE RESTRICTIVE CLAU SE(I) PROVIDED IN SECTION 115VD MAKES OUT A CLEAR CASE THAT THE ASSES SEE IS NOT ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME. 18. THE LEARNED COMMISSIONER OF INCOME-TAX FURTHER ARGUED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS H EAVILY RELIED ON SIMILAR LEGISLATION IN NETHERLANDS AND UNITED KINGD OM. HE EXPLAINED THAT SUCH COMPARATIVE STUDY IS APPRECIATED IN ACADE MICS BUT AS FAR AS INTERPRETATION OF LAW IS CONCERNED THE LAW MUST BE INTERPRETED STRICTLY ACCORDING TO THE STATUTORY EXPRESSION PROV IDED THEREIN AND CANNOT DRAW ANALOGIES FROM LEGISLATIONS OF OTHER CO UNTRIES. HE FURTHER ARGUED THAT IN ENGLISH LAW EXAMPLES HAVE BE EN PROVIDED TO HIGHLIGHT THE REAL INTENT OF THE RESTRICTION RELATI NG TO GOODS OR SERVICES THAT COULD BE PROVIDED ON LAND SUCH AS RETAILERS R ESTAURANTS HOTELS ETC. BUT IN CLAUSE(I) OF SECTION 115VD THE INDIAN LAW HAS NOT PROVIDED ITA NO.1195/MDS//2010. 34 ANY SUCH EXAMPLES. IT CLEARLY SHOWS THAT THE INDIA N LAW WAS NOT EXACTLY FOLLOWING THE ENGLISH LAW ON THE SUBJECT. 19. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE COMPANY ON THE OTHER HAND ARGUED THAT THERE IS NO THING IN THE LAW TO PRESUME THAT A SHIP OPERATING IN THE COASTAL WATERS OF INDIA IS NOT ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME. A SHIP CAN BE OPERATED BOTH IN COASTAL WATERS AND IN INTERNATIONA L WATERS. THE CORE ACTIVITY OF A SHIP IS TO CARRY PASSENGERS AND GOODS FROM DESTINATION TO DESTINATION. AS FAR AS A SHIP IS CONCERNED IT IS IMMATERIAL WHETHER IT IS OPERATING BETWEEN TWO DOMESTIC PORTS OR BETWEEN TWO INTERNATIONAL PORTS. THE CRUCIAL ASPECT TO BE LOOKED INTO IS WHE THER THE SHIP IS BEING OPERATED TO CARRY ON THE CARDINAL FUNCTION IN FERRED FROM THE OPERATION OF A SHIP VOYAGING THROUGH SEA WATERS. T HE LEARNED COUNSEL EXPLAINED THAT IT IS FOR THE ASSESSEE TO DE CIDE WHICH MODE OF TRANSPORTATION SHOULD BE SELECTED FOR CARRYING ON I TS BUSINESS. THE ASSESSEE IS ENGAGED IN THE CONTRACT OF TRANSPORTING THERMAL COAL FROM NORTH-EASTERN PORTS TO SOUTH-EASTERN PORTS. IT IS POSSIBLE TO TRANSPORT THE THERMAL COAL BY LAND ROUTES USING ROAD AND RAIL CARRIAGES AND ALSO BY SEA ROUTES USING SHIPS. THE ASSESSEE GOT THE CO NTRACT OF TRANSPORTATION BECAUSE THE ASSESSEE IS OWNING SHIP AND IS IN A ITA NO.1195/MDS//2010. 35 POSITION TO TRANSPORT THERMAL COAL BY SEA ROUTE PR OBABLY AT A BETTER ECONOMY OF COST. THE OPERATING CHARACTER OF THE SH IP IS NOT AT ALL CHANGED ONLY FOR THE REASON THAT THE SHIP IS NAVIGA TING ONLY THROUGH INDIAN COASTAL WATERS. 20. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED TH AT LAND ROUTES ARE AVAILABLE TO OUR NEIGHBOURING COUNTRIES LIKE BANGLA DESH MYANMAR PAKISTHAN AND EVEN THAILAND AND THEORETICA LLY TO ALL ASIAN COUNTRIES AND EVEN BEYOND THAT. IF THE INTERPRETAT ION MADE BY THE ASSESSING AUTHORITY IS TO BE ACCEPTED THE TONNAGE TAX BENEFIT WILL NOT BE AVAILABLE TO ANY SHIPPING COMPANY TRANSPORTING G OODS FROM INDIA TO SUCH COUNTRIES FOR THE SIMPLE ERRATIC REASON THA T LAND ROUTES ARE AVAILABLE BETWEEN INDIA AND THOSE COUNTRIES. THE LEARNED COUNSEL ARGUED THAT THIS LINE OF ARGUMENT IS PERVERSE AND T HE INTERPRETATION IS QUITE RIDICULOUS. IF THE INTERPRETATION GIVEN BY T HE ASSESSING AUTHORITY IS ACCEPTED NO SHIPPING COMPANY IN INDIA WILL BE A BLE TO AVAIL THE BENEFIT OF TONNAGE TAX SCHEME EXCEPT WHERE THE SHIP S ARE SAILING THROUGH COASTAL WATERS. THAT COULD NEVER BE THE IN TENTION OF THE LEGISLATURE IN ENACTING THE LAW PROVIDED IN CHAPTER XII-G OF THE INCOME-TAX ACT 1961. ITA NO.1195/MDS//2010. 36 21. IT IS IN THIS CONTEXT THE LEARNED COUNSEL ARG UED THAT A COMPARATIVE STUDY ON SIMILAR LINES AVAILABLE IN OTH ER COUNTRIES BECOMES RELEVANT. THE INTENTION OF THE LEGISLATURE TO INTRODUCE THE TONNAGE TAX SCHEME WAS TO GIVE INCENTIVES TO SHIPPI NG COMPANIES BY WAY OF LOW TAX INCIDENCE. THE SCHEME IS AVAILABLE NOT ONLY IN INDIA BUT ALSO IN OTHER COUNTRIES. THE UNITED KINGDOM HA S LEGISLATED ON THIS SUBJECT FOLLOWING THE LEGISLATION MADE IN NETH ERLANDS. INDIA HAS DRAFTED THE SAME PHRASEOLOGY IN ITS LEGISLATION. T HEREFORE THERE IS NOTHING WRONG IN COMPARING THE ANALOGOUS LEGISLATIO NS TO EXAMINE THE REAL INTENT AND PURPOSE OF THE RESTRICTIVE CLAU SES PROVIDED UNDER SECTION 115VD WHEREIN THE QUALIFICATIONS OF A SHIP ARE EXPLAINED. THE LEARNED COUNSEL EXPLAINED THAT THE INTENTION OF THE LEGISLATURE TO PUT SUCH A RESTRICTION IS TO PREVENT MISUSE OF THIS BENEFICIAL SECTION SO THAT THE BENEFIT IS ENJOYED ONLY BY THOSE SHIPPING COMPANIES WHO ARE OPERATING THE SHIPS TO PERFORM THE FUNCTIONS EXPECT ED FROM THE SHIPPING INDUSTRY LIKE BULK CARRIAGE OF GOODS AND T RANSPORTING OF PASSENGERS. THAT IS WHY THE BRITISH LEGISLATION HA S GIVEN CERTAIN EXAMPLES TO SHOW AS TO WHAT ARE THOSE ITEMS WHICH D O NOT COME UNDER THE PURVIEW OF THE BENEFIT. BY ANCHORING A S HIP IN COASTAL WATERS AN ASSESSEE CAN RUN A RETAIL BUSINESS RESTA URANT HOTEL RADIO ITA NO.1195/MDS//2010. 37 STATION CASINO ETC. IT MAY TRY TO GET THE BENEFI T OF TONNAGE TAX SCHEME. SUCH FACILITIES ARE EASILY PROVIDED ON LAN D. THOSE SERVICES MAY BE SHIFTED ABOARD A SHIP ANCHORED IN COASTAL WA TERS ONLY FOR THE PURPOSE OF GETTING TAX BENEFIT. IT IS TO EXCLUDE SU CH MISUSE OF THE PROVISION OF LAW THAT THE RESTRICTIVE CLAUSE(I) HAS BEEN PROVIDED UNDER SECTION 115VD. IT IS NOT MEANT FOR DENYING THE BEN EFIT TO AN ASSESSEE WHO IS OPERATING A SHIP TO PERFORM THE CORE FUNCTIO N OF A SHIP LIKE MASS TRANSPORTATION OF GOODS AND PASSENGERS. THE A SSESSEE IS OPERATING THE SHIP TO TRANSPORT TONS AND TONS OF TH ERMAL COAL FROM PORTS LIKE HALDIA PARADIP AND VIZAG TO PORTS LIKE ENNORE AND TUTICORIN. 22. THEREFORE THE LEARNED COUNSEL CONTENDED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY UN DERSTOOD THE INTENT AND PURPOSE OF THE LEGISLATION ON THE SUBJEC T MATTER AND HAS RIGHTLY HELD THAT THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME. 23. I HEARD BOTH SIDES IN DETAIL AND PERUSED THE R ELEVANT MATERIALS AVAILABLE ON RECORD. 24. SHIPPING COMPANIES ARE GIVEN OPTION TO PAY TAX AS PER NORMAL PROVISIONS OF COMPUTATION OR ON THE BASIS OF PRESUMPTIVE TAX ITA NO.1195/MDS//2010. 38 REGIME DESCRIBED AS TONNAGE TAX SCHEME. THE INC OME ARISING FROM OPERATION OF QUALIFYING SHIP IS DETERMINED BAS ED ON THE TONNAGE TAX SCHEME. NORMALLY A SHIPPING COMPANY IS TO BE A SSESSED AT THE NORMAL CORPORATE TAX RATE. IF THE ASSESSEE CHOOSES FOR TONNAGE TAX SCHEME IT PAYS TAX AT A PRESCRIBED RATE WITH REFER ENCE TO THE TONNAGE OF THE SHIP. THE ACTUAL LOSS OR PROFIT OF THE SHIP PING COMPANY IS NOT TAKEN INTO CONSIDERATION. IRRESPECTIVE OF THE OTHE R FACTORS INCOME IS ALWAYS COMPUTED BUT AT A TONNAGE RATE DE FACTO MUC H LOWER TO NORMAL CORPORATE TAX RATE. THE ACCOUNTING OR ACTUA L INCOME IS REPLACED BY A NOTIONAL INCOME. THE BUSINESS OF OPE RATING A QUALIFYING SHIP IS TREATED AS A SEPARATE BUSINESS A ND INCOME IS ALSO COMPUTED ON STAND-ALONE BASIS. 25. THE CONDITIONS ARE THAT IT MUST BE A SEA GOI NG SHIP; IT MUST HAVE A NET TONNAGE OF 15 TONS OR MORE; IT MUST BE A SHIP REGISTERED UNDER THE MERCHANT CHIPPING ACT AND IT M UST POSSESS A VALID CERTIFICATE FROM THE DIRECTOR-GENERAL OF SHIP PING. THE ASSESSEE MUST BE A COMPANY ENGAGED IN THE BUSINESS OF OPERAT ING QUALIFYING SHIP AND INCOME FROM THE BUSINESS OF OPERATING OF Q UALIFYING SHIP WOULD BE DEEMED TO BE CHARGEABLE TO TAX UNDER THE H EAD PROFITS AND ITA NO.1195/MDS//2010. 39 GAINS OF BUSINESS OR PROFESSION. THE ASSESSEE HAS COMPLIED WITH THE ABOVE CONDITIONS. 26. THE CONTENTION OF THE ASSESSING AUTHORITY THAT THE SHIP WAS EXCLUDED FROM THE AMBIT OF TONNAGE TAX SCHEME M AINLY FOR THE REASON THAT THE SHIP IS RENDERING SERVICES ONLY BET WEEN INDIAN PORTS WHICH WOULD HAVE ALSO BEEN RENDERED ON LAND BY ROAD OR RAIL IS TOO FAR-FETCHED. THERE IS NO SUCH STIPULATION ANYWHERE IN LAW. THE TONNAGE TAX SCHEME DOES NOT DISTINGUISH SHIPS OPERA TING IN COASTAL WATERS AD SHIPS OPERATING IN INTERNATIONAL WATERS. THERE IS NO BAR ON THE COASTAL SHIPPING FOR THE TONNAGE TAX SCHEME. I F THE CONTENTION OF THE ASSESSING AUTHORITY IS ACCEPTED THE INCOME FRO M COASTAL SHIPPING WOULD BE OUTSIDE THE PURVIEW OF TONNAGE TAX SCHEME. 27. THE NORMAL ACTIVITIES OF OPERATING A SEA GOING SHIP IS TO CARRY PASSENGERS CARRY CARGO TO DO TOWAGE SALVAG E OR OTHER MARINE ASSISTANCE OR TRANSPORT IN CONNECTION WITH OTHER SE RVICES OF KIND NECESSARILY PROVIDED AT SEA. THE RESTRICTION HAS TO BE LOOKED INTO IN THE ABOVE BACKGROUND. THE RESTRICTION IS THAT THE VESSEL IS NOT A QUALIFYING SHIP FOR THE PURPOSE OF SECTION 115VD IF THE MAIN PURPOSE FOR WHICH IT IS USED IS THE PROVISION OF GOODS OR S ERVICES OF A KIND NORMALLY PROVIDED ON LAND. IT IS TO BE SEEN THAT N O SERVICES CAN BE ITA NO.1195/MDS//2010. 40 RENDERED BY SHIPS ON LAND. IF THAT IS THE CASE WHE REVER LAND ROUTES ARE AVAILABLE ONE HAS TO PRESUME THAT AN ASSESSEE C ANNOT OPT FOR SEA ROUTES AND CANNOT CLAIM THE BENEFIT OF TONNAGE TAX SCHEME. THE LAW IS NOT MAKING ANY REFERENCE TO ANY OTHER ALTERN ATIVE METHOD AVAILABLE FOR TRANSPORTATION OF GOODS AND CARGO FRO M DESTINATION TO DESTINATION. THE LAW ONLY SAYS THAT AN ASSESSEE COM PANY IS ENTITLED FOR OPTING FOR TONNAGE TAX SCHEME IF IT IS OPERATIN G QUALIFYING SHIP AND SATISFIES OTHER CONDITIONS PROVIDED THEREIN. THE L AW DOES NOT SAY THAT THE SHIP SHOULD ALWAYS DO ITS VOYAGE BETWEEN INTERN ATIONAL PORTS. THE LAW DOES NOT SAY ANYTHING ABOUT THE DISTANCE TO BE COVERED BY SHIP IN A SINGLE VOYAGE. THE LAW PRESUMES THAT THE BENEFIT OF TONNAGE TAX SCHEME IS AVAILABLE TO ALL SEA GOING SH IPS SATISFYING THE CONDITION WHERE IT IS OPERATED BETWEEN INDIAN PORTS OR BETWEEN INDIAN PORTS AND FOREIGN PORTS. THE OPERATION OF A SEA GO ING SHIP DOES NOT ASSUME ANY DIFFERENT CHARACTER ONLY FOR THE REASON THAT THE SHIP IS OPERATEING BETWEEN TWO INDIAN PORTS. THE CHARACTER OF OPERATING A SHIP DOES NOT ASSUME ANY OTHER DIMENSION ONLY FOR T HE REASON THAT THE SHIP IS OPERATED BETWEEN ONE INDIAN PORT AND AN OTHER FOREIGN PORT. THESE ARE ALL MATTERS NEVER CONSTRUED IN THE SCHEME OF THE ACT ITA NO.1195/MDS//2010. 41 PROVIDING THE BENEFIT OF TONNAGE TAX SCHEME TO THE ASSESSEES WHO ARE IN THE SHIPPING INDUSTRY AND OPERATING QUALIFYI NG SHIPS. 28. THIS IS NOT AN ISSUE PARTICULAR TO INDIA. WOR LD OVER COUNTRIES ARE PROVIDING SUCH INCENTIVES TO SHIPPING INDUSTRY FOR THEIR OWN ECONOMIC ADVANTAGE. THE POLICY OF GIVING SUCH INCENTIVES TO SHIPPING INDUSTRY IS A MATTER OF LARGER POLICIES RE LATING TO ECONOMIC PRIORITIES. IF THE INTENT OF THE LAW IS INTERPRETE D IN SUCH A MANNER TO ARRIVE AT AN ERRATIC CONCLUSION THAT INTERPRETATIO N MUST ALWAYS BE AVOIDED. 29. THE ONLY PROVOCATION FOR THE ASSESSING OFFICER TO HOLD THAT THE SHIP OPERATED BY THE ASSESSEE COMPANY IS NOT A QUALIFYING SHIP IS THAT THE SHIP OPERATED BY THE ASSESSEE IS DOING THE SAME SERVICES THAT COULD BE PROVIDED ON LAND ALSO. IT IS IN THAT CONTEXT THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS MADE A REFE RENCE TO THE ENGLISH LAW ON THE SUBJECT. THE UNITED KINGDOM LAW WHILE USING THE SAME PHRASEOLOGY IN DRAFTING THE LAW IN THE MATTER OF TONNAGE TAX SCHEME HAS PROVIDED CERTAIN EXAMPLES. IT SAYS WHAT COULD BE THOSE ITEMS COMING UNDER THE PROVISIONS PROVIDED TO RESTR ICT THE ABUSE OF THE TAX INCENTIVE. THE EXAMPLES GIVEN IN THE ENGLI SH LAW STATES THE EXAMPLES SUCH AS BUSINESS THAT COULD BE PROVIDED ON LAND OR ITA NO.1195/MDS//2010. 42 RETAILERS RESTAURANTS HOTELS RADIO STATIONS CAS INOS ETC. ONLY FOR THE REASON THAT EXAMPLES HAVE BEEN TAKEN FROM ENGLISH L AW IT DOES NOT MEAN THAT IT IS NOT RELEVANT TO INDIAN LAW. THE NO RMAL INTERPRETATION OF THE PROVISION MAKES IT CLEAR THAT THE RESTRICTION P ROVIDED IN SUB- SECTION(I) APPLIES ONLY TO THOSE PROVISION OF GOODS OR SERVICES UNRELATED TO THE CORE ACTIVITIES OF OPERATING SHIP. EVEN THOUGH THE SHIP OPERATED BY THE ASSESSEE IS TRANSPORTING THERM AL COAL FROM INDIAN PORTS TO INDIAN PORTS THE SHIP IS PERFORMIN G EXACTLY THE CORE FUNCTION OF A SHIP OF CARRYING BULK CARGO FROM PORT TO PORT. THERE MAY BE ALTERNATIVE MEANS AVAILABLE FOR TRANSPORTATION O F THERMAL COAL ON LAND ROUTE BY TRUCK OR TRAIN. THEORETICALLY SPEAKI NG EVEN TRANSPORT PLANES CAN CARRY COAL FROM ONE DESTINATION TO ANOTH ER DESTINATION. THESE KINDS OF EXTREME VIEWS ARE NOT AT ALL CALLED FOR IN INTERPRETING A BENEFICIAL PROVISION COUCHED IN SIMPLE LANGUAGE. T HE ASSESSING OFFICER IS TRYING TO BRING IN ADDITIONAL CONDITIONS WHICH HAVE NEVER BEEN CONTEMPLATED IN DRAFTING THE LAW. 30. ON THE FACTS AND CIRCUMSTANCES OF THE CASE I A GREE WITH THE VIEW OF THE LEARNED ACCOUNTANT MEMBER TO HOLD T HAT THE SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNORE TRANSP ORTING THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN T HE COUNTRY IS A ITA NO.1195/MDS//2010. 43 QUALIFYING SHIP UNDER SECTION 115VD OF THE INCOME-T AX ACT 1961 AND THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER CHAPTER XII-C OF THE INCOME-TAX ACT 1961. I AGREE WITH THE VIEW OF THE LEARNED ACCOUNTANT MEMBER THAT THE APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED. 31. NOW THE MATTER WILL BE PLACED BEFORE THE REGUL AR BENCH FOR PASSING ORDERS TO FINALLY DISPOSE OF THE APPEA L ON MAJORITY VIEW. SD/- (DR. O.K.NARAYANAN) VICE-PRESIDENT THIRD MEMBER CHENNAI DATED THE 17 TH JUNE 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F. ITA NO.1195/MDS//2010. 44 IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI (BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER) .. I.T.A. NO. 1195/MDS/2010 ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE II(3) CHENNAI 600 034. (APPELLANT) V. M/S WEST ASIA MARITIME LTD. BUHARI TOWERS 6 TH FLOOR 4 MOORES ROAD CHENNAI 600 034 PAN : AAACW1023E (RESPONDENT) APPELLANT BY : SHRI CLEMOND RESPONDENT BY : SHRI R. VI JAYARAGHAVAN ORDER GIVING EFFECT PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : IN THE ABOVE APPEAL THERE WAS A DIFFERENCE OF OPI NION BETWEEN THE MEMBERS COMPRISING THE BENCH. HON'BLE PRESIDEN T ITAT REFERRED THE FOLLOWING QUESTION BEFORE HON'BLE VICE PRESIDENT ITAT CHENNAI AS THIRD MEMBER:- WHETHER IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE SHIP NAMED M.V. GEM OF ENNORE TRANSPORTING THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY WHEN SUCH PORTS ARE CONNECTED BY RAIL/RO AD ITA NO.1195/MDS//2010. 45 CAN BE EXCLUDED AS QUALIFYING SHIP IN TERMS OF THE EXCLUSION CLAUSE (I) OF SECTION 115VD FOR THE BENEF IT OF TONNAGE TAX SCHEME OR IT CAN BE TREATED AS QUALIFYING SHIP. 2. NOW HON'BLE THIRD MEMBER VIDE HIS ORDER DATED 17 TH JUNE 2011 HAS AGREED WITH THE VIEW TAKEN BY THE ACCOUNT ANT MEMBER. THUS BASED ON MAJORITY OPINION THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON THE FIRST DAY OF JULY 2011. SD/- SD/- (U.B.S. BEDI) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 1 ST JULY 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A) (4) CIT (5) D.R. (6) GUARD FILE