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‘Frieght Beneficiary’ not to be assessed u/s 172 provisions

Where freight beneficiary was not engaged in occasional, but in regular shipping business and its Indian agent was regularly filing return of income, it would be outside scope of section 172; it would rather liable to be assessed on basis of return filed under section 139(1) for its entire income

In the instant case, the respondent-company, acting as an agent of the freight beneficiary, filed voyage returns in respect of certain voyages before the AO. Instead of passing separate orders for each of the voyage return, the AO passed a composite order under section 172(4), disposing of all the voyage returns and worked out the taxable income of respondent at 7.5% of total amount of freight. But the respondent on the other hand contended that the procedure outlined in section 172(4) was not applicable to it as it had already filed its return of income under section 139(1) before the expiry of the assessment year under appeal and, therefore, it ought to have been assessed under the normal provisions of the Income Tax Act in view of the provisions of section 172(7). Further, the CIT(A) quashed the order passed by the AO under section 172(4).

On appeal, the Tribunal held in favour of assessee as under:

1) The summary procedure of assessment contemplated by section 172 cannot be mixed up with a regular assessment, especially when option is exercised by the owner or charterer of the ship under section 172(7);

2) There can’t be multiple assessments of profits from the same voyages, i.e., one under section 172(4) and the other under the normal provisions of the Income-tax Act on the basis of the return filed under section 139; and

3) As the respondent had been regularly filing its returns of income and was assessed to tax, the finding of the CIT(A) that the freight beneficiary would be outside the scope of section 172 couldn’t be said to be untenable. Thus, the CIT(A)’s finding in this behalf was confirmed – ITO, INTERNATIONAL TAXATION v. MARINE CONTAINERS SERVICES (INDIA) (P.) LTD [2012] 28 (Rajkot – Trib.)

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