Income from Carriage of Goods and for Operating Ship Taxable u/s 44B of Income Tax Act: ITAT [Read Order]

The bench of Amit Shukla and Gagan Goyal of Mumbai Income Tax Appellate Tribunal ruled that Income from carriage of goods and for operating ships is taxable under section 44B of the Income Tax Act, 1961.

The assessee Nan Lian Ship Management LLC, a company incorporated in and tax resident of UAE and is engaged in the business of shipping operation.

It has entered into a Time Charter contract with M/s Poompuhar Shipping Corp. Ltd. (PSCL) for transporting coal from Paradeep port to Tutucorine in Tami lNadu, through its ship ‘MV Eastern View’.

The assessee has disclosed the receipts of transporting coal from port to port from (PSCL) as shipping business and offered to tax under section 44B of the Income Tax Act, i.e. @ 7.5% of the gross receipt attributable to shipping operations carried out in India.

The Assessing Officer (AO) held that the assessee is not being paid for transporting coal from one port to another within India territory albeit for leasing the vessel. Therefore, it cannot be taxed under section 44B of the Income Tax Act.

The counsel for the assessee reasoned that because the assessee is a non-resident company engaged in the business of operating ships, income derived from that business must be taxed under the special provision. Further, the assessee has properly offered the income under section 44B of the Income Tax Act.

The bench observed that the assessee, since it is a non resident company engaged in the business of operation of ships, i.e., the ship of the assessee is used for transporting coal and has operated a ship on time charter basis by PSCL, therefore it has been subjected to tax under the special provision of section 44B of the Income Tax Act.

The bench ruled that the agreement and the payment received by the assessee is for carriage of goods and for operating the ships, therefore the income of the assessee has rightly been offered to tax under section 44B of Income Tax Act.

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