The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that no transfer pricing applicable to income from operation carried out through qualifying ships taxed under Tonnage Tax Scheme(TTS).
Assessee, Van Oord India Private Limited is a wholly owned subsidiary of Van Oord Dredging and Marine Contractors BV, a company registered in the Netherlands. The assessee over the years has become a main contractor directly entering into contracts with Government and port authorities in India.
The assessee also owns certain equipment which it uses for undertaking specified dredging activities. The assessee is registered as a Tonnage Tax Company under the Tonnage Tax Scheme (TTS) as provided under Chapter XXIIHG of the Act.
As per the provisions of TTS, income derived from porting qualified ships would be treated as shipping income and would be taxable as per the computation mechanism provided therein.
After filing the return of the income filed by the assessee’s case was selected for scrutiny under CASS and the statutory notices were duly served on the assessee.
Thereafter, a reference was made to the Transfer Pricing Officer (TPO) in order to determine the arm’s length price from the international transaction detailed in the audit report in form 3CEB.
It has the objective also of creating awareness and educating the public about the benefits of trading on commodity exchange and to publish books etc for the same objective. Subsequently TPO made adjustment and the AO passed a draft assessment order incorporating the said addition
Aggrieved by the order assesee filed objections before the Dispute Resolution Panel (DRP). The DRP rejected the objections from the assessee and confirmed the TP adjustment. Against the order, the assessee filed an appeal before the tribunal.
On behalf of the assessee, Porus Kaka, counsel argued that the issue of applicability of transfer pricing provisions to companies covered under the Tonnage Tax Scheme has been considered by the co-ordinate bench in assessee’s own case for A.Ys. 2007-08, 2010-11 & 2011-12.
Manoj Kumar, Counsel for Revenue supported the orders of the lower authorities.
After considering the facts submitted and circumstances, the two member bench of Padmavathy S (Accountant Member) and Vikas Awasthy (Judicial Member) held that “transfer pricing regulations do not apply to the assessee to the extent of operations carried out through operating qualifying ships where the income is taxed under TTS.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
