| The Tax Publishers2019 TaxPub(DT) 8369 (Mum-Trib) INCOME TAX ACT, 1961
Section 115VF
Since assessee had opted to be governed by TTS, provisions of section 115VA would override sections 28 to 43C and hence, income had to be calculated with reference to registered tonnage of ships and not on the basis of net profits; and consequently, related party transactions could be not considered for computing income chargeable to tax, and, therefore, arm's length price determined under transfer pricing provisions would be of no relevance; as it would not affect computation of income and taxability of tonnage income of assessee; Even if transfer pricing provisions were to apply, the provisions of TTS do not allow adjustment made by TPO to affect computation of income under TTS. That being so, adjustment made by TPO would not affect income of assessee.
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Tonnage tax scheme - Computation of income - Under section 115VF - Applicability of Chapter X transfer pricing provisions as regards international transactions with AE
Assessee registered as a Tonnage Tax Company under Tonnage Tax Scheme (TTS) as provided under Chapter XII-G. entered into International Transactions with its Associated Enterprise(s) (AE), amounting to more than Rs. 15 crores. Hence, matter was referred to TPO for determination of Arm's Length Price of International transactions and TPO suggested upward adjustment. Assessee contended that transfer pricing regulations did not apply to as assessee's income was taxable under Tonnage Tax Scheme. Held: For computing taxable income under Chapter XII-G related party transactions have no relevance. Consideration of TP provisions, enclosing within them, arm's length principle, under Chapter X (sections 92 to 92F) are a fortiori, not applicable to tonnage tax Scheme (TTS) and ALP does not affect computation and taxability of tonnage income of assessee. Also non-applicability of Chapter X did not get altered by the factum of assessee having either filed audit report in Form 3CEB, or undertaken benchmarking process and concluding its international transactions to be at arm's length. Thus, computation of income under TTS was not impugned upon by adjustment made by TPO.
REFERRED : Shreyas Shipping Logistics Ltd. [Mumbai ITAT-ITA 7406/Mum/2014], TAG Offshore Ltd. [Mumbai ITAT-ITA No. 710/Mum/2014], CGU Logistics Ltd. [Mumbai ITAT-ITA No. 1053/Mum/2014], Trans Asian Shipping Services Pvt. Ltd. (SC) [Civil Appeal No. 5869 and 5870 of 2016) : 2016 TaxPub(DT) 3187 (SC) and DRP Order, dt. 8-12-2014, passed under section 144C (5).
FAVOUR : In assessee's favour.
A.Y. : 2010-11
IN THE ITAT, MUMBAI BENCH
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