Bombay High Court
M/S. Maersk Bv vs Dy. Director Of Income Tax on 27 November, 2013
Author: M. S. Sanklecha
Bench: Mohit S. Shah, M. S. Sanklecha
itxa-2020-2013
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 2020 OF 2013
M/s. Maersk BV ]
(formerly known as Nedlloyd BV) ]
C/o. Maersk Line India Pvt. Ltd. ]
12th Floor, Tower A, Urmi Estate, ]
Ganpatrao Kadam Marg, Lower Parel, ]
Mumbai 400 013. .. Appellant.
V/s.
Dy. Director of Income Tax
International Taxation 2 (1)
]
]
1st floor, Scindia House, Ballard Estate, ]
Mumbai 400 038. ] .. Respondent.
Mr. Porus Kaka, Sr. Advocate with Mr. A. K. Jasani, for the Appellant.
Mr. Arvind Pinto, for the Respondent.
CORAM: MOHIT S. SHAH, C.J. &
M.S.SANKLECHA,J.
RESERVED ON : 22 NOVEMBER 2013.
PRONOUNCED ON : 27 NOVEMBER 2013.
JUDGMENT (Per M. S. Sanklecha,J.):
–
This appeal under Section 260-A of the Income Tax Act, 1961 (the Act) challenges the order dated 3 July 2013 passed by the Income Tax Appellate Tribunal (the Tribunal). This appeal relates to Assessment Year 2003-04.
2 Being aggrieved, the appellant has raised numerous questions of law. However, the appeal is admitted only on the following substantial S.R.JOSHI 1 of 5 itxa-2020-2013 question of law which reads as under:-
” Whether on the facts and circumstances of the case and in law, the Tribunal was right in holding that the appellant was not as assessee aggrieved from the order passed by the CIT(A) as contemplated by Section 253(1)?”
3 As the canvass of the controversy is limited, at the request of the Counsel for the parties, the appeal itself is taken up for final disposal at the stage of admission.
4 The appellant is a company incorporated in Netherlands and is a tax resident therein. The appellant is engaged in operation of ships in International water in partnership with M/s. Maersk Line UK Ltd. (formerly known as P & O Nedlloyd Ltd.), in the name and style of P & O Nedlloyd (PONP), a partnership in UK with a profit sharing ratio of 56:44 between Maersk Line UK Ltd. and the appellant.
5 For the Assessment Year 2003-04, the appellant filed its return of income on 25 November 2003, claiming to be exempt from payment of tax in view of India- Netherlands Double Taxation Avoidance Agreements (DTAA). The Assessing Officer by his order dated 30 December 2005, held that the PONP i.e. partnership firm was not taxable in UK but was taxable in India as person and the benefit India-UK DTAA was not available to the firm and further the benefit of neither India-UK DTAA or India – Netherlands DTAA could be extended to the partners.
Therefore, the appellant was assesed to tax on income of Rs.24.12 Crores.
6 In appeal, the Commissioner of Income Tax (Appeal) (CIT (A)) by an order dated 22 December 2006, upheld the order of the Assessing Officer to the extent it held that the partnership firm PONP was S.R.JOSHI 2 of 5 itxa-2020-2013 taxable in India. However, the share of the appellant as a partner in PONP was exempt under Section 10(2A) of the Act. However, the benefit of DTAA relief to the appellant as claimed was not granted.
7 On further appeal, the Tribunal dismissed the same on the preliminary ground that the appeal is not maintainable under Section 253(1) of the Act. The Tribunal held that the term “assessee aggrieved”
would mean a party liable to pay tax in terms of the order appealed against. The impugned order gives the following reasons for dismissing the appeal as not maintainable:
”
………………
The legal position emanating from the judicial pronouncements discussed above is that the term “assessee aggrieved” used in section 253(1) being a person competent to file an appeal before the Tribunal is the person who is an aggrieved party liable to pay tax in terms of the order against which the appeal is to be preferred. As already discussed by us there is no tax payable by the assessee in the present case as a result of the impugned order passed by the ld. CIT(A) even as a partner of the firm as the said order of the ld. CIT(A) has not given rise to any tax liability of the partnership firm. In our considered opinion, this appeal filed by the person, who is not the “assessee aggrieved” as envisaged in section 253(1) is not maintainable and the same is liable to be dismissed at the threshold. We order accordingly.”
8 The grievance of the appellant is that it is an assessee aggrieved by the order of the CIT(A) and the appeal should have been heard on merits. It was the appellant’s case before the authorities that it is entitled to the benefit of the India – Netherlands DTAA and the same was negatived. It is submitted that subsistence of demand is not a sina qua non for being aggrieved. In any case, the CIT(A) has held that the S.R.JOSHI 3 of 5 itxa-2020-2013 partnership firm namely – PONP is liable to tax in India; it then follows that the appellant being a partner of that firm would be liable to pay tax, in case, partnership firm fails to pay tax in terms of Section 188-A of the tax. Thus, there is a potential liability to pay tax. Thus, the appeal should be entertained otherwise the appellant’s right to file an appeal would become time barred as when the assessment is finalized in respect of the firm viz: PONP.
9 Mr. Pinto, learned Counsel for the revenue supports the impugned order of the Tribunal.
We have considered the rival submissions. Without going into the larger question of what is meant by a person aggrieved in terms of Section 253 (1) of the Act, we find that in the present facts, if the basis of the test laid down by Tribunal in the impugned order is correctly applied, then appellant would meet the test of assessee aggrieved. The test laid down by the Tribunal viz: the aggrieved assessee is one who is liable to pay tax in terms of the order against which the appeal is preferred. In this case, the CIT (A) has categorically held that the UK firm – PONP is taxable in India and the share of profits of the appellant is exempt from income under Section 10(2A) the Act. However, once the partnership firm is taxable in India then the appellant’s would become liable to pay tax under Section 188-A of the Act which provides – every person who is a partner of a firm is jointly and severally liable along with the firm for the payment of tax, penalty or other sum payable by the firm. Consequently, appellant is liable or at least potentially liable to pay taxes in terms of the order of the CIT(A)as and when assessment of PNOP is finalized. It is a different matter that the tax on the partnership firm has not yet been crystallized S.R.JOSHI 4 of 5 itxa-2020-2013 as the assessment proceedings for the Assessment Year 2003-04 against partnership firm has been stayed by the order dated 7 June 2006 of Calcutta High Court. However, as and when an assessment order is passed in respect of the partnership firm, the appellant would be liable to pay tax not paid by the partnership firm by virtue the order of CIT(A) in the present Appeal. The case of the appellant which has been negatived is that it is not liable to pay any tax in view of India – Netherlands DTAA even in its capacity as a partner of PNOP which unless examined will become final against the appellant for all time. Consequently, the appellant is an aggrieved assessee in terms of Section 253 (1) of the Act in the facts of the present case. Accordingly, we answer the above question in the negative i.e. in favour of the appellant and against the revenue.
11 In view of the above, the impugned order of the Tribunal dated 3 July 2013 is quashed and set aside. The appeal is restored to the file of the Tribunal with a direction to dispose of the appellant’s appeal on merits. All contentions on merits are left open.
12 Accordingly, appeal is allowed with no order as to costs.
CHIEF JUSTICE
(M.S.SANKLECHA,J.)
S.R.JOSHI 5 of 5
