- (1.) W.P. no.457 of 2005 Two companies, one incorporated under the laws relating to companies in the United Kingdom (UK) and another incorporated under the laws relating to companies in the Netherlands have filed this writ petition challenging a notice dated 25th March, 2004 issued under section 148 of the Income Tax Act, 1961 to P&O Nedlloyd (Partnership) requiring the partnership to deliver a return in the prescribed form of its income in respect of which it is assessable, chargeable to tax for the Assessment Year 1997-98 which, according to the Revenue, had escaped assessment within the meaning of section 147 of the said Act.
(2.) The petitioners pleaded by a deed of partnership dated 31st July, 1997 the petitioner nos. 1 and 2 formed a partnership firm with effect from 1st January, 1997 under the provisions of law relating to partnerships of England and Wales, having its office in the UK to carry on the business of shipping in international waters. It is the petitioners' case in their pleadings the first assessment year subsequent to the formation of the partnership was Assessment Year 1997-98. Since an incomplete return dated 19th May, 1998 was originally filed, the petitioner no. 1 under cover of its letter dated 31st March, 1999 enclosed a revised return. The contents of that letter are reproduced below:- "We enclose the Revised Return of Income for the assessment year 1997-98. With effect from 1st January, 1997 P&O Containers Ltd., U.K. and Nedlloyd Lines B.V. have pooled their business worldwide as both these companies were acquired by P&O Nedlloyd Container Ltd., U.K. The name of P&O Containers Ltd., U.K. was changed to P&O Nedlloyd Ltd. which operates in India with effect from that date. However, the return for the above assessment year was inadvertently filed in the name of P&O Containers Ltd. reflecting only the freight collected by P&O Containers Ltd., U.K. Therefore, this Revised Return of Income is being filed in correct name of P&O Nedlloyd Ltd. being the beneficial receiver of freight income earned in India, including the freight earned by Nedlloyd Lines B.V. from 1st January, 1997 to 31st March, 1997. Please take the above on your records. Please let us know if you require any further information in the matter."
(3.) The returns filed resulted in assessment order dated 30th July, 1999. The said order speaks as under:- "In this case, return of income was filed on 19/5/1998 showing income at Nil. Subsequently, a revised return was filed on 12/4/1999 showing income at Nil. The revised return was filed in order to claim refund of the taxes paid under section 172(4) to the extent of Rs.25,29,231. The assessee is non-resident shipping company, engaged in the business of operation of ships in the International Traffic. In response to notice under section 143(2) of the Income tax Act, Sri A.K. Basu, FCA, A/R. of the assessee, attended the proceedings from time to time and the case was discussed with him. During the year under consideration, the assessee has shown gross freight to the extent of Rs.2,41,68,52,588. It has been submitted on behalf of the assessee that in accordance with article 9 of the agreement for avoidance of the Double Taxation between India and U.K., the profit derived by the assessee company from the operation of ships in the International Traffic would be taxable only in the U.K. Accordingly, the sums received in India from the operation of ships including ancillary charges have been claimed as exempted from tax in India. I have perused the double taxation avoidance agreement between India and U.K. I have also considered the submissions made on behalf of the assessee in this context and found the contention of the assessee to be correct. Hence, the gross freight including ancillary charges, received by the assessee company, will not be taxed which implies that the tax payable would be Nil. Assessed as above u/s 143(3), issue Demand Notice and copy of the order to the assessee.";