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Tax Publishers Payments for time charter of dredgers on wet lease basis - whether royalty under Income tax act, 1961 *Facts:* Assessee had taken dredgers on time charter basis with the crew (wet lease) for which payments were made to British Virgin Islands (no DTAA) to the charter party without effecting TDS. AO was of the view that the chartering was a business activity subject to tax as business income in India and accordingly since the assessee did not remit TDS on such payments they were held in default. On appeal CIT(A) held that the payments were royalty for use of equipment under section 9(1) (vi). Assessee's plea was they were not royalty but business income and in the absence of a PE/BC no tax was fastened on the same thus no TDS was also warranted. They also questioned the time limitation in the TDS claims of holding them in default for non-deduction of TDS. On higher appeal - Held against the assessee that the payments were royalty warranting TDS under section 9(1) (vi) of the act. No business connection exists, it was not business income. Limitation was found to be alright given in those years no time limit was imposed under section 201(1). *Applied:* Poompuhar Shipping Corporation Ltd. (2013) 38 taxmann.com 150 (Madras) : 2014 TaxPub(DT) 0181 (Mad-HC) West Asia Maritime Ltd. v. ITO (2008) 111 ITD 155 (Chen-Trib) : 2008 TaxPub(DT) 2395 (Chen-Trib) *Limitation of Law:* Mahindra & Mahindra Ltd. v. DCIT (2009) 313 ITR (AT) 263 (Mum-Trib) : 2009 TaxPub(DT) 1638 (Mum-Trib) the ITAT made the following observations:- As decided by the Honble Calcutta High Court in the case of cited above, the time limit prescribed in Section 149 of the Act for taking action under section 147 cannot have any application for taking action under section 201 of the Act, since it was not a case of income escaping assessment but a case of inaction of payer to deduct tax on interest while making payment of the interest in violation of Section 194A of the Act. There is no scope for applying provisions of Limitation Act, 1963 to the Act since the Supreme Court in the case of Rao Bahadur Ravulu Subba Rao (1956) 30 ITR 163 (SC) : 1956 TaxPub(DT) 0170 (SC) held that the Act is a self contained code and its provisions show an intention to depart from the common rule. Relying on the three-judge Bench Supreme Courts decisions in the case of Uttam Namdeo Mahale v. Vithal Deo and Ors. AIR (1997) SC 2695 and Ishar Singh AIR (1984) SC 171, the Calcutta High Court observed that if no period of limitation is prescribed under the Act for taking action and the Limitation Act does not apply then there cannot be any prohibition of the period of limitation for taking action under the Act. Bhura Exports (2011) 13 taxmann.com 162 (Cal) : 2014 TaxPub(DT) 2965 (Cal-HC) (Calcutta), the High Court held that when there was no period of limitation fixed for exercising power under Section 201 at the relevant point, there is no question of invoking a reasonable period of limitation for applying provision contend in Section 201 of the Act. *Case:* Jaisu Shipping Co. (P) Ltd. v. Addl. DIT 2024 TaxPub(DT) 1192 (Rjk-Trib)

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Payments for time charter of dredgers on wet lease basis - whether royalty under Income tax act, 1961

Facts:

Assessee had taken dredgers on time charter basis with the crew (wet lease) for which payments were made to British Virgin Islands (no DTAA) to the charter party without effecting TDS. AO was of the view that the chartering was a business activity subject to tax as business income in India and accordingly since the assessee did not remit TDS on such payments they were held in default. On appeal CIT(A) held that the payments were royalty for use of equipment under section 9(1) (vi). Assessee's plea was they were not royalty but business income and in the absence of a PE/BC no tax was fastened on the same thus no TDS was also warranted. They also questioned the time limitation in the TDS claims of holding them in default for non-deduction of TDS. On higher appeal -

Held against the assessee that the payments were royalty warranting TDS under section 9(1) (vi) of the act.

No business connection exists, it was not business income.

Limitation was found to be alright given in those years no time limit was imposed under section 201(1).

Applied:

Poompuhar Shipping Corporation Ltd. (2013) 38 taxmann.com 150 (Madras) : 2014 TaxPub(DT) 0181 (Mad-HC)

West Asia Maritime Ltd. v. ITO (2008) 111 ITD 155 (Chen-Trib) : 2008 TaxPub(DT) 2395 (Chen-Trib)

Limitation of Law:

Mahindra & Mahindra Ltd. v. DCIT (2009) 313 ITR (AT) 263 (Mum-Trib) : 2009 TaxPub(DT) 1638 (Mum-Trib) the ITAT made the following observations:-

As decided by the Honble Calcutta High Court in the case of cited above, the time

limit prescribed in Section 149 of the Act for taking action under section 147 cannot

have any application for taking action under section 201 of the Act, since it was not

a case of income escaping assessment but a case of inaction of payer to deduct tax on

interest while making payment of the interest in violation of Section 194A of the Act.

There is no scope for applying provisions of Limitation Act, 1963 to the Act since the

Supreme Court in the case of Rao Bahadur Ravulu Subba Rao (1956) 30 ITR 163

(SC) : 1956 TaxPub(DT) 0170 (SC) held that the Act is a self contained code and its provisions show an intention to

depart from the common rule.

Relying on the three-judge Bench Supreme Courts decisions in the case of Uttam

Namdeo Mahale v. Vithal Deo and Ors. AIR (1997) SC 2695 and Ishar Singh AIR

(1984) SC 171, the Calcutta High Court observed that if no period of limitation is

prescribed under the Act for taking action and the Limitation Act does not apply then

there cannot be any prohibition of the period of limitation for taking action under the

Act.

Bhura Exports (2011) 13 taxmann.com 162 (Cal) : 2014 TaxPub(DT) 2965 (Cal-HC)

(Calcutta), the High Court held that when there was no period of limitation fixed for exercising power under Section 201 at the relevant point, there is no question of invoking a reasonable period of limitation for applying provision contend in Section 201 of the Act.

Case: Jaisu Shipping Co. (P) Ltd. v. Addl. DIT 2024 TaxPub(DT) 1192 (Rjk-Trib)