When the agreement is clear that the expenses included cannot be recovered from the charterer as lease rentals so there is no applicability of sec 92CA(3)

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The brief facts in apropos these grounds are that the assessee, Boskalis Dredging India P.Ltd, is a company incorporated in India on 5th January,1996. It is engaged in the business of undertaking inter alia capital and maintenance dredging projects and providing technical related services in dredging. However, during the relevant year, the income was earned from hire of personnel, hire of equipment and services rendered to group companies and not from dredging contracts. The assessee had leased dredger Gemini and Multicat Coby to associate enterprise, Boskalis International BV (‘BIBV’) since 1997, under the Standard Bareboat Charter Agreement. Since the project for which the dredger was to be used did not materialized, therefore, the said contract for dredger Gemini was terminated w.e.f. 1st January, 2003 and the contract for dredger Multicat Coby was terminated w.e.f. 17th August, 2003. In the return of income, however, the assessee claimed depreciation on dredger Gemini and Multicat Coby for sum of `.89,06,708/- and lay of cost of `.21,86,686/-. The Assessing Officer observed that since the dredgers were not used for the purpose of business right from the assessment year 2003-2004, he, therefore, required the assessee to justify its claim for depreciation and lay up cost as allowable deduction. The assessee’s contention was that these assets were kept ready for use as it was looking for further contracts with other parties and the same should be treated as in passive use entitling for depreciation and allowance of lay cost. The Assessing Officer did not agree with the plea of the assessee and held that the assets were not used for the purpose of business during the relevant year and there is no profit earn from these assets which is assessable to tax in this year and accordingly disallowed the entire depreciation claimed at `.89,06,708/- and expenses incurred on lay up cost for sum of `.21,86,686/-. The detail reasoning for not accepting the assessee’s claim has been dealt with by the Assessing Officer at pages 6 to 10 of the assessment order.

Citation :
DCIT-9(1), Mumbai Appellant Vs Boskalis Dredging India P. Ltd., 23, Sangeeta Tagore Road, Santacruz(W), Mumbai-400 054. PAN NO.AAACN2566R Respondent AND ITA No.7152 /Mum/2010 Assessment Year: 2004-2005 DCIT-9(1), Mumbai Appellant Vs. Boskalis Dredging India P. Ltd., 23, Sangeeta Tagore Road, Santacruz(W), Mumbai-400 054. PAN NO.AAACB2566R Respondent