Forex fluctuation gains on loan taken for purchase of ships entitled to benefit of tonnage taxation scheme
Principal Commissioner of Income-tax-5, Mumbai v. M. Pallonji Shipping (P.) Ltd. –  104 taxmann.com 101 (Bombay)
The assessee was engaged in the business of shipping. It filed a return declaring income of Rs. 62 crores with credit of Rs. 8.89 crore to the profit and loss account with respect to the gains on account of foreign exchange fluctuations on loan taken for acquisition of ships. A.O. claimed that the assessee couldn’t claim benefit of tonnage taxation scheme on such gains and the same were to be taxed as normal business income.
Assessee filed an appeal to the Commissioner (Appeals) against the order passed by the A.O. who upheld the order passed by the A.O. taxing the foreign exchange gains as normal business income.
Assessee further made an appeal to the Tribunal. It held that the gains made on account of foreign exchange variation for acquisition of ships would be covered under tonnage taxation scheme since it was a part of the core activity of the assessee’s shipping business. It also observed that A.O. had allowed the foreign exchange variation gain with similar circumstances in A.Y. 2010-11.
Revenue made an appeal to the HC against the order of the ITAT. HC observed that there was no reason as to why the gains made as reinstatement of foreign exchange liability was not part of the business activity and not eligible for benefit of tonnage taxation scheme. The Court dismissed the appeal stating that the issue didn’t involve any question of law and hence, couldn’t be entertained.
HC couldn’t reject review petition merely on ground that SLP filed against its order was dismissed by SC
Khoday Distilleries Ltd. v. Mahadeshwara Sahakara Sakkare Karkhane Ltd. –  104 taxmann.com 25 (SC)
Assessee had filed an SLP to the Supreme court against the High Court’s order. The Court dismissed the SLP in limine without giving any reasons. The assessee then filed a review petition in the High Court but the same was rejected on the ground that the order of the SC amounted to affirmation to the order passed by the HC and, therefore, the same couldn’t be reviewed by the HC.
SC held that the review petition would be maintainable and it could not be faulted on alleged ground of merger of High Court’s order with Supreme Court’s order of dismissal of special leave petition, since the order of dismissal was given without a speaking order.