SIDHWA M N AGENT TO EAST AND WEST STEAMSHIP CO Vs. COMMISSIONER OF INCOME TAX
LAWS(BOM)-1962-8-11
HIGH COURT OF BOMBAY
Decided on August 24,1962

M.N.SIDHWA, AGENT OF EAST AND WEST STEAMSHIP CO. Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents


Cited Judgements :-

COMMISSIONER OF INCOME TAX VS. S G SAMBANDAM AND CO [LAWS(MAD)-1997-11-82] [REFERRED TO]


JUDGEMENT

Y.S.TAMBE, J. - (1.)ON a direction given by this Court, the Tribunal has drawn up a statement of the case and referred to this Court the following question of law :
"Whether the orders purporting to have been made under s. 44B of the Indian IT Act by the ITOs at Bombay and Calcutta were in law orders validly made under that section ?"

(2.)WE are here concerned with the asst. yr. 1948-49, the relevant accounting year being that ended on 31st March, 1948. The facts giving rise to this reference in brief are : The East & WEst Steamship Company is a firm carrying on business in Pakistan. In the course of its business several of its ships touched Indian ports such as Bombay, Calcutta and Cochin. WE are not here concerned with the business done by the ships touching the Port at Cochin, but are concerned only with the tax levied in respect of the business done by the company in the ports of Calcutta and Bombay. In the relevant assessment year the company had no office in the then British India and the territories of the Indian Dominion. It is common ground that the company was not a resident within the meaning of that expression as used in the Indian IT Act. The company, however, had its agents in different places in India who collected the freight on behalf of the company. In the relevant assessment year whenever a ship owned or chartered by the said company touched the ports of Calcutta or Bombay, a statement of freight earned by the company was furnished by the respective agents of the company at those places to the respective ITOs of those places. On receipt of such statements, the ITOs at the said places made assessment orders on the basis of the statements of freight submitted to them by the respective agents. The tax due from the company on the basis of those statements of freight received by the company was neither assessed nor recovered before the ships left the ports, but the tax assessed was later on paid by the agents at the respective places. From the six sample orders which are placed on the record, it appears that except in one case the assessment orders had been made during the currency of the accounting period. In other words, all the assessment orders except one have been made before 31st March, 1948. All these assessment orders purport to have been made under sub-s. (2) of s. 44B. In no case the ships were either detained for the purpose of passing the assessment orders or recovery of tax. After the expiry of the accounting period, i.e., after 31st March, 1948, regular assessment in respect of company's income was done by the IT authorities in Karachi, and the IT authorities found that the business of the firm during that accounting period had resulted in a loss. The IT authorities also apportioned the loss attributable to the business done by the company in Indian Ports at Rs. 9,60,258. On 5th Jan., 1953, a claim for refund was made under s. 48 of the IT Act by one M. N. Sidhwa, who had been specially empowered by the company to make such a claim for and on behalf of the non- resident company. The ITO allowed the claim for refund by his order dt. 23rd Feb., 1953. This order of the ITO allowing refund came to be noticed by the CIT, and he took the view that the ITO was in error in allowing refund, and set aside that order. The reason given by the CIT for setting aside the order of the ITO was that the assessment orders having been made under s. 44B(2), an application for refund should have been made within a period of one year under s. 44C of the Act, and such an application not having been made, the one made on 5th Jan., 1953, after the expiry of the period of one year ought not to have been allowed. Against this order of the CIT, the assessee took an appeal to the Tribunal, and the principal contention raised on behalf of the assessee before the Tribunal, was that the provisions of s. 44C had no application to the facts of the present case. The original assessment orders which were made were not orders made under the provisions of Chapter V-A of the Act. In other words, the assessment orders were not made under s. 44B of the Act. It was conceded on behalf of the assessee that if it is held that the assessment order were made under s. 44B of the Act, then the provisions of 44C would come into play, and the assessee's application for refund was liable to be rejected on the ground of limitation. In substance, the contention was that the assessment orders which were made were not made against the company but were made against the agent of the company under the latter part of s. 44A of the Act and, therefore, fell out of the provisions of the Act. The Tribunal did not accept this contention of the assessee. It held that the agents at the ports in India, of the company, who collected the freight on behalf of the company were not agents within the meaning of s. 44A of the Act. In the opinion of the Tribunal, the agent referred to in s. 44A does not mean a statutory agent within the meaning of s. 43, but a contractual or factual one, and there was no proof that the said agents who collected freight were contractual or factual agents of the company. The Tribunal further held that the assessments made were under s. 44B of the Act, and, therefore, the application for refund made by the assessee was barred by time. As regards the returns filed by the said agents, i.e., the agents who collected the freight on behalf of the company, and the tax paid by them, the Tribunal observed :
"With a view to avoiding inconvenience to the ships concerned in the matter of getting port clearance, a sort of understanding is reached between the Department, port authorities and freight agents according to which the freight agents hold themselves responsible to pay tax that may be due from the masters before the respective ships are allowed to leave a port. That is why we find that though on several occasions ships were loaded and actually left ports in the account year 1947-48, tax has been actually paid by these freight agents in the account year 1948- 49."
In this view of the matter, the Tribunal dismissed the appeal filed by the assessee. The application made by the assessee under sub-s. (1) of s. 66 was rejected by the Tribunal. But, as already stated, on a direction made by this Court, the aforesaid question has been referred to us by the Tribunal.
To appreciate the contentions raised by counsel, it will be convenient at this stage to refer to the provisions of Chapter V- A of the Act and which consist of three sections i.e., 44A, 44B, and 44C. The provisions relate to liability to pay tax of occasional shipping. They are :

"44A. The provisions of this Chapter shall, notwithstanding anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of tax in the case of any person who resides out of the taxable territories and carries on business in the taxable territories in any year as the owner or charterer of a ship (such person hereinafter in this Chapter being referred to as the principal), unless the ITO is satisfied that there is an agent of such principal from whom the tax will be recoverable in the following year under the other provisions of this Act. 44B. (1) Before the departure from any port in the taxable territories of any ship in respect of which the provisions of this Chapter apply, the master of the ship shall prepare and furnish to the ITO a return of the full amount paid or payable to the principal, or to any person on his behalf, on account of the carriage of all passengers, livestock or goods shipped at that port since the last arrival of the ship thereat. (2) On receipt of the return, the ITO shall assess the amount referred to in sub-s. (1), and for this purpose may call for such accounts or documents as he may require, and one-sixth (then one-fifth) of the amount so assessed shall be deemed to be the amount of the profits and gains accruing to the principal on account of the carriage of the passengers, livestock and goods shipped at the port. (3) When the profits and gains have been assessed as aforesaid, the ITO shall determine the sum payable as tax thereon at the rate for the time being applicable to the total income of a company, and such sum shall be payable by the master of the ship, and a port-clearance shall not be granted to the ship until the Customs-collector, or other officer duly authorised to grant the same, is satisfied that the tax has been duly paid. 44C. Nothing in this Chapter shall be deemed to prevent a principal from claiming, in the year following that in which any payment has been made on his behalf under this Chapter, that an assessment be made of his total income in the previous year, and that the tax payable on the basis thereof be determined in accordance with the other provisions of this Act, and, if he so claims, any such payment as aforesaid shall be treated as a payment in advance of the tax and the difference between the sum so paid, and the amount of tax found payable by him shall be paid by him or refunded to him, as the case may be."

Mr. Kolah, appearing for the assessee, contends that the assessment orders made were not made under the provisions of Chapter V-A, but on the other hand they were orders made against the agent, the ITO acting under the provisions of the latter part of s. 44A of the Act. The mere fact that the section under which the order is said to have been made is s. 44B in the assessment orders, it would not debar this Court from ascertaining the correct provisions of law under which these orders have been made, and when the Court so scrutinises, it will be apparent that the orders are made under the provisions of the Act other than the provisions of Chapter V-A. The observations at page 261 in Navinchandra Mafatlal vs. CIT (1955) 27 ITR 245 (Bom) are relied upon. It is next contended that the agent mentioned in s. 44A includes both a statutory agent within the meaning of s. 43 of the Act and a contractual agent. The freight agents of the company were the statutory agents within the meaning of s. 43, and it was, therefore, obligatory on the ITO to assess the agents under the latter part of s. 44A. It is then contended that even on a perusal of the assessment orders, it is apparent that they are not made under the provision of section of 44B, but are made under general provisions of the Act. According to Mr. Kolah, the assessee in a case of assessment under s. 44B is a shipping master. It is the shipping master, who has to file a return, and it is also the shipping master who is liable to pay tax. The assessment orders are neither made on the shipping master nor has the shipping master filed a return, nor has he paid the tax. These being the facts of the case, the Tribunal was in error in holding that the assessment orders were made under s. 44B of the Act. In order to sustain an order under s. 44B of the Act, the Department must bring the case strictly within the four corners of s. 44B. This not having been done, the Department cannot claim that the orders are made under s. 44B. Reliance is placed on the observations at page 195 in CIT vs. Provident Investment Co. Ltd. (1957) 32 ITR 190 (SC) : TC20R.246.

(3.)MR. Joshi, on the other hand, contends that the assessment orders in question are not assessment orders made on the agents under the general provisions of the Act. The orders contemplated to be made under the latter part of s. 44A are to be made after the expiry of one year in respect of the entire income of the previous year. The orders in the present case are not made after the expiry of the accounting year, but during the course of the accounting year. Separate orders have been made in respect of each shipping. These orders could only be made under s. 44B of the Act, and under no other provisions of the Act. According to MR. Joshi, is true that the returns have not been filed by the master, nor has the tax been paid by the master of the ship. But this is only a concession granted as a result of an arrangement, as found by the Tribunal, and that concession would not vitiate the orders or take them out of s. 44B of the Act.
The crux of the question which falls for consideration is whether the application for refund made by the company on or about 5th Jan., 1953, through its authorised agent, Mr. M. N. Sidhwa, under s. 48 of the Act, is barred by time by reason of the provisions of s. 44C of the Act. Now, s. 44C, which we have already reproduced above, would have application when a non- resident assessee claims an adjustment in respect of payment of tax made by him under Chapter V-A. The adjustment which the principal can claim is that an assessment be made of his total income in the previous year, that the tax payable on the basis thereof be determined in accordance with the provisions of the Act other than Chapter V-A, and the amount payable by him by way of difference should be recovered from him, or if any amount is found refundable, it should be refunded to him. It has, therefore, to be seen whether the payments of which refund is claimed by the company are payments made by the company under the provisions of Chapter V-A of the Act, and this in turn brings us to the question whether the assessment orders are under s. 44B of the Act. No doubt, the sample orders which have been included in the statement of the case are purported to have been made under sub- s. (2) of s. 44B of the Act. But, as pointed out by this Court, that by itself is not conclusive to hold that the orders are under s. 44B(2). It is open to this Court, having regard to the facts of the case, to ascertain for itself the section under which the orders in question fall. At page 261 in Navinchandra Mafatlal vs. CIT (supra), the learned Chief Justice observed:

"Therefore, broadly, the position on the reference is this. An order was made by the ITO on 23rd Jan., 1950. If that order was a valid or proper order, it was made within the period of limitation. But this order, as already pointed out, was not made under s. 34. Now, if an order is made by an ITO and even though he may state that he has not made it under any particular section of the IT Act, or even if he may state that he has made it under a particular section, it is for us to decide which is the proper provision of the law under which such an order should have been made."



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