Y. V. Chandrachud, C. J. - (1.) The respondent, Gosalia Shipping Private Limited, which is a company incorporated under the Indian Companies Act does the business of Clearing and Forwarding and as Steamship Agents. In 1970, respondent acted as the shipping agent of "Aluminium Company of Canada, Limited" which is a non-resident company. The Aluminium Company time-chartered a ship "M. V. Sparto" belonging to a non-resident company called Sparto Compania Naviera of Panama. The said ship called at the port of Betul, Goa, on March 1, 1970 where it loaded 13,000 long tons of bauxite belonging to the time-charterers, the Aluminium Company. On March 20, 1970 the ship left for Alfred port, Canada. The ship was allowed to leave the port of Betul on the basis of a guarantee bond executed by the respondent in favour of the President of India, undertaking to pay the income-tax payable by the time-charterers under Section 172 of the Income Tax Act, 1961. On April 15, 1970, the First Income-tax Officer, Margao, Goa, issued a demand notice to the respondent for payment of Rs. 51,191 by way of income-tax under the aforesaid provision. The respondent filed Special Civil Application No. 31 of 1970 in the court of the Judicial Commissioner, Goa, asking for a writ of Mandamus directing the Income-tax Officer to withdraw the demand notice. By a judgment dated October 29, 1971, the learned Judicial Commissioner allowed the respondent"s Writ Petition and passed an order quashing the demand notice. Having obtained from the Judicial Commissioner a certificate of fitness to appeal to this Court under Article 133 (1) (b) and (c) of the Constitution, the Union of India has filed this appeal.
(2.) The question as to whether the respondent is liable to pay the income-tax demanded of it by the Income-tax Officer, depends for its decision on the construction of S. 172 of the Income Tax Act, 1961, which read as follows at the relevant time: "172 (1) The provisions of this section, 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 ship, belonging to or chartered by a non-resident, which carries passengers, live-stock, mail or goods shipped at a port in India. (2) Where such a ship carries passengers, live-stock, mail or goods shipped at a port in India, one-sixth of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner or charterer on account of such carriage. (3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Income-tax Officer a return of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of the carriage of all passengers, live-stock, mail or goods shipped at that port since the last arrival of the ship thereat: Provided that where the Income-tax Officer is satisfied that it is not possible for the master of the ship to furnish the return required by this sub-section before the departure of the ship from the port and provided the master of the ship has made satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf, the Income-tax Officer may, if the return is filed within thirty days of the departure of the ship, deem the filing of the return by the person so authorised by the master as sufficient compliance with this sub-section. (4) On receipt of the return, the Income-tax Officer shall assess the income referred to in sub-section (2) and determine the sum payable as tax thereon at the rate or rates in force applicable to the total income of a company which has not made the arrangements referred to in Section 194 and such sum shall be payable by the master of the ship. (5) For the purpose of determining the tax payable under sub-section (4), the Income-tax Officer may call for such accounts or documents as he may require. (6) A port clearance shall not be granted to the ship until the Collector of Customs or other Officer duly authorised to grant the same, is satisfied that the tax assessable under this section has been duly paid or that satisfactory arrangements have been made for the payment thereof. (7) Nothing in this section shall be deemed to prevent the owner or charterer of a ship from claiming before the expiry of the assessment year relevant to the previous year in which the date of departure of the ship from the Indian port falls, that an assessment be made of his total income of the previous year and the tax payable on the basis thereof be determined in accordance with the other provisions of this Act, and if he so claims, any payment made under this section in respect of the passengers, livestock, mail or goods shipped at Indian port during that previous year shall be treated as a payment in advance of the tax leviable for that assessment year, and the difference between the sum so paid and the amount of tax found payable by him on such assessment shall be paid by him or refunded to him, as the case may be."
(3.) Section 172 occurs in Chap. XV which is entitled "Liability in special cases" and the sub-heading of the section is "Profits of non-residents from occasional shipping business". It creates a tax liability in respect of occasional shipping by making a special provision for the levy and recovery of tax in the case of a ship belonging to or chartered by a non-resident which carries passengers, livestock, mail or goods shipped at a port in India. The object of the section is to ensure the levy and recovery of tax in the case of ships belonging to chartered by non-residents. The section brings to tax the profits made by them from occasional shipping, by means of a summary assessment in which one-sixth of the gross amount received by them is deemed to be the assessable profit. Before the departure of the ship, the master of the ship has to furnish to the Income-tax Officer a return of the full amount paid or payable to the owner or charter on account of the carriage of passengers, goods etc., shipped at the port in India since the last arrival of the ship at the port. In the event that, to the satisfaction of the Income-tax Officer, the master is unable so to do, he has to make satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf. A port clearance cannot be granted to the ship until the tax assessable under the section is duly paid or satisfactory arrangements have been made for the payment thereof.;