SIIAII, - (1.) THE Judgment of the court was delivered by
(2.) NETHERLANDS Steam Navigation Company Ltd.-hereinaftercalled "the assessee"-is a non-resident company engaged in shippingbusiness. For the assessment years 1952-53 to 1956-57 the assessee filediis return of income for the relevant accounting years disclosing taxableincome computed on the basis of its annual turnover in its Indian wade i. t."round voyages" to and from Indian Ports. The assessee did not furnishparticulars of its world income. The Income-tax Offiter computed thetaxable business income of the assessco for each year by the application cf thefollowing formula: JUDGEMENT_84_2_1969Image1.jpg 86By the expression "Indian trade profits" in the formula was meantprofit earned in "round voyages" made by the assessee's ships whichtoughed Indian ports. Operation of the formula, may be illustrated bytaking a sample computation by the Income-tax Officer for the year1953-54: JUDGEMENT_84_2_1969Html1.htm In computing the profits of the assessee in India in each year theIncome-tax Officer allowed normal depreciation and other trade allowancesadmissible under the Indian Income-tax Act, 1922, and the relevant rules madethereunder. He, however, did not allow initial depreciation and additionaldepreciation in respect of the ships of the assessee in any of the assessmentyears, because the ships acquired by the assessee were .not introduced intothe' Indian business in -the years in which they were newly acquired.The orders of assessment were confirmed by the Appellate AssistantCommissioner. In appeal to the Income-tax Appellate tribunal the assesseeclaimed additional depreciation for four ships for which the followingdetails were furnished: JUDGEMENT_84_2_1969Html2.htm The assessee and the Conmmissioner were agreed that the taxable incomeof the assessee had to be determined by the application of the second methodin Rule 33 of the Indian Income-tax Rules, 1922. The tribunal also obser-ved that the Commissioner and the assessee agreed that the formula adop-ted by the Income-tax Officer was "the correct method of assessment".
(3.) THE Commissioner submitted before the tribunal that if the Indianbusiness of the assessee be regarded as part of its world business and' not, indep-endent of it, the world profits of the assessee must be computed according tothe provisions of the Indian Income-tax Act, 1922, and additional deprecia-tion may be taken into account in determining the taxable profits under theIndian Income-tax Act as a fraction of the world profits. But he maintainedthat if the Indian trade be regarded as a separate business and not part of theworld trade of the assessee, additional depreciation could only be allowed underSection 10(2) (vi-a) of the Indian Income-tax Act, provided ships which arenew are introduced into the Indian trade and not otherwise. In the opinion of the tribunal, in computing the taxable income ofthe assessee under the Indian Income-tax Act, 1922, the Indian business mustbe taken to be part of the assessee's world business, and "depreciation whichthe assessee was entitled to, in respect of its world business by the applicationof the Indian Income-tax Act would be proportionately "available in respectof its Indian business". The tribunal observed that under Rule 33 "the profitshave to be calculated under the terms of the Indian Income-tax Act and thisact postulated that on all machinery, plants and such other things like steamersbrought into business after 31/03/1948, additional depreciation mustalso be granted". The tribunal then observed that the ships brought intothe Indian trade were not new in the years of account relevant to the fiveyears of assessment, but the assessee was still qualified under Section 10(2)(vi-a) to additional depreciation for a continuous period of five years, and"the fact that in the first of these years the new ships did not call at theIndian Ports in one assessment year did not disentitle the assessee to thebenefit not only for that year but also for the succeeding four years".Accordingly the tribunal held that in respect of all the-four ships of theassessee, additional depreciation was admissible as claimed. At the instance of the Commissioner of Income-tax, the followingquestion was referred by the tribunal to the High court of Calcutta foropinion in respect of each of the five years : "Whether on the facts and circumstances of the case the assessee-Company is entitled to additional depreciation in respect of the four shipsmentioned above ?" ;