COMMISSIONER OF INCOME TAX WEST BENGAL I CALCUTTA Vs. WILH WILHELMSEN CALCUTTA

JUDGEMENT

(1.) The following questions are involved in this reference under Section 66(2) of the Indian Income-tax Act, 1922: "1.Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to get depreciation allowance under Rule 8 of the Income-tax Rules even in respect of ships which had formed part of the assessee's fleet for more than twenty years?

(2.) Whether, on the fact and in the circumstances of the case, the Tribunal was right in deleting the addition of Rs.55,280/- made by the Appellate Assistant Commissioner on accounts of excess depreciation in respect of the vessel "Tortugas".?

(3.) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the enhancement of Rs.97,547/- to the total income made by the Appellate Assistant Commissioner on account of wrong deduction of unabsorbed depreciation allowed by the Income Tax Officer?" 2.The assessee is a Norwegian Shipping Company. The assessment year involved is 1958-59. The previous year ended on-December 31, 1957. The facts stated by the Tribunal may be briefly stated as follows: (i)Instead of furnishing the annual accounts for its world business for the assessment year 1958-59, the assessee furnished separate complete annual accounts for its Indian trade, that is to say, for all round voyages of each ship to and from the Indian ports. The assessment was made under the third method of rule 33 of the Indian Income-tax Rules, 1922 and the instructions issued under this rule. What was ultimately brought to tax was the net Indian profits of each ship employed in the Indian trade in the accounting year 1957. (ii)In view of the said instructions the Income-tax Officer disallowed depreciation on 8 ships mentioned in his order as those ships were in the assessee's fleet for more than 20 years. (iii)The Income-tax Officer allowed Rs.55,280/- as depreciation in respect of the vessel "Tortugus" for its three round voyages of 195, 150 and 128 days respectively aggregating to 473 days in accounting year. (iv)There was an unabsorbed depreciation of Rs.3,31,493/- in the assessment year 1953-54. Out of that amount, Rs.2,49,093/- was set off against the assessee's income for the assessment year 1957-58. The unabsorbed depreciation of Rs.97,547/- for the assessment year 1953-54 pertained to seven ships mentioned at page 33 of the paper book and those ships did not come to India in the assessment year 1958-59 and only one of the came to India in the assessment year 1957-58. In the books of the assessee the said sum of Rs.97,547/- was shown as a business loss brought forward from the earlier years and the Income-tax Officer allowed it to be set off against the profits for the assessment year 1958-59. (v)On appeal by the assessee, the Appellate Assistant Commissioner sustained the order of the Income-tax Officer regarding the disallowance of depreciation on those 8 ships which were in the assessee's fleet for more than 20 years. (vi)The Income-tax Officer submitted that by mistake he had allowed depreciation for 473 days on the ship "Tortugus" instead of 365 days and therefore depreciation for 108 days should be disallowed. He also submitted that due to mistake he had allowed the set off of Rs.97,547/-. The assessee accepted those contentions and accordingly, the Appellate Assistant Commissioner enhanced the assessment by disallowing the excess depreciation of 108 days on the Tortugus and also by the said sum of Rs.97,547/-. (vii)On further appeal, the assessee contended before the Tribunal that the instructions so far as they relate to disallowance of depreciation on those 8 ships were ultra vires the provisions of section 10(2) (vi), proviso (c) to that section and rule 8 of the Income-tax Rules, 1922. The assessee argued that depreciation on all those ships should be allowed under section 10 (2) (vi) and proviso (c) to that section read with rule 8. It further contended that the words "company's fleet" used in the instructions were referable only to those ships of the assessee which were employed in its Indian trade and therefore the Appellate Assistant Commissioner was wrong in holding that the depreciation allowance on those ships had ceased after the 20th assessment year. (viii)The Tribunal expressed no opinion on the vires of the instructions and held that the instructions were misinterpreted by the Appellate Assistant Commissioner, for, according to the Tribunal the instructions could not go against the provision of Section 10 (2) (vi), proviso (c) to that section and rule 8 of the Rules. The Tribunal accordingly allowed the said claim in the following terms: