TMI Blog2001 (4) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-97 against the appellate order dated October 28, 1999, of the Commissioner (Appeals)-IV, Chennai, dealing with the assessment order passed under section 143(3) of the Act. As, in effect there are appeals on identical issue for the two consecutive assessment years 1995-96 and 1996-97 in the case of the same assessee, these appeals were clubbed together, heard together and are being disposed of by this common and consolidated order for the sake of convenience and brevity. Let us take up the appeal in I. T. A. No. 1044 (Mds) of 1999, for the assessment year 1995-96. This is an appeal preferred by the assessee against the appellate order dated December 21, 1998, of the Commissioner (Appeals)-IV, Chennai, wherein the subject-matter was the assessment order for the relevant assessment year passed by the Assessing Officer under section 143(3) of the Act. There is a delay of 113 days in filing this appeal by the assessee-company. The assessee had also filed a condonation petition along with the necessary affidavit by the director of the company. The contents of the affidavit are extracted below : 2. I state that the appellate order was passed by the first appellate authority for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority in normal regular proceedings. It is submitted that the subtle distinction between the scope of the relevant provisions cannot be understood by an assessee. I further state that a number of cases rendered under the relevant sections outlining the scope of the power of the concerned authority will be a definite indicator of the cloudy nature of the relevant provisions. 7. Under these circumstances it is prayed that the delay of 113 days in filing the above appeal may be condoned in the interest of justice. 9. It is further submitted that pursuing the remedy as suggested by the authorised representative which in turn not using the appellant remedy as guaranteed under the statute is definitely a bona fide act and in view of the principles of legitimate expectation, equity and justice require sympathetic consideration from the Bench for the admission of the said appeal in order to render justice. Learned counsel for the assessee, Shri S. Sridhar, of Subbaraya Aiyar, Padmanabhan and Ramamani, advocates, representing the assessee at the time of hearing placed on record a xerox copy of the decision of the Cochin Bench of the Tribunal reported in Autoser (P.) Ltd. v. Asst. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igant should not suffer for the laches on the part of his lawyer. Accordingly, it was to be held that the assessee acted on the advice of its authorised representative to await the order of the Commissioner (Appeals) on the miscellaneous petition filed by it and since there was no decision forthcoming, the assessee hastened to file the appeal before the Tribunal. In this process, delay was caused in filing the appeal and since the reasons adduced by the assessee were satisfactory, the delay was condoned. In the above said case a delay of 2,116 days was condoned by the Tribunal. In the case on hand the delay is only 113 days and the assessee acted bona fide on the advice of its counsel. Regarding the objection of the learned Departmental Representative that there was no affidavit filed by the concerned advocate, we would like to mention that the very same advocate was appearing before us in this appeal and also vouched for the truth of the contents of the affidavit filed by the director. In such circumstances, we find that the decision of the Cochin Bench of the Tribunal reported in Autoser (P.) Ltd. v. Asst. CIT [1998] 101 Taxman-Mag. 70, squarely supports the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e section as above the Assessing Officer observed that as per the provisions of section 33AC it is quite clear that to avail the deduction under section 33AC the assessee should engage in the business of operation of ships, i.e., either it should own the ship or hire for the purpose of doing the business of operation of ships. In the present case, the assessee-company is not owning any ships and it has not taken any ships on hire or lease also. It is only rendering some services to the ships owned by Reliance Industries Ltd. as per the terms and conditions of the agreement. As per the agreement entered into between the Reliance Industries Ltd. and the assessee-company the assessee is acting as a technical manager for the purpose of ensuring efficient running and maintenance including providing of necessary personnel. Other than this the assessee-company is not having any other right on the ships owned by Reliance Industries Ltd. Towards the services rendered, the assessee is eligible for service charges from Reliance Industries Ltd. in accordance with the agreement. For the reasons above mentioned, according to the Assessing Officer, since the assessee-company was not doing any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 31, 1995. (3) Accounts for the year ended on March 31, 1996. (4) Agreements. It was also stated that the above materials were available in the records of the Department. Learned counsel for the assessee vehemently contended that the Commissioner (Appeals) and the Assessing Officer were wrong in disallowing the claim under section 33AC of the Income-tax Act made by the assessee, and to say in brief, he contended that : The order of the Commissioner (Appeals) is contrary to the principles of legitimate expectation. He erred in sustaining the action of the Assessing Officer in denying deduction as claimed under section 33AC of the Act. He failed to appreciate that claiming deduction under section 33AC on the profits received from the operation of the ships was perfectly justifiable with reference to the intention of the Legislature. The Commissioner (Appeals) failed to appreciate that the Assessing Officer s interpretation of the said section would defeat the purposeful approach in understanding the said section and further failed to appreciate that the taxing statutes should be interpreted in a purposive manner. He ought to have appreciated that the deduction as claimed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would clearly go to show that the main objects of the company enlisted under III.A, more especially against serial Nos. 1, 2 and 5 thereat are exactly the same as contemplated in sections 33AC of the Act. Nowhere in the section it is said that the assessee should own the ship. As such there is no ambiguity in the section. wherever the ownership of the assets was a must for claiming any deduction (such as depreciation under section 32 and investment allowance under section 32A) the Legislature has specifically and explicitly mentioned that the assets should be owned by the assessee, whereas the Legislature consciously has not mentioned about the ownership of the asset for claiming the deduction under section 33AC of the Act. Even under section 28 the ownership of the business is not the main criteria for levy of tax. In this connection reference is invited to page 1368 of the Commentary by Chaturvedi and Pithisaria (page 16 of the compilation filed). The letter dated March 11, 1999, of the assessee-company addressed to the Commissioner of Income-tax (Appeals) in connection with the rectification petition may be seen, wherein the meaning of the word operation has been given elabora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the appellant-company was not owning the ship it was responsible for the efficient running of the ships and maintenance of the ships including the management of the personnel. The responsibilities of the owner of the ships, namely, Reliance Industries Ltd., are all found under the head Responsibilities of the owner in the agreement. Page 12 of the agreement against para. 5 of the terms of payment are mentioned. Replacement of ships is not contemplated in section 33AC. Circular No. 554, dated 13th February 1990 (see [1990] 183 ITR (St.) 130) (page No. 1765 of the commentary by Chaturvedi and Pithisaria) (copy filed by the assessee), states that with a view to provide tax incentives to the public companies engaged in the business of operation of ships for generation of resources internally to augment their fleet, a new section 33AC has been inserted in the Income-tax Act, 1961. But nothing is said about the ownership of the ship in the said circular. Augmentation means, according to the Oxford Dictionary, enlarging, having the power to increase. The section talks about profits derived from business of operation . Thus, the exemption is based on profits and not on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the Assessing Officer in the grounds of appeal or statement of facts before the Commissioner (Appeals) or during the course of the proceedings before the Commissioner (Appeals). Thus, the assessee sought to misuse the benefits of section 33AC. This is the background of the case. The assessee was only managing the operation of the ships and it was not owning the ships. Section 36(1)(viii) is analogous to section 33AC. The Madras High Court while deciding an issue in the context of section 36(1)(viii) which is analogous to section 33AC in the case of CIT v. Tamil Nadu Industrial Investment Corporation Ltd. [1999] 240 ITR 573 had observed as under (page 578) : The object of granting deduction under section 36(1)(viii) is to strengthen the financial resources of the financial corporation or the joint financial corporation and the deduction is granted out of the total income before making any deduction under Chapter VI-A of the Act. The section provides for a higher deduction and the section also enjoins that the amount must be carried to a special reserve account and once a special reserve was created and the amount was carried to the special reserve account, it is not open to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugment its fleet ? Fleet denotes plural. In other words it denotes a group of similar items. Already the assessee should possess more than one ship to hold that the assessee was owning a fleet of ships. In this case on hand as the assessee was not even having a single ship it could not have augmented its fleet. The Legislature later on extended the benefits of this section, namely, section 33AC, to Government shipping companies by amending the Act suitably. Circular No. 636 dated August 31, 1992 (see [1992] 198 ITR (St.) 1), deals with the scope and effect of the amendment made in the Finance Act, 1992. In the said circular against paragraph No. 24.2 it is mentioned as under : It was noticed that shipping companies have diversified into trading, real estate business, etc., and are claiming deduction under this section even in respect of their income from activities other than shipping. There is no justification for allowing 100 per cent. deduction with reference to income from activities other than operation of ships. In the same circular against paragraph 24.3 it is mentioned as under : Section 33AC has been amended to restrict the deduction to 50 per cent. of the income de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Applying the same analogy in the case on hand we have to construe that it is imperative that the assessee should own the ship or at least kept one ship for augmenting its fleet. The mere text or the language employed in the section alone is not conclusive one and the context of the insertion of a particular section into the statute book is also to be borne in mind. In this connection, the Full Bench decision of the Madras High Court in the case of CIT/CWT v. P. Manonmani [2000] 245 ITR 48 would be of help to the Tribunal. In that decision while dealing with section 168 of the Income-tax Act it was observed as under (page 55) : While ascertaining the true scope of a provision in a statute, attention must necessarily be paid not only to the text, viz., the words employed in the relevant provision, but also the context. The Supreme Court in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663, observed (page 692) : Interpretation must depend on the text and the context. They are the bases of interpretation . . . . In every case the object of bringing in a particular section is to be borne in mind while interpreting the same. If section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lised in the manner laid down in sub-section (2) : Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid-up share capital (excluding the amounts capitalised from reserves) of the assessee, no allowance under this sub-section shall be made in respect of such excess. (2) The amount credited to the reserve account under sub-section (1) shall be utilised by the assessee before the expiry of a period of eight years next following the previous year in which the amount was credited- (a) for acquiring a new ship for the purposes of the business of the assessee ; and (b) until the acquisition of a new ship, for the purposes of the business of the assessee other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India. (3) Where any amount credited to the reserve account under sub-section (1),- (a) has been utilised for any purpose other than that referred to in clause (a) or clause (b) of sub-section (2), the amount so utilised ; or (b) has not been utilised for the purpose specified in clause (a) of subsection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er : (a) For acquiring a new ship for the purpose of the business of the assessee. (b) Until the acquisition of a new ship, for the purposes of the business of the assessee other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India. (v) Sub-section (3) deals with the manner in which the amount so utilised in the way other than those mentioned in sub-section (2) shall be dealt with by the Income-tax Department. Thus, on a careful analysis of the whole section with the relevant provisos and the Explanation it transpires that the deduction contemplated under section 33AC is related not to the asset possessed at the time of claiming of this deduction by the assessee but to the total income debited to the profit and loss account and credited to the special reserve in the relevant previous year. Thus, it can be seen that the deduction is only income-based and not assetrelated. Further clause (b) of sub-section (2) of section 33AC gives a licence to the assessee to utilise the amount credited to the special reserve for the purposes of the business of the assessee other than for distribution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that in this case on hand the assessee also has acquired a ship subsequently. Now let us consider whether it is permissible for the Revenue or any court to read into a taxing provision any words which are not there or exclude any words which are there. The apex court in the case of CED v. R. Kanakasabai [1973] 89 ITR 251 (SC), and in the case of Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC), has held that : It is impermissible for the court to read into a taxing provision any words which are not there or exclude words which are there. The words found in the provision must be given their natural meaning. There is no scope for importing into the statute words which are not there. Such importation would be not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation. The normal rule of construction is that the intention of the Legislature is primarily to be gathered from the words used in the statute. The apex court in the case of CWT v. Hashmatunnisa Begam [1989] 176 ITR 98 has held as under (page 106) : One of the pillars of statutory interpretation, viz., the litera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose that they are intended to serve. Applying the ratio decidendi of the summit court on various occasions as extracted above, we are unable to appreciate both the assessee s learned counsel and the learned Departmental Representative, who were harping upon the theory of interpretation and on the dictionary meanings of certain words for interpreting the section having plain language without any ambiguity or uncertainty. Wherever the Legislature wanted to insist for the ownership of an asset it has specifically mentioned so, as in sections 32, 32A, 32AB, 33 and 33A. As nothing is mentioned in section 33AC about the ownership of ships, we have to conclude that the Legislature was not intending to make the ownership of ship a pre-condition at the threshold level for claiming deduction under section 33AC. Even in the circulars issued by the Central Board of Direct Taxes, namely, Circular No. 554 of February 13, 1990 (see [1990] 183 ITR (St.) 130) and No. 636 of August 31, 1992 (see [1992] 198 ITR (St.) 1), wherein certain amendments of section 33AC have been explained, the Board has been silent about the ownership of ship by the assessee at the threshold level. In our considered op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x court mentioned elsewhere in this order. The learned Departmental Representative also relied upon the decision of the Full Bench of the Madras High Court in the case of CIT/CWT v. P. Manonmani [2000] 245 ITR 48 and argued that the object of bringing in a particular section is to be borne in mind while interpreting the same. Of course this decision, wherein it was held that while ascertaining the true scope of a provision in a statute attention must necessarily be paid not only to the text, viz., the words employed in the relevant provision, but also the context, is not of much relevance in deciding the matter, wherein the section is plain and consists of unambiguous words. As regards the theory of double deduction we do not find force in the contention of the learned Departmental Representative, because in the case of section 33AC the deduction is profit or income oriented and not asset oriented. The reliance on section 80HHC by the learned Departmental Representative is not advancing the Revenue s case, because there is no restriction in section 33AC to the number of assessees who could claim such deduction and further the deduction under section 33AC is with reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the specified period of eight years if the assessee is not acquiring a new ship as contemplated under this section. In this case on hand the assessee has already bought a new ship within the specified period of eight years, as pointed out by learned counsel for the assessee. Hence, we do not find any reason to deny the assessee the exemption claimed under section 33AC. Hence, we are inclined to quash the orders of the authorities below and allow the appeal of the assessee. In the result, the appeal in I. T. A. No. 1044 (Mds) of 1999 for the assessment year 1995-96 is allowed. For the same reasonings the appeal of the assessee for the assessment year 1996-97 (I. T. A. No. 1773 (Mds) of 1999) is also allowed. The appeal in I. T. A. No. 1043 (Mds) of 1999 against the Commissioner (Appeals) order refusing to rectify under section 154 has become infructuous in view of our decision in I. T. A. No. 1044 (Mds) of 1999 above. Before parting with, we would be failing in our duties if we are not recording our appreciation for the way in which the learned representatives of both the sides, more especially the learned Departmental Representative, have taken pains to put forth their resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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