TMI Blog1969 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... dian trade profits" in the formula was meant profit earned in "round voyages" made by the assessee's ships which touched Indian ports. Operation of the formula may be illustrated by taking a sample computation by the Income-tax Officer for the year 1953-54: Kr. Kr. "Total gross earnings in Indian Trade Kr. 10,024,996 Deduct:-- (1) Total expenses in Indian Trade (2) Depreciation allowance Net profit Indian Trade Gross earnings from Indian ports -- Kr. 7,705,474 Kr. 733,671 Kr. 8,439,145 Kr. 1,585,851 Kr. 5,440,042 Proportionate Indian profits5,440,042 ----------------- X 1,585,851 10,024,996 Kr. 860,559 (Rs. 100: Kr. 79.80) Rs. 10,78,395" In computing the profits of the assesssee in India in each year the Income-tax Officer allowed normal depreciation and other trade allowances admissible under the Indian Income-tax Act, 1922, and the relevant rules made thereunder. He, however, did not allow initial depreciation and additional depreciation in respect of the ships of the assessee in any of the assessment years, because the ships acquired by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of its world business by the application of the Indian Income-tax Act would be proportionately available in respect of its Indian business". The Tribunal observed that under rule 33 "the profits have to be calculated under the terms of the Indian Income-tax Act and this Act postulated that on all machinery, plants and such other things like steamers brought into business after March 31, 1948, additional depreciation must also be granted". The Tribunal then observed that the ships brought into the Indian trade were not new in the years of account relevant to the five years of assessment, but the assessee was still qualified under section 10(2)(via) to additional depreciation for the continuous period of five years, and "the fact that in the first of these years the now ships did not call at the Indian ports in one assessment year did not disentitle the assessee to the benefit 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 the assessee, additional depreciation was admissible as claimed. At the instance of the Commissioner of Income-tax, the following question was referred by the Tribunal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the taxable territories during such year. Section 10 of the Act which charges to tax the profits and gains of business, profession or vocation carried on by an assessee applies to assessees who are residents, residents but not ordinarily resident, and non-residents. Profits and gains of business of a non-resident received or deemed to be received in the taxable territories by or on behalf of the assessee are taxable under the Indian Income-tax Act, 1922, profits and gains of business which accrue or arise or are deemed to accrue or arise to him in the taxable territories are also taxable under that Act; but profits and gains which accrue or arise or are deemed to accrue or arise to a non-resident without the taxable territories are not taxable under the Act. Section 4 is one of the pivotal sections in the scheme of the Income-tax Act. Thereby within the total income of a non-resident is included income received, arising or accruing, or deemed to be received, or to have arisen or accrued, within the taxable territories. The Act, however, gives no clear guidance for determining when income may be said to have arisen or accrued within the taxable territories. But rule 33 frame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the assessee. That method requires as a first step, determination of the total profits of the business of the assessee in accordance with the provisions of the Indian Income-tax Act, the next step is to determine the proportion between the receipts accruing or arising within the taxable territories and the total receipts of the business; and the third step is to determine the income, profits or gains by the application of the proportion for the purpose of assessment to income-tax. This method ordains that the fraction which the total profits bear to the total world receipts is to be applied to the Indian receipts for determining the taxable profits. The income so determined will be the taxable income without any further allowances, because the permissible allowance will all enter the computation of the world income and income taxable under the Income-tax Act is also a fraction thereof. Apparently the Income-tax Officer did not apply the second method under rule 33 in computing the taxable income of the assessee, for, under that method, in determining the taxable income, the receipts accrued or arising in India had to be multiplied by the proportion between the total proht ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he second method in rule 33 of the Income-tax Rules. We are exercising in these appeals advisory jurisdiction, and are only called upon to answer the question referred by the Tribunal. We are incompetent to decide whether computation of the taxable income by the Income-tax Officer by the application of the formula evolved by him is correct; that question is not before us. We are only concerned to determine the validity of the claim for admitting additional depreciation in the computation of the taxable income of the assessee by the method adopted by the Income-tax Officer. Additional depreciation is a statutory allowance in the determination of taxable profits under section 10 of the Act, and in the case of a non-resident where actual income cannot be determined, and resort is had to rule 33, not when an empirical method is adopted for computation of the taxable income. We are, however, unable to agree with the observations of the High Court that "no relief in any shape or form can be enjoyed by any assessee under the Indian Income-tax Act in respect of a source of income, unless the income from that source is taken into consideration for the purpose of that Act. In the referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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