TMI Blog1997 (4) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... 1977, dated March 24, 1981. The judgment is reported in [1981] 130 ITR 301 [FB]. The appellants-assessees, are non-resident shippers represented by one common agent. The ships carry goods from the Port of Cochin to various places. The ships concerned are, Fernbrook, Fernwave, Fernmoor, Ferngate and Ferndale. Fernbrook called at Cochin Port during the previous years relating to the assessment years 1967-68 and 1969-70 ; Ferndale called at Cochin Port during the year relating to the assessment year 1967-68 and the other ships, Fernwave, Fernmoor and Ferngate called at Cochin Port during the year relating to the assessment year 1969-70. In respect of the freight earnings, assessments were made on the shippers under section 172(4) of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese payments have, by fiction, been treated as advance tax, it necessarily follows that all the provisions in respect of the payment of advance tax in the Act will apply. From the point of regular assessment, i.e., if there is any excess payment made by the assessee, then the assessee would be entitled to interest under section 214 of the Act. The Appellate Tribunal directed the Income-tax Officer to allow the interest claimed by the assessees. As directed by the High Court, the Income-tax Appellate Tribunal referred the following question of law in all the cases for the decision of the High Court : "Whether the amount directed under section 172, clause (7), of the Income-tax Act, to be treated as a payment in advance of the tax leviab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h ship, the master of the ship shall prepare and furnish to the Assessing 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, livestock, mail or goods shipped at that port since the last arrival of the ship thereat : Provided that where the Assessing 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 Assessing Officer may, if the return is filed within thirty day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " (emphasis supplied). Section 172 occurs in Chapter XV of the Act--Liability in special cases--and the heading of the section is "Profits of non-residents from occasional shipping business". At this juncture, it will be useful to bear in mind that section 2(1) of the Act defines "advance tax". It is as follows :-- "2. Definitions.--In this Act, unless the context otherwise requires,-- (1) 'advance tax' means the advance tax payable in accordance with the provisions of Chapter XVII-C ;" The above clause was inserted in the Act by Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. We are concerned in this case relating to the periods before the said Amendment Act. The scheme of section 172 of the Act appears t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch assessment, shall be paid by the assessee or refunded to him. The "ad hoc" assessment made under section 172(4) of the Act is superseded and a "regular assessment" is made as per the provisions of the Act. In such a case, it is only proper and appropriate to hold that all "the provisions" of the Act in the determination of the tax liability including the ancillary or incidental or consequential matters pertaining to it are necessarily attracted. Section 172(7) of the Act provides that payment made under the section shall be treated as a payment in advance of the tax leviable for that assessment year. It only means that such payment would be treated as advance of the tax leviable. Such payments are treated on par with advance income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax assessed. We are unable to appreciate the distinction drawn by the High Court between "advance tax" and "payment in advance of the tax" mentioned in sub-section 172(7) of the Act. We hold that the distinction so drawn has no basis. The High Court has further held that the payment made under section 172(4) of the Act is not a payment of advance tax within the meaning of the Act, as the tax paid under section 172(4) of the Act is a payment on assessment and not a payment of advance tax under the Act. We are afraid that the High Court has failed to give due effect to the language employed in section 172(7) of the Act and the scope of the legal fiction enshrined therein. The reasoning of the High Court is rather strained as the distinction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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