TMI Blog2000 (2) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... rests ranging from shipping to sugar refining. During the previous year relevant to the assessment year 1979-80, the assessee's ships visited Indian ports for shipment of cargo. Gross freight earnings of Rs. 2,75,06,151 for shipment of cargo from Indian ports were subjected to tax in accordance with the provisions of section 172(4) of the Income-tax Act, 1961. The assessee being a non-resident company the assessment was made through its Indian agents, Devshi Dhanji Khona, Cochin. On the basis of the assessment under section 172(4) of the Income-tax Act, the Assessing Officer proposed to levy surtax under the Act. The assessee's stand before the Assessing Officer was that in the absence of any assessment under section 143 or 144 of the Income-tax Act, there was no question of levy of such tax. Any assessment made under section 172(4) of the Income-tax Act cannot be said to be computation of total income under the said Act which alone can form the basis of assessment under the Act. The Assessing Officer did not accept the view. He held that whatever was assessed under section 172(4) of the Income-tax Act would amount to chargeable profit under section 2(5) of the Act and attract levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of surtax being levied does not arise. In view of the rival submissions, it is necessary to take note of a few relevant provisions Sections 172 and 5(2) of the Income-tax Act, and sections 2(5) and 4 of the Act read as follows : Income-tax Act : "172. Shipping business of non-residents.---(1) The provisions of this section shall, notwithstanding anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, live-stock, mail or goods shipped at a port in India. (2) Where such a ship carries passengers, live-stock, mail or goods shipped at a port in India, seven and a half per cent. of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner or charterer on account of such carriage. (3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Assessing Officer a return of the full amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.---Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance-sheet prepared in India. Explanation 2.---For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India." The Act : "2.(5) Chargeable profits.---'Chargeable profits' means the total income of an assessee computed under the Income-tax Act, 1961 (43 of 1961), for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule." "4. Charge of tax.---Subject to the provisions contained in this Act, there shall be charged on every company for every assessment year commencing on and from the 1st day of April, 1964, a tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44B. In the latter section, no procedure for assessment and collection of tax is provided. It is significant that by use of a non-obstante clause what is excluded are sections 28 to 43A and no other provision of the Income-tax Act while in the former provision, operation of all other provisions of the Income-tax Act is excluded. In Chapter IV of the Income-tax Act, under the heading "Profits and gains of business or profession" section 28 to 43A are covered. In other words, income from shipping accrued or deemed to have accrued to a non-resident ship owner or charterer falls outside the scope of trade and business as it is commonly understood. Under section 44B, the incidence of tax is on a non-resident engaged in the business of operation of ships owned or chartered by him or it. When an assessment in terms of section 44B is made, profits or gains of business is computed at seven and half per cent. of not only the freight collected or collectable in respect of the goods or other things specified which is shipped at any Indian port, but also the freight deemed to be received in India in respect of the carriage of goods or things specified shipped at any port outside India, till th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such assessments can be viewed as ad hoc or provisional or special purpose assessment. The Assessing Officer is not precluded from resorting to section 44B of the Income-tax Act in respect of freight paid or payable on account of carriage of passengers, livestock, mail or goods shipped at any port in India and the amount received or deemed to be received in India on account of carriage of such items shipped at any port outside India. Unless assessment was made in terms of section 44B, it cannot be said that the owner of the ship or charterer had been assessed on the total income under the Income-tax Act. The stand of the Revenue that the assessment under sub-section (2) of section 172 was itself an assessment of total income cannot be accepted, as before the Assessing Officer could proceed on that basis, either the assessee should have exercised option under section 172(7) or the Assessing Officer should have made an assessment in terms of section 44B of the Act. The Commissioner of Income-tax (Appeals) and the Tribunal were, therefore, justified in their conclusion that tax under the Act is not leviable. Our answer to the questions referred is in the affirmative, in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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