TMI Blog1997 (9) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ly after June 1, 1975, are liable to be taxed on the deemed income. Therefore, the assessees contended that for the period before June 1, 1975, the voyage account alone should be adopted. The Income-tax Officer did not agree with the said contention and proceeded to say that section 44B of the Income-tax Act was to come into effect from April 1, 1976, and therefore applies to the assessment year 1976-77. Consequently, the assessee's previous year relevant to the assessment year should be taken note of for the purpose of applying the amended provisions of law. In this view of the matter, the Income-tax Officer applied the amended section 44B of the Income-tax Act and charged the income accordingly even in respect of the period from January 1, 1975 to May 31, 1975. Consequently, in cases of some assessees additional tax was payable and in cases of some assessees, certain refunds were payable, all the assessees had filed appeals before the Commissioner of Income-tax (Appeals). Before the appellate authority, it was contended that section 44B had been amended along with certain amendments introduced to section 172 of the Act. Therefore, both the amendments have to be read together even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The above clause, which we have quoted in inverted commas, would clearly suggest that it was open to the Income-tax Officer to deny the applicability of section 172, in a case where there was an agent of the non-resident as mentioned above. Sub-section (2) provides for the freight charges as the deemed income and a percentage of such deemed income as the tax payable by the non-resident shipper. Sub-section (3) provides for filing of the return by the master of the ship and sub-section (4) enables the Assessing Officer to assess the income and determine the sum payable as tax. The manner of payment is provided for in sub-sections (5) and (6). Sub-section (7) is important and has some bearing on the facts of the present case. We, therefore, quote sub-section (7) and it is as follows : "(7) Nothing in this section shall be deemed to prevent the owner or charterer of a ship from claiming before the expiry of the assessment year relevant to the previous year in which the date of departure of the ship from the Indian port falls, that an assessment be made of his total income of the previous year and the tax payable on the basis thereof be determined in accordance with the other provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44B of the Act is, as the sub-title itself says, it is a special provision for computing profits and gains of shipping business in the case of non-residents. It clearly says that notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of such an assessee, a sum equal to 7 1/2 per cent. of the aggregate amount specified in sub-section (2) shall be deemed to be the profits and gains of such business, chargeable to tax under the head "Profits and gains of business or profession." Sub-section (2)(i) says that the deemed income will be the amount paid or payable whether in or out of India to the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port in India. Similarly, under sub-section (2)(ii) any amount received or deemed to be received in India by or on behalf of the assessee shall also be added to the said amount. The difficulty in the assessment of the cases in hand, arose out of the fact that section 44B was to come into effect from April 1, 1976, and therefore applicable to the assessment year 1976-77 whereas the amendment to section 172 was to come into effect on June 1, 1975. The contention of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellate authority again made a mistake purporting to deduce the legislative intention to continue the voyage account basis for computing the income up to May 31, 1975, and for this purpose, the appellate authority has stated that the amendments to sections 44B and 172 of the Act should be read together. The appellate authority proceeded to say that it was open to the assessee to either opt for regular assessment under sub-section (7) of section 172 or refuse to do so. According to the appellate authority if section 44B is to be given effect to for the whole assessment year, the very purpose of the option under section 172(7) will become otiose. The option under sub-section (7) of section 172 cannot, according to the appellate authority, be taken away by the introduction of section 44B with effect from April 1, 1976. We are unable to agree with this reasoning of the appellate authority. The Tribunal went one step further. After referring to the history of the legislation, the Tribunal observes that it is a well-settled principle of law that the law as on the first day of April of any assessment year should govern the assessment of that year. However, the Tribunal clarifies by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th effect from April 1, 1976. In fact, the Tribunal went to the extent of saying that the deemed income could not be adopted for the entire accounting year. However, since the assessees had offered the income from June 1, 1975 to December 31, 1975, the Tribunal restricted its relief to the extent granted by the appellate authority. We have given our anxious thoughts to the submissions made on either side. We have also carefully perused the orders of the authorities below. We are clearly of the opinion that both the Commissioner of Appeals and the Tribunal have failed to keep in mind the dichotomy between section 44B of the Act and section 172 of the Act. We have already noticed the fact that section 172 which is in the statute book right from the beginning, is meant for assessing non-residents from occasional shipping business. The same cannot be mixed up with a regular assessment, especially when an option is exercised under sub-section (7) of section 172 of the Act. It may be true, that the omission of the words in sub-section (1) from June 1, 1975, relating to the existence of an agent of a non-resident from whom tax could be recovered under the provisions of the Act, could no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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