COMMISSIONER OF INCOME TAX vs. OCEANIC SHIPPING SERVICE OF M T SUHAIL

ITR/253/1993HC GujaratGJHC24021282199308 July 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI11 pages
AI SummaryAllowed

What were the facts?

The assessee, Oceanic Shipping Service of M.T. Suhail, a non-resident entity, received US$ 1,00,000 for towing a merchant vessel, M.V. Kranj, from Navlakhi port to Singapore/Japan in Assessment Year 1987-88. M.V. Kranj had developed engine trouble while in the Indian port. The agreement and payment were made outside India. The Assessing Officer treated the assessee as an agent of M.T. Suhail and assessed total income. The assessee paid tax of Rs. 63,725 under protest. The CIT(Appeals) upheld taxability under Section 172 but not under Section 5(2)(b). The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-appeal, holding Section 172 inapplicable. The Revenue has referred the question of Section 172 applicability to the High Court.

What did the High Court hold?

The High Court held that Section 172(1) of the Income Tax Act, 1961, was not applicable to the facts of the case. The Court analyzed the terms 'carries', 'goods', and 'shipped' in the context of Section 172(1). It reasoned that 'towing' a vessel is distinct from 'carrying' goods. The plain dictionary meaning of 'tow' is to pull, not to carry. Even if the towed vessel were considered 'goods', it could not be said to be 'carried' in the sense contemplated by the section, which implies goods being placed aboard a ship. Furthermore, the term 'shipped' implies putting goods on board a vessel for transport, which did not occur. The Court also noted that the term 'goods' should take colour from preceding terms like 'passengers', 'livestock', and 'mail', implying they are transported aboard a ship. Since none of the requirements of Section 172(1) were fulfilled, the section was not applicable, and consequently, no tax was leviable under Section 172(2). The Tribunal's order was upheld.

What were the issues?

1. Whether the Appellate Tribunal is right in law in holding that the provisions of Section 172 of the Income Tax Act, 1961 were not applicable, and hence tax was not leviable under Section 172(2), in respect of US$ 1,00,000 received by the assessee for towing away a merchant vessel? Assessee's Contention: Not explicitly recorded, but the Tribunal's decision in favour of the assessee implies acceptance of the assessee's arguments that Section 172 was not applicable. Revenue's Contention: Mr. Tanvish U. Bhatt argued that Section 172(1) requires carriage of goods by a ship belonging to or chartered by a non-resident, shipped at an Indian port. He contended that M.V. Kranj, being towed, constituted 'goods' and the tug was a 'ship'. He relied on a broad interpretation of 'goods' as all moveable articles and urged that a ship unable to propel itself is goods when towed. He sought to restore the CIT(Appeals)'s order.

Which sections of the Income-tax Act were involved?

Section 172,Section 172(1),Section 172(2),Section 256(1),Section 143(3),Section 5(2)(b),Section 163

AI-generated summary — verify with the full judgment below

ITR/253/1993 /11 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 253 of 1993 For Approval and Signature: HON'BLE MR.JUSTICE D.A.MEHTA HON'BLE MS.JUSTICE H.N.DEVANI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus OCEANIC SHIPPING SERVICE OF M T SUHAIL - Respondent(s) ========================================================= == Appearance : MR TANVISH U. BHATT for Petitioner No(s).: 1. NOTICE SERVED for Respondent No(s).: 1. ========================================================= CORAM :HON'BLE MR.JUSTICE D.A.MEHTA

ITR/253/1993 2/11 JUDGMENT HON'BLE MS.JUSTICE H.N.DEVANI Date : 08/07/2005 ORAL JUDGMENT (Per : HON'BLE MR.JUSTICE D.

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