THE COMMR. OF INCOME TAX,ERNAKULAM vs. THE KERALA SHIPPING CORPN.LTD.

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ITR/20/1997HC KeralaKLHC01011517199711 February 2008Bench: HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court declined to answer the questions referred to it. The Court observed that the issue had become academic because even if the decision favored the Revenue, no tax would be collectible due to sufficient carried forward losses and depreciation available for set-off against any income. The Court considered pursuing the matter a waste of the court's time, given the company was defunct and the amounts involved were relatively small. Therefore, the Tax Reference Applications were closed without answering the questions on merits.

What were the facts?

The Kerala High Court was hearing two Tax Reference Applications (ITR Nos. 20 & 21 of 1997) filed by the Commissioner of Income Tax, Ernakulam, against the respondent, The Kerala Shipping Corporation Ltd., Cochin. The references pertained to assessment orders where the assessee, a shipping company promoted by the Government of Kerala, had sustained heavy losses. The company had become defunct after its only vessel sank. Notices sent to the assessee by the Registry were returned with the endorsement 'not known' on multiple occasions. The unabsorbed business loss, depreciation, and S.80J benefits carried forward were in lakhs of rupees. The total amount in dispute for both years was less than Rs. 3 lakhs.

What were the issues?

1. Whether the tax paid by the assessee on foreign earnings is to be allowed as a deduction in the computation of income (a question of law). Assessee's contention: Only the net income received from abroad is assessable. Revenue's contention: Tax paid abroad forms part of the income and should be added to the total income. The judgment does not explicitly state arguments from the revenue regarding the specific provision or authority relied upon, beyond their general contention on the tax paid abroad.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR MONDAY, THE 11TH FEBRUARY 2008 / 22ND MAGHA 1929 ITR.No. 20 of 1997() -------------------- AGAINST THE ORDER DATED 21/10/1994 IN RA 318C/91 IN ITA.590/COCH/1988 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT: ----------- COMMISSIONER OF INCOME TAX, ERNAKULAM. BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT SRI.P.K.R.MENON(SR.),SC FOR IT RESPONDENTS: ------------- THE KERALA SHIPPING CORPORATION LTD., COCHIN. BY ADV. SRI.K.P.DANDAPANI THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 11/02/2008, ALONG WITH ITR NO. 21 OF 1997, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

C.N.RAMACHANDRAN NAIR & T.R.RAMACHANDRAN NAIR, JJ. .................................................................... I.T.R. Nos.20 & 21 of 1997 .................................................................... Dated this the 11th day of February, 2008. JUDGMENT C.N.Ramachandran Nair, J. In the reference application filed by the Department, notice sent by the Registry got returned with the endorsement that "not known". We find that notices sent on several occasions were returned with the same endorsement. The assessee appears to be a shipping company promoted by the Government of Kerala. The company became defunct after the only vessel it had drowned several years back. It is seen from the two assessment orders produced in this court that the assessee was sustaining heavy losses. The unabsorbed business loss, depreciation, S.80J benefits etc. allowed to be carried forward to subsequent years are in lakhs of rupees. The only issue raised in these cases is whether the tax paid by the assessee on foreign earnings were to be allowed as a deduction in the computation of income. While the case of the assessee is that only net income received from abroad is assessable, the department's case is tax paid abroad forms part of income and should also be added to the total income. We are of the view that the issue has become academic because even if decision goes in favour of the

2 Revenue, Revenue is not going to get single rupee towards tax as carried forward losses are enough to absorb any amount of income. The total amount involved in both the years together is less than Rs.3 lakhs and considering the eligible losses and depreciation available for set off against income and since the company is defunct, we feel pursuing the matter in this court by the Revenue is only waste of time for this court. We, therefore, decline to answer the questions referred. The I.T.Rs. are accordingly closed. A copy of this judgment under the seal of the High Court and signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench, Cochin. C.N.RAMACHANDRAN NAIR Judge T.R.RAMACHANDRAN NAIR Judge pms

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