UNION OF INDIA Vs. GOSALIA SHIPPING PRIVATE LIMITED

JUDGEMENT

(1.) The respondent, Gosalia Shipping Private Limited, which is a company incorporated under the Indian Companies Act does the business of Clearing and Forwarding and as Steamship Agents. In 1970, respondent acted as the shipping agent of "Aluminium Company of Canada, Limited" which is a non-resident company. The Aluminium Company time-chartered a ship "M. V. Sparto" belonging to a non-resident company called Sparto Compania Naviera of Panama. The said ship called at the port of Betul, Goa, on March 1, 1970 where it loaded 13,000 long tons of bauxite belonging to the time-charterers, the Aluminium Company. On March 20, 1970 the ship left for Alfred port, Canada. The ship was allowed to leave the port of Betul on the basis of a guarantee bond executed by the respondent in favour of the President of India, undertaking to pay the income-tax payable by the time-charterers under Section 172 of the Income Tax Act, 1961. On April 15, 1970, the First Income-tax Officer, Margao, Goa, issued a demand notice to the respondent for payment of Rs. 51,191 by way of income-tax under the aforesaid provision. The respondent filed Special Civil Application No. 31 of 1970 in the court of the Judicial Commissioner, Goa, asking for a writ of Mandamus directing the Income-tax Officer to withdraw the demand notice. By a judgment dated October 29, 1971, the learned Judicial Commissioner allowed the respondent"s Writ Petition and passed an order quashing the demand notice. Having obtained from the Judicial Commissioner a certificate of fitness to appeal to this Court under Article 133 (1) (b) and (c) of the Constitution, the Union of India has filed this appeal.

(2.) The question as to whether the respondent is liable to pay the income-tax demanded of it by the Income-tax Officer, depends for its decision on the construction of S. 172 of the Income Tax Act, 1961, which read as follows at the relevant time:

(3.) Section 172 occurs in Chap. XV which is entitled "Liability in special cases" and the sub-heading of the section is "Profits of non-residents from occasional shipping business". It creates a tax liability in respect of occasional shipping by making a special provision for the levy and recovery of tax in the case of a ship belonging to or chartered by a non-resident which carries passengers, livestock, mail or goods shipped at a port in India. The object of the section is to ensure the levy and recovery of tax in the case of ships belonging to chartered by non-residents. The section brings to tax the profits made by them from occasional shipping, by means of a summary assessment in which one-sixth of the gross amount received by them is deemed to be the assessable profit. Before the departure of the ship, the master of the ship has to furnish to the Income-tax Officer a return of the full amount paid or payable to the owner or charter on account of the carriage of passengers, goods etc., shipped at the port in India since the last arrival of the ship at the port. In the event that, to the satisfaction of the Income-tax Officer, the master is unable so to do, he has to make satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf. A port clearance cannot be granted to the ship until the tax assessable under the section is duly paid or satisfactory arrangements have been made for the payment thereof.