CENTRAL BDT Vs. CHOWGULE AND COMPANY LIMITED

JUDGEMENT

(1.) THE first respondent in each of these appleals is the petitioner who filed the writ petitions. In the writ petitions, two letters dated February 22, 1988, and October 11, 1988, addressed by the Reserve Bank to all the exporters/importers in the Goa Region were sought to be quashed; by those letters, it was pointed out that demurrage charges payable to the overseas owners of vessels chartered by the Indian parties attract income-tax and hence application for remittances towards them are to be duly supported by income-tax clearance certificates; it was further clarified that "all demurrage amounts payable in respect of foreign vessels chartered for carriage of goods exported from India under any type of contract, i.e., C. & F/CIF/FOB attract India income-tax and, therefore, the exporters/importers were advised "to ensure that all applications for remittances towards demurrage payable on foreign vessels to overseas parties are duly supported by income-tax clearance certificates or documentary evidence that tax is withheld along with a no objection certificate from the income-tax authorities." THEse letters were allegedly the result of an opinion expressed by the Central Board of Direct Taxes that such demurrage charges attract tax under the Income-tax Act, 1961 ("the Act" for short).

(2.) THE question for consideration is whether demurrage payable to a non-resident owner or charterer of a ship for the delay in loading the ore sold to the foreigner is liable to be taxed under the provisions of the Income-tax Act.

(3.) THE law was declared by the learned single judge (see [1991] 187 ITR 381) in favour of the petitioners who held that the demurrage in the instant case is not an expended freight at all; that section 172 covered the field of taxing a non-resident owner or charterer of a ship who was not engaged in the business of operation of shipping (the latter subject being covered by section 44B), and section 5 of the Act was inapplicable to the facts of the instant case.