COMMISSIONER OF INCOME TAX Vs. PESTONJI BHICAJEE

JUDGEMENT

(1.) A short question of law as to the applicability of sub -section (2) of section 172 of the Income -tax Act, 1961, to earnings by way of dead freight arises in this reference in the context of the following facts.

(2.) THE assessment year with which we are concerned in this reference is 1967 -68. The assessee was a non -resident and received a total sum of Rs. 1,54,350, under the contract entered into by the shipping company with the charterer firm, inter alia, for carrying certain cargo shipping at Kandla. This amount included a sum of Rs. 32,835 being the dead freight recoverable on account of 223.365 M. Tons of cargo having not been shipped from the port as per the contract. The Income -tax Officer computed, under the provisions of section 172(2), the amount of Rs. 25,725 as the income accruing in India to the assessee on account of the carriage of cargo, the said amount being one -sixth of the total amount of Rs. 1,54,350 which was received by the assessee (including the amount of dead freight of Rs. 32,835). The assessee preferred an appeal before the Appellate Assistant Commissioner and contended that the amount paid to him on account of the carriage of cargo consisted only of Rs. 1,21,516 and that the amount of Rs. 32,835 earned as dead freight in respect of the cargo which was not loaded as per the contract between the shipping company and the charterer firm, could not be said to have been paid to it on account of the carriage of goods. According to the assessee, therefore, the provisions of section 172(2) were not attracted in respect of the aforesaid amount of dead freight and the said amount could not have been taken into account in determining the income of the assessee thereunder. The Appellate Assistant Commissioner accepted the contention advanced by the assessee and directed the Income -tax Officer to modify the order of assessment by deduction of the amount of dead freight. The revenue preferred as appeal before the Income -tax Appellate Tribunal and the Tribunal, agreeing with the Appellate Assistant Commissioner, dismissed the appeal. At the instance of the revenue, however, the Tribunal has referred the following question of law for our opinion :

(3.) IN view of the foregoing discussion, it would become clear that the Tribunal was right in the view that it took as regards the non -inclusion of the amount of dead freight in the amount which is to be taken into account for computing income under section 172(2). Accordingly, we answer the question referred to us in the affirmative, that is, in favour of the assessee and against the revenue. The Commissioner will pay the costs of this reference to the assessee.