COMMISSIONER OF INCOME TAX Vs. HONGKONG OCEANS SHIPPING

JUDGEMENT

(1.) THESE five tax cases arise out of orders passed in the case of five assessees for the assessment year 1976-77. In all the cases, the assessment orders were passed on identical terms except with regard to the actual figures relating to the total income and the tax payable or refundable as the case may be. In all the cases, the assessees contended that the income for the year should be computed in two periods, namely, for the period between January 1, 1975 and May 31, 1975, on the basis of the voyage accounts and so far as the second period from June 1, 1975 to December 31, 1975, the, assessment had to be made on the deemed income, as per the amendment to section 44B of the income-tax Act. According to the assessees, the amendment for computing the income in respect of the ships owned by the non-residents touching the Indian ports only after June 1, 1975, are liable to be taxed on the deemed income. Therefore, the assessees contended that for the period before June 1, 1975, the voyage account alone should be adopted. The Income-tax Officer did not agree with the said contention and proceeded to say that section 44B of the Income-tax Act was to come into effect from April 1, 1976, and therefore applies to the assessment year 1976-77. Consequently, the assessee's previous year relevant to the assessment year should be taken note of for the purpose of applying the amended provisions of law. In this view of the matter, the Income-tax Officer applied the amended section 44B of the Income-tax Act and charged the income accordingly even in respect of the period from January 1, 1975 to May 31, 1975. Consequently, in cases of some assessees additional tax was payable and in cases of some assessees, certain refunds were payable, all the assessees had filed appeals before the Commissioner of Income-tax (Appeals). Before the appellate authority, it was contended that section 44B had been amended along with certain amendments introduced to section 172 of the Act. Therefore, both the amendments have to be read together even though the amendment to section 172 came into force with effect from June 1, 1975. We will discuss the finer aspects of the amendments a little later. Suffice it to say at this stage, that all the appeals were allowed and the appellate authority held that the assessment should be completed only as per the assessees' contention, namely, on the basis of the voyage accounts up to May 31, 1975, and on the basis of the, deemed income from June 1, 1975. The Revenue took up the matter in appeals before the Tribunal,. The Tribunal agreed with the order of the appellate authority.

(2.) IT is under these circumstances, at the instance of the Revenue, the following question has been referred to us or decision :

(3.) SO far as section 172 is concerned, the changes made by the Finance Act, 1975, the amendments were two fold. The provision of sub-section (1) of section 172 was made applicable even in the case where the non-residents had an agent in India from whom the tax in respect of the income of the non-resident could be recovered under the provisions of the Income-tax Act. The second part of the amendment related to the specific words 71/2 per cent of the freight charges instead of 1/6th of the freight charges,