ISTHMIAN STEAMSHIP LINES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference made by the Tribunal under s. 66 of the Indian IT Act at the instance of the assessees. The question which has been formulated for the opinion of this Court is as follows :

(2.) THE assessees, M/s Isthmian Steamship Co. of New York, are assessed in India as a company through their agents, M/s Angus Co. Ltd. In the three relevant assessment years which are referred to in the question as also for the asst. yr. 1940-41, the unabsorbed depreciation as at the end of the asst. yr. 1938- 39 was not allowed to be carried forward by the ITO. For the asst. yr. 1940-41 the assessees did not appeal against this order and that assessment became final. In the three assessments from 1941 onwards three appeals were filed and the assessees contended that their unabsorbed depreciation at the end of the asst. yr. 193839 should be carried forward for the purpose of the depreciation allowance in the asst. yr. 1939-40. THE claim was rejected by the ITO and the AAC. THE latter was of opinion that this question should have been raised in the assessment for 1940- 41 and as the disallowance of the unabsorbed depreciation had not been appealed from the matter could not be raised in subsequent assessments. It is to be observed that the Tribunal disagreed with the AAC on this question and held that though the assessment for the year 1940-41 had been allowed to become final, nevertheless the matter could still be raised in subsequent assessments and they heard the case upon that basis. It is to be observed that the IT authorities have accepted that view and they have not asked the Tribunal to state a case giving rise to the contention which had found favour with the Court of the Appellate Commissioner, but had been rejected by the Tribunal. As I have stated, the assesses are a company incorporated in the United States and they own steamships which visit India. THEy have been assessed to Indian income-tax. THE Indian profit of the assessee company is computed on the basis of "days on round voyage", and it would appear from their returns that there was each year a large amount as unabsorbed depreciation as the annual depreciation far exceeded their profits and gains.

(3.) THIS section was amended by the Indian IT (Amendment) Act, 1939. For the words "original cost" the words "written down value" were substituted, and also the words "not being a year which ended prior to the April 1, 1939" were inserted between the words "any year" and "owing" in the second line of proviso (b); but it was provided that this amendment was to take effect only from April 1, 1940. Thus for assessment for the year 1939- 40 the unabsorbed depreciation as at the end of 1938-39 was to be brought forward.