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Issues Involved
1. Nature of Advances: Whether the advances made to the ship's master for disbursements were loans or part-payments of the hire. 2. Chargeability under Income Tax Act: Whether the amounts paid for disbursements were chargeable under the provisions of the Indian Income-tax Act. 3. Earmarked for Expenditure: Whether the amounts paid for ordinary disbursements on the vessel's account were earmarked for expenditure and thus not taxable as income. 4. Availability of Writ of Certiorari: Whether a writ of certiorari could be issued given the existence of an alternative remedy and the appellant's conduct in pursuing an appeal simultaneously. Detailed Analysis 1. Nature of Advances The court examined whether the advances made under clause 14 of the charter-party were loans or part-payments of the hire. Clause 14 stated that the charterers would advance necessary funds for ordinary disbursements for the vessel's account, charging interest at 6% per annum, and such advances would be deducted from the hire. The court referred to extensive literature and case law, concluding that the advances were not loans but pre-payments of portions of the hire. The court emphasized that even if the advances were initially loans, they were repaid in Calcutta by deduction from the hire due to the ship's owners, thus making the money constructively received by the owners in Calcutta. 2. Chargeability under Income Tax Act The court analyzed whether the amounts paid for disbursements were chargeable under section 18(3B) of the Indian Income-tax Act. It was argued that if the advances were loans repaid by deduction from the hire, the money belonging to non-resident owners was applied to the payment of their creditors in India, making it received by them in India. The court referred to the Supreme Court's decision in Aggarwal Chamber of Commerce Ltd. v. Ganpat Rai Hiralal, which held that deductions are required to be made out of various heads of income, profits, and gains, and adjustments are made finally at the time of assessments. The court concluded that the sums paid for disbursements were chargeable under the Act since they were gross receipts in the hands of the recipient, part of which might be taxable income. 3. Earmarked for Expenditure The appellant contended that the amounts paid for ordinary disbursements were earmarked for expenditure and thus not chargeable as income. The court rejected this argument, citing the principle that the nature of a payment for income-tax purposes cannot be determined by what becomes of it after the payee has received it. The court referred to the House of Lords' decision in Commissioners of Inland Revenue v. Corporation of London, which held that an amount received is none the less income because the recipient is bound to use it in a particular way. 4. Availability of Writ of Certiorari The court addressed whether a writ of certiorari could be issued given the appellant's simultaneous pursuit of an appeal. The court noted that the appellant had initially claimed to have no alternative remedy but later preferred an appeal against the same order. The court cited the Supreme Court's decision in Rashid and Sons v. Income-tax Investigation Commission, which held that invoking discretionary jurisdiction under article 226 of the Constitution is not proper if the petitioner is pursuing a parallel remedy. The court concluded that the appellant's conduct in pursuing an appeal and failing to disclose it to the court was sufficient reason to deny the writ, even if the appellant was otherwise entitled. Conclusion The court dismissed the appeal, holding that the advances were part-payments of the hire, the amounts were chargeable under the Income-tax Act, the earmarked expenditure argument was untenable, and the writ of certiorari was not available due to the appellant's conduct and the existence of an alternative remedy.
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