1990 (4) TMI 4 - HC - Income Tax

Summary

Issues:
1. Deductibility of deferred rebate in the computation of income from shipping business under section 44B of the Income-tax Act.
2. Deductibility of special rebate allowed to Government and semi-Government shippers in determining income from shipping business under section 44B of the Income-tax Act.

Analysis:
The case involved the deduction of deferred rebate and special rebate in computing the income from a shipping business under section 44B of the Income-tax Act. The Tribunal had referred two questions of law regarding the deductibility of these rebates. The deferred rebate of Rs. 10,30,731 allowed to shippers was disallowed by the Income-tax Officer as it was claimed after the freight was earned. The Commissioner of Income-tax (Appeals) upheld this disallowance, stating that the rebate was given after the income had accrued, and hence, not deductible. The Tribunal, following its decision for the assessment year 1976-77, ruled against the assessee, emphasizing that the deferred rebate was allowed only after the freight earnings had accrued, and thus, not deductible from the gross earnings.

Regarding the special rebate of Rs. 2,36,024 allowed to Government and semi-Government shippers, it was also disallowed for the same reason - being granted after the accrual of freight earnings. The Commissioner of Income-tax (Appeals) held that this rebate, similar to the deferred rebate, could not be excluded from the freight earnings for computing taxable income under section 44B. The Tribunal concurred with these findings, emphasizing that both rebates were allowed post-accrual of income, and hence, not deductible under section 44B.

The Court analyzed section 44B, which provides a special provision for computing profits of a shipping business for non-residents. It deems a percentage of the aggregate amounts received or payable for carriage of goods as taxable profits. The Court highlighted that any rebate or commission granted did not alter the total freight income and could be allowable deductions under another section but were irrelevant for calculating chargeable income under section 44B. The Court upheld the Tribunal's decision, stating that the deferred and special rebates were not deductible as they were granted after the accrual of income, in line with the provisions of section 44B.

In conclusion, the Court answered the questions in favor of the Revenue, affirming the disallowance of the deferred and special rebates in computing the taxable income from the shipping business under section 44B. No costs were awarded in the case.