2008 (11) TMI 93 - HC - Income Tax

Deduction of amount credited to reserve account held that to claim deduction it is not required that the amount credited to reserve account has to be income earned from shipping business assessee should have operation of ships as its main object - claim for deduction u/s 33AC disallowed on ground that assessee is not engaged in the shipping business is not justified amendment to section 33AC came w.e.f. 1.4.96 is not clarificatory/retrospective hence not applicable to instant case

Issues Involved:
1. Entitlement to deduction under section 33AC of the Income Tax Act.
2. Consideration of material on record and application for additional evidence regarding the assessee's engagement in the shipping business during the relevant year.

Issue-wise Detailed Analysis:

1. Entitlement to Deduction Under Section 33AC of the Income Tax Act
The primary issue was whether the assessee was entitled to a deduction under section 33AC of the Income Tax Act for the Assessment Year 1994-95. The Tribunal had upheld the lower authorities' decision that the assessee was not entitled to the deduction on the grounds that the assessee was not engaged in the shipping business during the relevant year.

Arguments by the Assessee:
- The assessee argued that section 33AC, as it stood in the relevant assessment year, did not require actual operation of ships to be eligible for the deduction. The section required that the assessee be a government company or a company formed and registered in India with the main object of carrying on the business of operation of ships.
- The assessee cited Supreme Court decisions emphasizing that clear statutory provisions must be applied as worded, without external aids or interpretations contrary to the statute's language.
- The assessee contended that the amendment to section 33AC, effective from 1st April 1996, introduced the requirement of actual operation of ships and was not applicable retrospectively.

Arguments by the Revenue:
- The revenue argued that the deduction under section 33AC was available only if the assessee earned income from the shipping business in the relevant year. Since the assessee had only purchased ships but not operated them, it was not entitled to the deduction.

Court's Analysis:
- The court examined section 33AC as it existed in 1994-95 and the amended section effective from 1st April 1996. It found that the original section did not require actual operation of ships for the deduction.
- The court referred to departmental circulars and Supreme Court decisions to conclude that the amendment was prospective and not clarificatory.
- The court noted that the assessee had entered into agreements for the purchase of ships in the relevant year and operated them in the subsequent year, fulfilling the conditions of section 33AC as it stood in 1994-95.

Conclusion:
- The court held that the Tribunal was not justified in denying the deduction under section 33AC. The amendment effective from 1st April 1996 was not applicable to the assessment year 1994-95.
- The court answered the first question in favor of the assessee, allowing the deduction under section 33AC.

2. Consideration of Material on Record and Application for Additional Evidence
The second issue was whether the Tribunal erred in not considering the material on record and the application for additional evidence showing that the assessee was engaged in the shipping business during the relevant year.

Arguments by the Assessee:
- The assessee argued that it had entered into agreements for the purchase of ships during the relevant year, which the Tribunal overlooked.
- The assessee claimed that this evidence demonstrated its engagement in the shipping business.

Court's Analysis:
- The court noted that it had already addressed the issue of the assessee's engagement in the shipping business while discussing the first issue.
- The court found that the agreements for the purchase of ships were sufficient to establish that the assessee was engaged in the business of operation of ships during the relevant year.

Conclusion:
- The court did not find it necessary to answer the second question separately, as it had already dealt with the relevant contentions in its analysis of the first issue.
- The appeal was allowed in favor of the assessee, with no order as to costs.

Final Judgment:
The court concluded that the Tribunal was not justified in upholding the lower authorities' decision to deny the deduction under section 33AC. The assessee was entitled to the deduction for the Assessment Year 1994-95, and the appeal was allowed.

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