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TMI Blog1969 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... e computation by the Income-tax Officer for the year 1953-54: Kr. Kr. "Total gross earnings in Indian Trade Kr. 10,024,996 Deduct:-- (1) Total expenses in Indian Trade (2) Depreciation allowance Net profit Indian Trade Gross earnings from Indian ports -- Kr. 7,705,474 Kr. 733,671 Kr. 8,439,145 Kr. 1,585,851 Kr. 5,440,042 Proportionate Indian profits5,440,042 ----------------- X 1,585,851 10,024,996 Kr. 860,559 (Rs. 100: Kr. 79.80) Rs. 10,78,395" In computing the profits of the assesssee in India in each year the Income-tax Officer allowed normal depreciation and other trade allowances admissible under the Indian Income-tax Act, 1922, and the relevant rules made thereunder. He, however, did not allow initial depreciation and additional depreciation in respect of the ships of the assessee in any of the assessment years, because the ships acquired by the assessee were not introduced into the Indian business in the years in which they were newly acquired. The orders of assessment were confirmed by the Appellate Assistant Commissioner. In Appeal to the Income-tax Appellate Tribunal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery, plants and such other things like steamers brought into business after March 31, 1948, additional depreciation must also be granted". The Tribunal then observed that the ships brought into the Indian trade were not new in the years of account relevant to the five years of assessment, but the assessee was still qualified under section 10(2)(via) to additional depreciation for the continuous period of five years, and "the fact that in the first of these years the now ships did not call at the Indian ports in one assessment year did not disentitle the assessee to the benefit not only for that year but also for the succeeding four years." Accordingly, the Tribunal held that in respect of all the four ships of the assessee, additional depreciation was admissible as claimed. At the instance of the Commissioner of Income-tax, the following question was referred by the Tribunal to the High Court of Calcutta for opinion in respect of each of the five years: "Whether, on the facts and circumstances of the case, the assessee-company is entitled to additional depreciation in respect of the four ships mentioned above ?" The High Court answered the question in the negative. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resident received or deemed to be received in the taxable territories by or on behalf of the assessee are taxable under the Indian Income-tax Act, 1922, profits and gains of business which accrue or arise or are deemed to accrue or arise to him in the taxable territories are also taxable under that Act; but profits and gains which accrue or arise or are deemed to accrue or arise to a non-resident without the taxable territories are not taxable under the Act. Section 4 is one of the pivotal sections in the scheme of the Income-tax Act. Thereby within the total income of a non-resident is included income received, arising or accruing, or deemed to be received, or to have arisen or accrued, within the taxable territories. The Act, however, gives no clear guidance for determining when income may be said to have arisen or accrued within the taxable territories. But rule 33 framed under the Act purports to give some direction to the Income-tax Officer for determining income, profits or gains accruing or arising to a non-resident for the purpose of assessment to income-tax. There is no dispute that the profits of the business taxable under the Indian Income-tax Act, 1922, are a fraction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total receipts of the business; and the third step is to determine the income, profits or gains by the application of the proportion for the purpose of assessment to income-tax. This method ordains that the fraction which the total profits bear to the total world receipts is to be applied to the Indian receipts for determining the taxable profits. The income so determined will be the taxable income without any further allowances, because the permissible allowance will all enter the computation of the world income and income taxable under the Income-tax Act is also a fraction thereof. Apparently the Income-tax Officer did not apply the second method under rule 33 in computing the taxable income of the assessee, for, under that method, in determining the taxable income, the receipts accrued or arising in India had to be multiplied by the proportion between the total prohts of the business and the total receipts of the world business. Counsel for the assessee asked us to assume that the profits computed by the Income-tax Officer according to the formula adopted by him are profits determined by the second method in rule 33, and claimed on that footing that, besides normal depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by him is correct; that question is not before us. We are only concerned to determine the validity of the claim for admitting additional depreciation in the computation of the taxable income of the assessee by the method adopted by the Income-tax Officer. Additional depreciation is a statutory allowance in the determination of taxable profits under section 10 of the Act, and in the case of a non-resident where actual income cannot be determined, and resort is had to rule 33, not when an empirical method is adopted for computation of the taxable income. We are, however, unable to agree with the observations of the High Court that "no relief in any shape or form can be enjoyed by any assessee under the Indian Income-tax Act in respect of a source of income, unless the income from that source is taken into consideration for the purpose of that Act. In the reference before us the income in question was outside the purview of assessment under the Indian Income-tax Act". That was not the plea of the Commissioner. The source of the income of the assessee charged to tax was business; it was not income from any other source. The Commissioner and the assessee were ad idem on that matte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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