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TMI Blog1964 (2) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... port receipts. By Indian trade profits is meant the profits of round voyages in which Indian ports were touched by the vessels. It was agreed between the department and the assessee that this was the correct method of assessment. In so computing the profits in India in each year, the Income-tax Officer allowed depreciation admissible under the Indian Income-tax Act and the relevant Rules made thereunder. He did not, however, allow initial or additional depreciation in respect of some ships in any of the years on the finding that those ships were newly acquired by the assessee in the accounting years, prior to those in which they were brought for trading in Indian waters and were not, therefore, entitled to initial or additional depreciation. The Income-tax Officer computed the taxable profits by applying rule 33 of the Income-tax Rules. In other words, the Income tax Officer held that the assessee was entitled to initial depreciation and development rebate only on those ships which were entirely new and which were first brought into use in the Indian trade. The Income-tax Officer was of the view that as none of the concerned ships had been brought into use in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and that ships appeared under the same category as other such assets. The department agreed up to that point, but it stated that depreciation had to be considered in calculating the world profits only according to the provisions of the Indian Income-tax Act. The department contended further that once this was done and profits arrived at as per the second part of rule 33, the assessee was entitled to no more depreciation than that granted. The Tribunal has held that in fact the steamers were brought into use after the 31st March, 1948, the relevant date for the allowances of depreciation claimed by the assessee. The Tribunal has also held upon reading rule 8 that ships like other assets were entitled to additional depreciation. Further, it held that as a shipping company was entitled to get additional depreciation for a continuous period of five years and the fact that in the first of these years the new steamer, about which there was no dispute, did not call at the Indian ports in one year or the next, would not disentitle the assessee to this benefit not only for that year but also for succeeding years. On these facts the following question of law arises : Whether, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business, . . . the amount of any premium paid ; . . . (vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent (where the assets are ships other than ships ordinarily plying on inland waters), to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed (and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed); . . . (via) in respect of depreciation of buildings newly erected, or of machinery or plant being new which has been installed after the 31st day of March, 1948, a further sum (which shall be deductible in determining the written down value) equal to the amount admissible in clause (vi) (exclusive of the extra allowance for double or multiple shift working of the machinery or plant and the initial depreciation allowance admissible under that clause for the first year of erection of the building or the installation of the machinery or plant) (in not more than five successive assessments for the financial years next following the previous year in which such buildings ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nceded that rule 33 of the Income-tax Rules was applicable to the assessee. The relevant portion of the rule necessary for the purpose of the present reference which relates to computation of income liable to tax has been quoted in the statement of the case. For the sake of convenience we may once again quote the said portion here. It runs thus : ... on an amount which bears the same proportion to the total profits of the business of such person (such profits being computed in accordance with the provisions of the Indian Income-tax Act), as the receipts so accruing or arising bear to the. total receipts of the business, or in such other manner as the Income-tax Officer may deem suitable. It appears that the income of a non-resident like the assessee in the instant case that is chargeable to Indian income-tax is to be computed in the manner following: Receipts accruing in India Net world profit Total world receipts In the statement of the case we are told that no particulars were ever furnished by the assessee of its shipping trade. An agreed basis of computation of the assessee's income for levying India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1922, does not distinguish between the business in British India and business in an Indian State or so divide business. On this basis Mr. Debi Pal argued that the respondent in this reference cannot be said to have been carrying on an Indian trade and a world trade. This dichotomy is not permissible under the Indian Income-tax Act and, therefore, the depreciation claimed by the assessee should have been allowed. It should be remembered that the Supreme Court in Indo-Mercantile Bank's case 1 was dealing with the case of a resident. A resident under section 4(1)(b) is subjected to tax in respect of income in the taxable territories and without the taxable territories. The problem that arises before us did not come up for consideration by the learned judges of the Supreme Court. The next case of Mr. Debi Pal is the judgment of the Madras High Court in Veerappa Transports v. Commissioner of Income-tax [1963] 50 ITR 442 . It has been stated in this case that if the plant or machinery is new and would be eligible for allowance in terms of section 10)(via), the fact that during the period of five years or the prescribed period under section 10(2)(via), there is a transfer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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