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TMI Blog1990 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and in the circumstances of the case, the Tribunal was right in holding that the special rebate of Rs. 2,36,024 allowed to Government and semi-Government shippers was not deductible from the amount of freight earnings for the purpose of determining the applicant's income from shipping business under section 44B of the Income tax Act, 1961 ?" The relevant year of assessment is 1978-79 for which the accounting year ended on December 31, 1977. In the statement of case, the Tribunal has recorded the following facts : "The Income-tax Officer noted that the business of the assessee was in operation of ships at various Indian ports. It claimed the deferred rebate of Rs. 10,30,731 on amounts payable in and outside India. The Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim for any rebate after the freight was actually earned could not be allowed. The Tribunal, following its decision for the assessment year 1976-77, decided the case against the assessee. From the order of the Tribunal, a reference came up before this court but no answer was given to the question because no paper book had been filed at all. It has been contended on behalf of the assessee that the question of law has not been decided and we should go into the question now and decide the case in accordance with law. A copy of the Tribunal's order was handed up in court. The case of the assessee is that it is a member of a shipping conference and the shippers who despatched their goods only by the ships belonging to the lines which were me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . of the gross freight earnings. Therefore, there could not be any deduction from the gross earnings. There was a further dispute regarding disallowance of deduction on account of special rebate allowed to Government and semi-Government shippers. The assessee allowed a special rebate of 5 per cent. on the freight in respect of goods imported into India where the shippers were Government or semi-Government organisations and this special rebate like the deferred rebate was allowed only subsequent to the accrual of the freight earnings. Accordingly, there could not be any question of excluding it from the freight earnings in computing the tax under section 44B of the Income-tax Act, 1961. Accordingly, the Commissioner of Income-tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssengers, livestock, mail or goods shipped at any port in India ; and (ii) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India. " This section applies notwithstanding anything to the contrary contained in sections 28 to 43A. In the case of a non-resident, engaged in the business of operation of ships a sum of 7 1/2 per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax. A legal fiction has been introduced. The aggregation that has to be made under sub-section (2) of section 44B is of the amount paid or payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und to be correct, the deferred commission was to be paid. When we consider the language of section 44B, we find that what has to be taken as the basis is the amount paid or payable to the assessee and the amount received or deemed to be received in India by the assessee. The amount which has to be included is the gross amount and any later liability or expenditure cannot be considered for this purpose. The nature of the deferred commission is different from the immediate commission and the assessee became entitled only to the reduced income after the deduction of the immediate commission. If an assessment was to be made in the normal manner, the deferred commission could be claimed as an expenditure under the relevant provisions of law. No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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