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TMI Blog1956 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... said vessel for a period of six months in the first instance. The charterparty agreement was renewed from time to time. A copy of the charterparty agreement is annexed to the petition and marked with the letter 'A'. The clauses in the said charterparty agreement, which are important for our purposes are set out below: "6. The charterers to pay as hire: 16s. (sixteen shillings) per ton on vessel's deadweight of 5,250 tons, per 30 days commencing in accordance with Clause (1) until her re-delivery to the owners. Payment of hire to be made in cash, in Calcutta, without discount, every 30 days in advance....... 14. The charterers or their agents to advance to the master, if required, necessary funds for ordinary disbursements for the vessel's account at any port, charging only interest at 6 per cent, per annum, such advances to be deducted from hire. 25. The owners to pay a commission of 3 per cent, to Clegg, Cruickshank and Co. Ltd., Calcutta, also 1-1/2 per cent, to Harris and Dixon and a brokerage of 1 per cent, to Lambert Bros., Ltd., on any hire paid under the charter........" 2. On or about the 25th August, 1954, the parties agreed to a variati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the facts of this case and no tax is payable by the petitioner. He argues that the hire which is payable to the owner, is payable in London, and therefore, is not liable to Indian Income Tax Act. In fact, as he points out, the Income Tax authorities have not sought to impose any tax on the hire, as such. He then proceeds to argue that the amounts that have been advanced in terms of clause 14 are loans made to the owner at interest at the rate of 6 per cent, per annum, and loans cannot be treated as income. He says that even assuming that it becomes income when it is deducted from hire, it must be deemed to be income which has arisen in London, the stipulated venue of payment. Next he argues that on the facts and circumstances of this case, it does not follow that the amount that has been so advanced, even when it becomes hire, becomes the income of the non-resident foreigner, because income has to be determined after taking into account the disbursements etc., that is to say, before one can tax the income, it will have to be determined not on the gross hire but on the net amount available to the owner after deducting the outgoings. 6. The relevant provisions of Section 18 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the issue. It is not as if a loan is made and then the parties agree to treat it as hire, apart from the charter-party agreement. The charterparty agreement has to be considered as a whole. It lays down "how and where the hire is to be paid, and it also lays down that advances would have to be made under Clause 14, and such advances would be deductible as hire. The provisions of the charterparty agreement must be taken as a whole, and considered from this point of view, it appears to me to contemplate that part of the hire would be payable in places other than London, that is to say, payable where money would be required for local disbursement. It has been held that the expression "Constructive payment" is not a happy one. Either a payment is made, or it is not made, and where it is made in a particular place, it is incorrect to consider if as being made somewhere else constructively. In this particular case, payment has been made under Clause 14, of the sums in question, in Calcutta. The charterparty agreement contemplates that such payment shall be deemed as payment of hire. It is impossible to hold that the payments were made elsewhere than in Calcutta. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken to have been transmitted by the Trinidad Co. to Barber and Co. to New York. Lord Wright considered the facts and the law and held that the transaction did amount to a transmission. The learned Judge further held that the transaction did amount to a transmission. The learned Judge further held that the amount was to be deemed to have been transmitted to New York. This decision was doubted in the House of Lords Case, Commissioner of Inland Revenue v. Gordon, (1952) 33 Tax Cas 226 (B). Lord Cohen pointed out that in the Trinidad case, payment could be certainly deemed to be a transmission, but he did not agree that it was a transmission to New York. In Gordon's case (B) (Supra), it appears that he was a partner in a firm carrying on business in Ceylon. He had an account with the Colombo branch of a bank which had its head office in London. He came to the United Kingdom in 1940 and opened an account at the head office of his bank in London. By arrangement he was allowed to over-draw his account, the over-drafts being transferred to the Colombo branch whenever if reached £500. At the Colombo branch, they were converted into rupees and satisfied by periodic payment into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessarily decide the question. If no actual payments were made within the taxing territory, then the tendency is not to treat it as an income accrued within the taxing territory. On the other hand, when such payments have been made within the taxing territory, then the tendency is to treat it as made where it was made, and not by notionally treating it as being made where the books were adjusted or where it should have been made. So far as the Trinidad Asphalt case is concerned, it really turned on the particular wordings of the Trinidad Ordinance, and the question was whether it could be said to have been 'transmitted' according to the words used in the Ordinance. In this particular case, we are concerned with the question as to whether the amount in dispute is chargeable to Indian Income Tax Act. That depends on the question as to whether the income arose within the taxing territory. In my opinion, it did so. The actual payment was made in the territories of India and it cannot be notionally considered to be made anywhere else. Not only has it been made in India, but it was contemplated by the charterparty agreement that it should be so made. Thus, there is no injustice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include gross profits or gains which on examination and when proper deductions have been made fade away and leave nothing upon which the tax itself can be payable. But I do not think that is the right interpretation to be put upon these words. I think it is made plain by what was said by Lord Justice Fry, as affirmed in the case of Grainger v. Gough (1896) 2 Tax Cas 462 (G), that the meaning of these words 'factor or agent having the receipt of any profits or gains' is gross profits or gains in which there may be wrapped up some net profits or gains ultimately to be found chargeable to Income Tax... "Now, holding that view of Section 41, it appears that both these agents can be assessed, because upon the very statement of the case they do receive sums in the way of freight which will include, may include, or probably do include profits or gains in respect of their business of ship owners........." It will thus be seen that the consensus of opinion does not exempt the petitioner from liability of deducting the Indian Income Tax, simply on the ground that the net income of the owner cannot be determined until an account is taken of the entire disbursement. At the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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