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TMI Blog2008 (11) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... The said appeal pertains to the Assessment Year1994-95. 2. The present appeal was admitted by this Court on the following substantial questions of law. "1. Whether the Hon'ble Tribunal was justified in upholding the action of the lower authorities that the Appellant is not entitled to deduction under section 33AC of the Act? 2. Whether the Hon'ble Tribunal was justified in not considering the material on record and the application for additional evidence to show that the assessee was engaged in the business of operation of ships during the year under consideration?" 3. The relevant facts giving rise to the present appeal are briefly set out hereunder. (a) The main objects for which the assessee company was incorporated are reproduced hereunder: (1) To promote, manage, assist, render services to and to invest in projects relating to offshore and onshore gas and oil exploration, prospecting, development and production, including but without being limited to, brokering of work contracts, construction contracts, exploration licences and financing agreements and arrangements in India and in any part of the world. (2) To acquire, purchase, sell, own, lease, charter, let out to hir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 the Income-tax Appellate Tribunal, Mumbai, dismissed the appeal filed by the assessee upholding disallowance of deduction under section 33AC primarily on the following grounds: (i) Section 33AC contemplates actual carrying on of the business of operations of shipping in the year of claim; (ii) Amendment brought by Finance Act, 1995 with effect from 1st April, 1996 is clarificatory and retrospective. (iii) Circular No.554 dated 13 February, 1990 (see [1990]183 ITR (St.) 130) clarifies that companies should engage in the business of operation of ships. 4. Being aggrieved by the said order of the Income-tax Appellate Tribunal the present appeal is filed and is admitted on the questions set out in paragraph 2 above. 5. We have heard the learned Counsel appearing for the assessee as well as the revenue. Before we proceed to deal with the arguments advanced by the learned Advocates for the parties, it is necessary to set out section 33AC of the said Act as it existed in 1994-95 and also the amended section which admittedly came into effect only from 1st April, 1996 and is not applicable to the case in hand. "33AC(1): Assessment Year 1994-95 In the case of an assessee, being a Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax reported in (1999) 237 ITR 589 (SC) and Padmasundara Rao v. State of Tamil Nadu reported in (2002) 255 ITR 147 (SC) pointed out that the Hon'ble Supreme Court has inter alia laid down the following well settled principles of construction of statutory provisions particularly those in a fiscal statute: (a) in case a statutory provision is clear it must be applied as it is worded; (b) external aids are impermissible if the words of the statute are clear; (c) in the case of a clear statutory provision, arguments contrary to the words of the statute cannot be entertained based upon the avowed or perceived intention of the legislature or the object of the legislation. 8. The learned Advocate for the assessee submitted that application of the above principles of statutory construction establishes beyond doubt that the claim of the revenue that section 33AC contemplates actual carrying on of business of operations of shipping in the year of claim or that the company should engage in the business of operation of shipping is totally erroneous. He submitted that a bare perusal of section 33AC as it is stood in the Assessment year 1994-95 shows that it nowhere lays down the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing from businesses other than shipping business, or from sources other than business. 24.4: The amendment will take effect from 1st April, 1996 and will accordingly apply in relation to the assessment year 1996-97 and subsequent years." 10. The learned Advocate for the Assessee has relied on the decision of the Hon'ble Supreme Court in Sedco Forex International Drill Inc. v. Commissioner of Income Tax (2005) 279 ITR 310 wherein it was held that the amendment to the Explanation to Section 9(1)(ii) brought about by the Finance Act, 1999 was deliberately introduced with effect from 1st April, 2000 and was, therefore, intended to apply only prospectively. It was also understood as such by Central Board of Direct Taxes which issued Circular No.779 dated 14th September, 1999 : [1999] 240 ITR (St) 3 which though not binding on the assessee, afforded a reasonable construction of the amendment. It was, therefore, submitted by the Assessee before us that the finding of the Tribunal that the Amendment brought by Finance Act, 1995 with effect from 1st April, 1996 is clarificatory and retrospective, is erroneous and is contrary to the decision of the Hon'ble Supreme Court, particularly as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is satisfied, the assessee would be entitled to deduction of an amount not exceeding the total income, as is debited to the profit and loss of the previous year in respect of which the deduction is to be allowed and credited to the reserve account to be utilised in the manner laid down in sub-section (2). There is no such requirement that the assessee in order to be eligible for deduction has to actually operate ships or that the amount in respect of which deduction is to be allowed and credited to the reserved account, had to be the income earned from shipping business. In the instant case, the assessee was a company formed and registered in India and one of its main objects was to carry on the business of operations of ships. The company had entered into agreement for purchase of ships in the relevant assessment year i.e.1994-95 and actually operated them in the assessment year 1995-96. We agree with the submissions made on behalf of the assessee that the principles of satutory provisions laid down by the Hon'ble Supreme Court in the case of Orissa State Warehousing Corporation [1999] 237 ITR 589 and in the case of Padmasundara Rao [2002] 255 ITR 147 (SC) squarely applies to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction was restricted to only 50 per cent.of profits and that too derived from the business of operation of ships. It is, therefore, established that despite being conscious of the fact that prior to the amendment the assessees were claiming deduction in respect of their income from activities other than shipping, the framers of the amendment did not think it fit to make it applicable retrospectively but brought the said amendment into effect only from 1st April, 1996. The assessees were, therefore, allowed to claim the deductions even in respect of the income from the activities other than shipping prior to 1st April, 1996. In view thereof, in the instant case also, it cannot be insisted that the deduction claimed by the assessee ought to be in respect of their income from the activities from shipping and not from any other business. 16. In view thereof we hold that the Tribunal was not justified in upholding the action of the lower authorities and in holding that the assessee is not entitled to deduction under section 33AC of the said act. We, therefore, answer question no.1 in negative i.e. in favour of the assessee and against the revenue. Since we have already dealt with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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