Case Law Details
RELEVANT PARAGRAPH
6. We have heard both the parties and perused the orders of the revenue authorities. The case of the revenue is that the ‘barges’ are not the ‘ships’ and the earnings made out of running and maintaining of the barges, which are not owned by the assessee, are not covered by the provisions of section 33AC of the Act. Further, the hiring receipts out of let out of assessee’s barge are also not eligible for deduction. Such incomes are not considered derived from the business of ‘operation of ships’. Considering the above issue, in our opinion, we need to examine the provisions of sub-section (1) of section 33AC of the Act one side and the decision of the Chennai Bench decisions referred to above. To start with the subsection (1) of section 33AC, the said provisions read as under;-
“(1) In case of an assessee, being a Government company or a public company formed and registered in India with the main object of carrying on the business of operation of ships, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount not exceeding fifty percent of profits derived from the business of operations of ships (computed under the head ‘profits and gains of business or profession’ and before making any deduction under this section), as is debited to profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account, to be utilized in the manner laid down in sub-section (2)”.
As seen from above, the assessee is under statutory obligation to fulfill the following conditions in order to avail the benefits of the above section. They are: (1) assessee should either be a Government Company or a Public Company formed and registered in India; (2) main object of assessee company should be that of carrying on business of operation of ships; (3) assessee should have debited an amount not exceeding 50 per cent of profits derived from business of operation of ships to its Profits and Loss Account; and (4) assessee should have credited the amount to a reserve account viz Shipping Reserve Account. Considering the dispute between the parties, the phrase “profits derived from the business of operation of ships” the used in sub-section (1) above are relevant for the instant case. To elaborate the same, the assessee-company must have been incorporated with the `object of carrying on the business of operation of ships ‘and the deduction u/s section 33AC is available out of the profits derived from `business of operation of ships’.
7. Applying the above statutory requirements to the facts of the case, we find that there is no dispute with regard to conditions (1), (2) and (4) above. Thus, the dispute in the appeal is restricted to whether the expression ‘ship’ covers the ‘barge’ and the business of ‘operation of running and maintaining the barges of JNPT (third party) constitute the business of’ operation of ships’ within the meaning of section 33AC of the Act. Considering the ground taken by the appellant, the issue of whether the hiring receipts out of letting out of the assessee’s barge’ constitutes the business of’ operation of ships’ within the meaning of section 33 AC of the Act is not relevant here.
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