8. Section 172 of the Act 1961 is carefully considered by us. Chapter XV titles as “LIABILITY IN SPECIAL CASES”. We have no concern with sections, starting from Section 159, till Section 171 from this Chapter XV. Section 172 comes under sub-title “H.-Profits of nonresidents from occasional shipping business”.
Title of Section 172 is “Shipping business of non-residents. ” For bringing a case under Chapter XV, H of the Act 1961, one has to establish a case of profits of non-residents from occasional shipping business. “Non-resident” is defined under section 2(30), as a person who is not a “resident” and for the purpose of Sections 92, 93 and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of Section 6. The respondent assessee is a company, incorporated under the provisions of Indian Companies Act, 1956, is fairly an admitted position. The assessee cannot be said to be non-resident. We have also taken notice of section 6 i.e. “Residence in India”. In short, respondent assessee cannot be said to be non-resident. The present appeal pertains to the respondent assessee. In our view, in the facts of the present case, the respondent assessee cannot lay fingers on section 172, since we are not dealing with profits of non-residents. The other aspect is that such profits of non-residents should be from occasional shipping business. It is not the case that the respondent assessee has earned some profit from occasional shipping and is a non-resident. In our view, Section 172 does not have application in relation to the respondent assessee and in the facts and circumstances of the present case. The company from Japan viz. Mitsui & Co. Ltd., Japan, recipient of demurrage amount is not before us. In other words, we are not examining the tax liability of the foreign company i.e. Mitsui & Co. Ltd., Japan. On our query to the learned Senior Advocate Shri Usgaonkar as to material on record for occasional shipping, part of para 3 from the Judgment of the learned Commissioner of Income-tax has been pointed out to us. His observations are in very few lines. We may reproduce the said portion herein below.
” 3. We have heard the rival submissions in the light of material placed before us. Assessee claimed deduction of Rs.1,08,53,980/ – being the amount of demurrage payable to Mitsui Co. Ltd., Japan. The Assessing Officer opined that since the assessee did not deduct tax at source, as such the case of the assessee falls within the mischief of section 40(a)(i) of the Income Tax Act, 1961.” Provisions of Section 172 are to apply notwithstanding anything contained in the other provisions of the Act. Therefore, in such cases, the provisions of Section 194C and 195 relating to tax deduction at source, are not applicable. The recovery of tax is to be regulated for voyage undertaken from any port in India by a ship, under the provisions of Section 172. In this view, these observations of the learned Vice President of Income Tax Appellate Tribunal have no concern with the factual aspect that it is a case of occasional shipping, pleaded or raised by assessee. There is no dispute about interpretation of Section 172 or Section 195. Crucial point is as to how Section 172 applies to the facts of the present case wherein the respondent assessee is an Indian company, incorporated under the provisions of Indian Companies Act, 1956. In our view, the learned Vice President of the ITAT has recorded a perverse observation/ finding in para 3 regarding application of Section 44B and 172 of the Act 1961.
9. We may notice that the Judgment of the learned Appellate Tribunal is unreasoned and cryptic one. This judgment runs in around 20 to 25 lines. We are not oblivious of the fact, that not the form, but substance is material. The learned appellate Tribunal seems to have referred to the Circular of CBDT, No.723 dated 19.9.1995.
10. We have considered the submission of the learned Counsel appearing for the parties pertaining to the Circular No.723 dated 19.9.1995 by CBDT (Annexure “C”). Section 119 empowers the Central Board of Direct Taxes to give instructions to subordinate authorities. We have considered Section 119 of the Act 1961. We have also perused the Circular Annexure C. This Circular seems to have been issued by the CBDT, clarifying the scope of Sections 172, 194C and 195 of the Act 1961. Advocate on behalf of the Revenue points out from para 4 of the Circular and submits that Section 172 operates in the area of computation of profits from shipping business of non-residents and there is no overlapping in the areas of operation of these sections. Learned Senior Advocate Shri Usgaonkar, appearing on behalf of the respondent assessee, also drew our attention to the Judgment of the Hon’ble Supreme Court in the matter of Commissioner of Sales Tax vs. Indra Industries, reported in (2001) 248 ITR 338 (SC). It is a three Bench Judgment of the Honourable Supreme Court. It has been held by the Honourable Supreme Court that the circulars issued by Commissioner of Sale Tax not binding on assessee or Court, however, binding on the Department. In the case on hand, in our view, learned Commissioner of Income-tax (Appeals) and the learned appellate Tribunal have wrongly interpreted the Circular dated 19.9.1995 issued by the CBDT. This circular, in our opinion, cannot be considered in the facts and circumstances of the present case, in aid to the respondent assessee. The learned Assessing Officer, in fact, has passed a legal, proper and reasoned order, holding that the provisions laid down under Section 40(a)(i) of the Act 1961 apply to the case on hand.
11. We may notice here the Judgment of the Honourable Supreme Court in the matter of Union of India vs. Gosalia Shipping P. Ltd. reported in (1978) 113 ITR 307. This judgment seems to be the basic judgment which is being referred to by the learned Single Bench of the Karnataka High Court. In that case, Gosalia Shipping P. Ltd., a company incorporated under the provisions of the Indian Companies Act, 1956 indulged at the relevant time in business of clearing and forwarding and as steamship agents. Gosalia Shipping P. Ltd., had acted as the shipping agent of “Aluminium Company of Canada Limited” which was a non-resident company. That on resident company had chartered a ship “M.V. Sparto” belonging to a non-resident company called Sparto Compania Naviera of Panama. The said ship called at the port of Betul, Goa on March 1, 1970. On March 20, 1970, the ship had left for Canada. The ship was allowed to leave port of Betul on the basis of guarantee bond, executed by the respondent in favour of the President of India. On April 15, 1970, the First Income-tax Officer, Margao, Goa issued a Demand Notice to the respondent Gosalia Shipping P. Ltd. for payment of Rs.51,000/- and odd amount, by way of income tax. We have noticed all these facts only to say that in the case on hand, there are no pleadings or material brought on record to show that the case is governed by occasional shipping within the meaning of Section 172 of the Act, 1961 and said section applies.
12. Having considered the submissions of the learned Counsel appearing for the parties, in our view, the facts of the present case, are governed by Section 40(a)(i) of the Act 1961. Order passed by the Assessing Officer, in our view, is legal, proper and in accordance with the Scheme of Act 1961. In view of the view which we have taken in the matter, the appeal deserves to be allowed by quashing and setting aside the Order passed by the learned Commissioner of Income-Tax (Appeals) dated 28.8.2002 and the Order passed by the Income Tax Appellate Tribunal, Panaji dated 2.12.2004. The same are, accordingly, quashed and set aside and the Order passed by the Assessing Officer stands upheld. Appeal is, accordingly, allowed and disposed of with no order as to costs.