Additional depreciation for non-resident shipping income depends on computation under rule 33, not a special formula.

For a non-resident shipping company, additional depreciation was not available where taxable income was computed under a special empirical formula rather than the second method in rule 33 of the Indian Income-tax Rules, 1922. Under that rule, world profits must first be computed in accordance with the Act and then apportioned to Indian receipts, so statutory allowances enter the computation only when income is determined by that prescribed method. Because the Income-tax Officer used a formula that deducted normal depreciation and trade expenses but not additional depreciation, the statutory allowance could not be claimed on that basis.

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Issues: Whether additional depreciation under section 10(2)(via) of the Indian Income-tax Act, 1922 was admissible in computing the taxable income of a non-resident shipping company when the Income-tax Officer adopted a special formula rather than the second method under rule 33 of the Indian Income-tax Rules, 1922.

Analysis: For a non-resident, taxable income is confined to income received, deemed to be received, accruing or arising within the taxable territories, and rule 33 permits computation by reference to a proportion of the total profits of the business computed in accordance with the Act. Under the second method in rule 33, the world profits must first be computed under the Act and then apportioned to the Indian receipts, in which event the statutory allowances would enter that computation. The Officer, however, did not apply that method and instead used an empirical formula deducting normal depreciation and trade expenses but not additional depreciation. The claim for additional depreciation could not be sustained on that footing, because it was a statutory allowance tied to computation under the Act and not to a special formula not warranted by rule 33.

Conclusion: Additional depreciation was not admissible in the computation made by the special formula adopted by the Income-tax Officer; the answer was against the assessee.

Ratio Decidendi: Statutory depreciation allowance for a non-resident is available only when taxable profits are computed under the method prescribed by rule 33 and the Act, and cannot be claimed where income is determined by a special empirical formula not sanctioned by that rule.

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