1989 (7) TMI 146 - AT - Income Tax

Tribunal grants section 80-J relief on barges, deeming them ships, entitling deduction.

The Tribunal allowed the appeals, overturning the C.I.T. (A)'s decision to withdraw the section 80-J relief granted on the barges. It held that barges ... Deduction under section 80-J - classification of a vessel as 'ship' - interpretation of statutory term 'ship' by reference to external statutes and dictionaries - Part I of Appendix I to the Income-tax Rules, 1962 - investment allowance - capital employedClassification of a vessel as 'ship' - deduction under section 80-J - Part I of Appendix I to the Income-tax Rules, 1962 - Whether the barges owned by the assessee are to be treated as 'ships' for the purpose of claiming deduction under section 80-J of the Act. - HELD THAT: - The word 'ship' is not defined in the Income-tax Act or the Rules; external sources such as the General Clauses Act, other statutes, judicial dictionary and standard dictionaries furnish a wide and descriptive meaning. Part I of Appendix I to the Income-tax Rules, 1962 gives a classificatory description of 'ships' including vessels operating on inland waters and other vessels, which supports a broad construction. Precedents of High Courts and the Tribunal treating pontoons, trawlers and barges as falling within the concept of 'ship' for related tax benefits were examined and found supportive. The CIT(A)'s contrary view, based on selective dictionary meanings, was outweighed by the statutory descriptive classification and by the fact that the assessee's barges are self-propelled and used in the assessee's shipping operations (including hire to others). For these reasons the barges must be treated as 'ships' for the purposes of section 80-J, and the CIT(A)'s direction to withdraw the relief already allowed on the barges was not justified.Barges owned by the assessee are to be treated as 'ships' for the purpose of claiming deduction under section 80-J; the CIT(A)'s direction to withdraw the 80J relief on the barges is set aside.Final Conclusion: Both appeals are allowed; the barges are held to be 'ships' for the purposes of section 80-J and the appellate direction to withdraw the relief is quashed. Issues Involved:1. Entitlement to deduction under section 80-J of the Act for Barges.2. Treatment of liabilities in determining 'capital employed' for deduction under section 80-J.3. Classification of barges as ships under section 80-J.Issue-wise Detailed Analysis:1. Entitlement to Deduction under Section 80-J of the Act for Barges:The primary point of contention is whether the assessee is entitled to a deduction under section 80-J of the Act for the barges owned by it. The assessee, a company engaged in mining operations and shipping ore with barges, claimed this deduction, which the I.T.O. initially accepted. However, the C.I.T. (A) later contested this, stating that a barge is not a ship and thus does not qualify for the deduction under section 80-J. The Tribunal, however, found that the word 'ship' is not defined in the Act, necessitating reference to other statutes and dictionaries. The Tribunal noted that the General Clauses Act and various dictionaries provide a broad definition of 'ship' that includes vessels used in navigation not exclusively propelled by oars. The Tribunal also referred to Part I of Appendix I to the Income-tax Rules, 1962, which describes 'ship' as a class of vessels, including ocean-going ships and vessels operating on inland waters. Based on these references and previous judicial decisions, the Tribunal concluded that barges should be considered ships for the purposes of section 80-J, thereby entitling the assessee to the deduction.2. Treatment of Liabilities in Determining 'Capital Employed' for Deduction under Section 80-J:The dispute also involved how to treat liabilities when determining the 'capital employed' for the deduction under section 80-J. The assessee argued that liabilities should be ignored, whereas the I.T.O. deducted the amount of liabilities from the value of the barges, citing the retrospective amendment made in section 80-J by the Taxation Laws (Amendment) Act, 1980. The C.I.T. (A) upheld the I.T.O.'s action based on the Supreme Court's decision in Lohia Machines Ltd. v. Union of India, which supported considering liabilities in determining the capital employed. The Tribunal did not find fault with this approach, indicating that the retrospective amendment and the Supreme Court's decision provide a clear directive on this matter.3. Classification of Barges as Ships under Section 80-J:The classification of barges as ships was a significant issue. The C.I.T. (A) argued that a barge is not a ship based on dictionary definitions and the General Clauses Act. However, the Tribunal found that the definitions in various legal dictionaries and statutes, including the General Clauses Act, Carriage of Goods Act, and Marine Insurance Act, provide a wide meaning to the term 'ship,' encompassing various types of vessels used in navigation. The Tribunal also referred to previous judicial decisions, such as CIT v. Shri Digvijay Cement Company Ltd. and Chola Fish & Farms (P.) Ltd. v. CIT, which supported the classification of similar vessels as ships for tax purposes. Moreover, the Tribunal noted that the C.I.T. (A) had previously granted investment allowance on a barge by treating it as a ship, following instructions from the C.B.D.T. Given these considerations, the Tribunal concluded that the barges owned by the assessee should be treated as ships for the purpose of section 80-J, thus allowing the deduction.Conclusion:The Tribunal allowed the appeals, setting aside the C.I.T. (A)'s order to withdraw the section 80-J relief granted on the barges. The Tribunal's decision was based on a comprehensive analysis of statutory definitions, judicial precedents, and the specific facts of the case, affirming the assessee's entitlement to the deduction under section 80-J for the barges owned by it.