Foreign investment allowance must be counted when computing Indian income of a non-resident shipping company.

In computing the Indian income of a non-resident shipping company under rule 33 of the Indian Income-tax Rules, 1922, the U.K. investment allowance was required to be taken into account in determining total world income for the purpose of arriving at Indian income. The computation could proceed on the equitable basis recognised by the rule and the Board's instructions, which treated the foreign ratio certificate as a proper assessment basis and allowed the allowance corresponding to development rebate, subject to the prescribed limit. The fact that the foreign allowance did not mirror the domestic depreciation provisions exactly did not prevent its inclusion. The referred question was answered in favour of the assessee.

---

---

Issues: Whether, in computing the Indian income of a non-resident shipping company under rule 33 of the Indian Income-tax Rules, 1922, the investment allowance granted under the U.K. law could be taken into account for determining total world income for the purpose of arriving at the Indian income.

Analysis: The computation was undertaken on the footing that rule 33 applied, and the relevant question was how the assessee's income should be fairly determined under that rule. The authorities and the Board's instructions treated ratio certificates issued by the U.K. authorities as a proper basis for assessment of British shipping companies. The Board had issued directions under section 5(8) of the Indian Income-tax Act, 1922, indicating that the investment allowance in the U.K. corresponding to development rebate under Indian law should be allowed in computing the Indian income of such companies, subject to the prescribed limit. The rule permitted a wide and equitable method of computation, and the instructions furnished a legitimate manner of applying it. The fact that the detailed allowance provisions in section 10(2)(vib) were not rigidly matched by the foreign computation did not prevent the allowance from being considered on the basis adopted by the Tribunal.

Conclusion: The investment allowance granted under the U.K. law was required to be taken into account in computing the assessee's Indian income, and the answer to the referred question was in favour of the assessee.

---