Business income from requisitioned vessels retained its transport character and was not treated as a new income source.

Receipts from requisitioned vessels were treated as income from the assessee's existing transport business and fell within item 5(g) of the India-Pakistan double taxation Schedule, not the residuary item 9. The Court held that requisition and payment described as hire did not create a new and distinct source of income where the essential character of the business remained transport by vessels; only the user of the commercial asset and the identity of the customer changed. Accordingly, the first issue was answered in favour of the assessee and the residuary provision did not apply.

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Issues: Whether the receipt from requisitioned vessels fell within item 5(g) of the Schedule to the Agreement for the Avoidance of Double Taxation of Income between India and Pakistan, or was governed by the residuary item 9.

Analysis: The assessee's business before requisition was transport by vessels, and income from such transport was squarely within item 5(g). The requisition of the vessels and the payment described as hire did not, on the materials before the Court, establish a new and distinct source of income. The change was only in the user of the commercial asset and in the identity of the customer, not in the essential character of the business. The Court declined to accept that the receipt became a different source merely because the Government became the chartering party and the payment was described as hire.

Conclusion: The receipt was covered by item 5(g) of the Schedule and not by item 9. The answer to the first question was in the affirmative in favour of the assessee, and the second question did not survive.

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