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Issues: Whether the ship, ss. Bharatsena, was used by the assessee for the purposes of its business at any time during the previous year so as to attract the deeming profit provision under section 10(2)(vii) of the Indian Income-tax Act, 1922.
Analysis: The decisive question was whether the ship had any active or passive user in the relevant accounting year. After the concluded agreement for sale, the assessee gave express instructions not to load any cargo and to send the vessel to Calcutta only in ballast. The vessel thereafter ceased to be employed in the assessee's trading operations; the voyage to Calcutta, the dry-docking, and the repairs were undertaken to fulfil the sale contract and maintain the vessel's class for delivery, not to further the assessee's business. The Court distinguished situations where machinery is kept ready for use in the business and held that the present facts showed a clear decision not to use the ship for business at all during the period in question.
Conclusion: The ship was not used, even passively, for the assessee's business during the previous year, and section 10(2)(vii) did not apply.
Ratio Decidendi: For the purposes of section 10(2)(vii) of the Indian Income-tax Act, 1922, a plant or ship must be shown to have been used in the assessee's business during the relevant previous year; where the asset is withdrawn from business and employed only for delivery obligations under a sale contract, there is no qualifying use, whether active or passive.
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