TaxTMI 
TaxTMI 
1971 (10) TMI 7
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....ng into account the ratio certificates issued by the Chief Inspector of Taxes, U.K., which were based on the assessments made on the appellant in U.K. During the relevant period, there was in U.K. "investment allowance" corresponding to "development rebate" under the Act. The certificates issued by the Chief Inspector contained the percentage ratio of the total world profits of the appellant to its world earnings and similarly the percentage ratio of the wear and tear allowance and the investment allowance to its total world earnings. In making the assessment, the Income-tax Officer purported to proceed on the basis of rule 33 of the Indian Income-tax Rules, 1922. The said rule reads: "In any case in which the Income-tax Officer is of opinion that the actual amount of the income, profits or gains accruing or arising to any person residing out of the taxable territories whether directly or indirectly through or from any business connection in the taxable territories, or through or from any property in the taxable territories or through or from any asset or source of income in the taxable territories, or through or from any money lent at interest and brought into the taxable territ....
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....f determining the assessee's Indian income under rule 33 of the Income-tax Rules, 1922 ? " The High Court answered the first question in favour of the assessee and the second in favour of the revenue. Hence, these appeals by the assessee. The revenue has not appealed against the decision of the High Court as regards question No. 1. Hence, we have only to consider whether the decision of the High Court relating to question No. 2 is in accordance with law. At the commencement of his arguments Mr. Palkhivala, learned counsel for the assessee, indicated that rule 33 may not be applicable to the facts of the case; but he said that, for the purpose of this case, he was prepared to proceed on the basis that the said rule is the governing provision. The authorities under the Act as well as the High Court have examined the facts of this case on the basis of rule 33. The second question referred to the High Court requires the High Court to express its opinion whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing the claim of the assessee for the investment allowance under the U.K. Act in the computation of the total world income for the purpose of....
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....ribution by way of dividends or profits, or (ii) for remittance outside India as profits or for the creation of any asset outside India, and if any such ship, machinery, or plant is sold or otherwise transferred by the assessee to any person other than the Government at any time before the expiry of ten years from the end of the year in which it was acquired or installed, any allowance made under this clause shall be deemed to have been wrongly allowed for the purposes of this Act." It may be noted that in the case of a shipping company like the appellant before us, whose ships ply all over the world, it may not be possible to strictly comply with the provisions contained in section 4 and section 10(2). The provisions dealing with the levy of income-tax are not identical in all countries. It may well nigh be impossible for a shipping company like the appellant to rigidly comply with the requirements of the laws in force in the numerous countries where it can be said to have earned income. Possibly to get over such a difficulty rule 33 was enacted. That is how the revenue had proceeded in assessing the appellant. Evidently, in exercise of its powers under section 5(8) of the....
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.... Indian income of British shipping companies. This would, however, be subject to the condition that the investment allowance would be permitted as a deduction only to the extent to which the rate of the allowance granted in the U. K. is not greater than the rate of development rebate allowed under the Indian Income-tax Act." We were informed that the copies of that letter were sent to the Income-tax Commissioners in the various States. From this letter, it is clear that the Board of Revenue had instructed the taxing authorities to take into consideration the investment allowance granted by the U. K. authorities in computing the taxable income of the British shipping companies. At this stage, it is necessary to mention that the proviso to clause (vib) of section 10(2) referred to earlier was incorporated into the Act some time after the above instructions were issued by the Board of Revenue. The authorities under the Act have proceeded on the basis that the computation of the income of the assessee has to be made on the second of the three bases mentioned in rule 33. This assumption appears to be incorrect. Admittedly, the profits of the assessee-company were not computed in acc....