TaxTMI 
TaxTMI 
1984 (5) TMI 76
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....lar allowed a British shipping company to elect to be assessed on the basis of the ratio certificate granted by the UK authorities regarding the income or loss and the wear and tear allowance. 3. Section 44B of the Income-tax Act, 1961 ('the Act') which was inserted in the Act, by the Finance Act, 1975, with effect from the assessment year 1976-77, made a special provision for computing profits and gains of shipping business in case of non-residents. The contention of the assessee before the ITO was that since the said circular had not been withdrawn by the CBDT it was binding on the assessing authorities, with the result that the assessing authorities were bound to follow the directions in the said circular for the assessment of the Bri....
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....ssing authorities notwithstanding the insertion of section 44B. Reliance is placed on certain decisions which shall be considered subsequently. 5. The contention on behalf of the department is that in view of the subsequent insertion of specific provision on the subject in section 44B, the circular in question should be deemed to have been rendered ineffective. He drew our attention to Circular No. 169, dated 23-6-1975---Taxmann's Direct Taxes Circulars, Vol. 2, 1980 edn., p. 500 and contended that the said circular should be deemed to have rendered the previous circular ineffective. 6. We have considered the rival submissions and facts on record. We find that prior to coming into force of section 44B as well as the amendment to secti....
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....ion 32 providing for depreciation allowance. Provisions of section 44B are applicable to all non-resident assessees engaged in the business of operation of ships. It does not make any distinction between a British company and any other non-resident company. That distinction has been provided in Circular No. 7 of 1942. But since special provision has been made for computation of profits and gains of an assessee, who is non-resident and who is engaged in the business of operation of ships, provisions of the earlier circular, which contained directions of an altogether different nature, must be deemed to have been superseded. Certainly, a circular issued by the CBDT would be binding on all officers and persons in the execution of the Act, but ....
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..... The learned counsel for assessee invited our attention to provisions in section 297(2)(a) of the Act. It has been mentioned therein that notwithstanding the repeal of the Indian Income-tax Act, 1922 ('the 1922 Act'), any direction or instructions issued under any provisions of the repealed Act shall, so far as they are not inconsistent with the corresponding provisions of the 1961 Act, be deemed to have been made or given under the corresponding provisions aforesaid and shall continue in force accordingly. 10. According to the learned counsel for the assessee, since Circular No. 7 of 1942 had been issued under section 5(8) of the 1922 Act, that circular continued to be in force after the 1961 Act came in force, because there was a corr....
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....llerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC). It is necessary to give factual background of that case in order to understand the ratio of that decision. Under rule 33 of the Indian Income-tax Rules, 1922 ('the 1922 Rules') there were three alternate basis on which the income of non-resident shipping company could be computed for levy of income-tax in India. The first was on the basis of such percentage of the turnover as the ITO might consider reasonable ; the second was on the basis of an amount which bore the same proportion to the total profits of the business as the receipts so accruing or arising bore to the total receipts of the business ; the third basis was such other manner 'as the ITO may deem suitable'. 14. The Supreme Cou....
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.... held that the addition of proviso did not affect either the validity of rule 33 or the force of the instructions. It may be noted that the instructions in question had been given in order to soften the rigour of the law as was in force at that time and to simplify the otherwise complicated task of assessment of profits of non-resident shipping companies. There was nothing in the subsequently added proviso which rendered the assessment in accordance with rule 33 nugatory. 16. The aforesaid decision of the Supreme Court is of no assistance in the present case. This is because the provision contained in the subsequently inserted section 44B of the 1961 Act was materially inconsistent with the method prescribed in rule 33 of the 1922 rules.....