Commissioner of Income Tax vs Japan Lines Ltd. (Navix Lines Ltd.)

R. Jayasimha Babu, J.—The question referred to us, at the instance of the Revenue, for our consideration, is as follows :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that demurrage charges received by

the assessee are not includible in the assessee''s total income and accordingly in allowing the appeal filed by the assessee ?

The assessment years are 1983-84, 1984-85 and 1987-88.

Subsequent to the date of the Tribunal''s order the applicable provision of the Income Tax Act was amended by the Finance Act, 1997, with

effect from April 1, 1976, thereby making the amended law applicable for these assessment years as well. Section 44B which is a special provision

for computing profits and gains of shipping business in the case of non-residents, under the Explanation that was added by the Finance Act, 1997,

expressly provides that demurrage charges or handling charges or any other amount of similar nature shall be regarded as the part of the amount

paid or payable to the person engaged in the business of operation of ships on account of the carriage of passengers, livestock, mail or goods

shipped at any port in India. In this case, as the amount of demurrage was admittedly received in India, the amended provision is clearly applicable.

The question is, therefore, answered against the assessee and in favour of the Revenue.