Commissioner of Income Tax vs Showa Line Ltd.

On an application u/s 256(1) of the Income Tax Act, 1961, the Tribunal has referred the following question set out at page 1 of the paper book for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing the assessee''s appeal against the order of the Commissioner of Income Tax (Appeals)-XIV wherein the learned Commissioner of Income Tax (Appeals) held that demurrage was received on account of the carriage goods ?"

The assessee is a non-resident shipping company of Japan. The return of income was filed on August 23, 1988, showing total income at Rs. 1,13,92,563. The assessee earns income from the collection of freight from tramp vessels as well as liner vessels and also income from the detention charges during the year. During the course of assessment, the Assessing Officer noticed that the assessee has claimed that demurrage charges received was not a part of the taxable income, as the same is in the nature of insurance and not taxable under the Income Tax Act, 1961. The Income Tax Officer has rejected the claim of the assessee. According to him, as per the provisions of Section 44B, the demurrage charges are taxable.

In appeal before the Commissioner of Income Tax (Appeals), the Commissioner of Income Tax (Appeals) has also confirmed the view taken by the Assessing Officer.

In appeal before the Tribunal, the Tribunal has allowed the claim of the assessee, following the view taken by the Tribunal in Nippon Steel Shipping Co. Ltd. v. Deputy CIT in I. T. A. Nos. 1087,1088,1089 and 1090 (Cal) of 1992, dated November 3, 1995.

None appeared for the assessee. Heard learned counsel for the Revenue. Learned counsel for the Revenue submits that the issue is covered by the decision of this court in Commissioner of Income Tax Vs. Nippon Yusen Kaisha, . He further submits that the finding is there that the demurrage income was received in India. Following our view in the case relied on by learned counsel for the Revenue and the fact that the demurrage income has accrued in India and also received in India, in our view, the Tribunal has committed an error by allowing the claim of the assessee.

In the result, we answer the question in the negative, i.e., in favour of the Revenue and against the assessee. Reference so made stands disposed of accordingly.

All parties are to act on a xeroxed signed copy of this dictated order on the usual undertaking.