Madras High Court
Chola Fish & Farms Private Ltd. vs Commissioner Of Income-Tax on 13 August, 1986
Equivalent citations: [1987]166ITR601(MAD)
Author: V. Ramaswami
Bench: V. Ramaswami
JUDGMENT V. Ramaswami, J.
1. At the instance of the assessee, the Tribunal has referred the following question under section 256(1) of the Income-tax Act, 1961 :
"Whether, on the facts and circumstances of the case, the assessee is entitled to development rebate at 40% on the trawlers for the assessment year 1974-75 under section 33(1)(b)(A) of the Income-tax Act, 1961 ?"
2. The assessee is a private limited company carrying on the business of catching and selling fish from the seas with the help of powered mechanised trawlers. In the return filed for the assessment year 1974-75, the assessee claimed a loss of Rs. 56,660 and in arriving at this loss, it had deducted a sum of Rs. 61,456 by way of development rebate in respect of new trawlers purchased and used by it during the relevant previous year. There is no dispute that the cost of acquisition of the new trawlers was Rs. 1,53,643. The assessee claimed that it was entitled to rebate at the rate of 40 per cent. under section 33(1)(b)(A) of the Income-tax Act on the ground that the trawlers are "ships" within the meaning of that provision. The Income-tax Officer was, however, of the view that trawlers are not ships within the meaning of section 33 and that the assessee is entitled to development rebate under section 33(1)(b)(B)(iv)(b) in the view that it may be treated as machinery or plant coming under the residuary clause in that section. In that view, he allowed development rebate of Rs. 21,628 calculated at 15 per cent. of the cost and disallowed the balance of Rs. 36,992.
3. On appeal, however, the Appellate Assistant Commissioner accepted the contention of the assessee that trawlers would come within the word "ship" in section 33 and in coming to this conclusion, relied on Part I of Appendix I to the Income-tax Rules, 1962, where "ship" is categorised in four different categories for the purpose of depreciation under section 32. On further appeal by the Revenue, the Tribunal, after referring to the definition of "ship" in various other enactment the meanings given in the dictionary and in the view that the word must be construed in a popular sense meaning that sense which people conversant with the subject-matter with which the statute deals would attribute to it, held :
"Judged by the above principle, it will be appreciated that ship is generally understood as a vessel intended for transport of passengers or cargo in the high seas, that is to say, for navigation purposes. It can by no means be understood as a vessel provided with appliances for catching fish. I am, therefore, of the opinion that fishing trawlers cannot be considered as 'ships'. The fact that fishing boats have been included under the head 'ship' in item 4 of part I of Appendix I to the Income-tax Rules, 1962, is of no guidance in construing the expression 'ship' occurring in section 33(1)(b) of entitled the Income-tax Act, 1961. I, therefore, hold that the assessee will be entitled to development rebate in respect of fishing trawlers only at the rate of 15%."
4. The word "ship" is not defined in the Income-tax Act, 1961. Normally, in such circumstances the word should not be understood in any technical sense, but it has to be construed in the popular sense and as pointed out by the Tribunal in the sense that people conversant with the subject-matter with which the statute deals would attribute to it. But this rule also should not be understood in its absoluteness. The word will have to be understood in the context in which it occurs in the statute, the purpose of the provision and other relevant consideration. The word "ship" has been defined in the Carriage of Goods Act, 1925, as meaning any vessel used for the carriage in the Marine Insurance Act of 1963 has been defined as including every description of vessel used in navigation. The word "ship" is a generic term comprehending many types of sea-going vessels within it. Particular expressions are given with reference to the use as a ship. That is how trawler gets its name. Having regard to its use in fishing, the vessel is called a trawler. Webster's Third New International Dictionary gives the meaning of the word "ship" as :
"any large seagoing boat : a sailing boat having a bowsprit and usu a square-rigged foremast, mainmast, and mizzenmast each composed of a lower must, a topmast, a topgallant mast, and sometimes higher masts : a boat intended or used for navigation and propelled by power or sail : a boat or structure used for purposes of navigation or intended or used for transportation on a river, sea, ocean, or other navigable water without regard to its form or means of propulsion :"
5. Webster's New Twentieth Century Dictionary, second edition, 1979, gives its meaning as :
"any vessel of considerable size navigating deep water and not propelled by oars, paddles, or the like : distinguished from boat."
6. Similar meanings are given for the word in other dictionaries. Webster's Dictionary gives the meaning of the word "trawl" as "a long line, sometimes more than a mile in length and supported by buoys, from which short lines with baited hooks are suspended : used especially in deep sea fishing, as for cod or haddock : a large, bag-like net dragged along the bottom of a fishing bank by a boat. As a verb "trawl" means, to drag, to catch or take with a trawl." It is from this the vessel gets its name as a trawler, one which trawls, a fishing boat which trails or drags a trawl. Thus the word "trawler" would come within the meaning of "ship" as per the meaning given in the dictionary. We also find that for the purpose of section 32 of the Income-tax Act which provides for depreciation in respect of certain classes of vessels, Part I of Appendix I to the Income-tax Rules, 1962, describes ship as a class of vessel and under the heading of "Ships", four different classes of ships are mentioned :
"(1) Oceangoing ships -
(i) Fishing vessels with wooden hull
(ii) Other ships (2) Vessels ordinarily operating on inland waters -
(i) Speed boats
(ii) Other vessels."
7. As will be seen from this description of "ship" as a class of vessels, for the purpose of depreciation of the vessels including trawlers, it would come within the word "ship" and the percentage of depreciation is put only with reference to the ocean-going ships and vessels ordinarily operating on inland waters. Learned counsel for the assessee contended that though this description of there word "ship" in Part I of Appendix I to the Income-tax Rules, 1962, is for the purpose of determining the depreciation under section 32, since even for the purpose of section 32 the word "ship" is not defined, the description given in Part I of Appendix I of the Rules could with justification be applied in interpreting the word occurring in section 33 also. In this connection, learned counsel also referred to a decision of the Gujarat High Court CIT v. Shri Digvijay Cement Company Ltd. [1986] 159 ITR 253. In that case also, the meaning of the word "ship" in section 33 came up for consideration, but that was with reference to a vessel known as pontoon, but what is relevant for our purpose is that in that case also, the Bench considered Part I of Appendix I of the Rules where the categories of ships covered for the purpose of depreciation, as an inherent indication of the broad classification of vessels which will come within the word "ship" for the purpose of the Income-tax Act and that the ratio of that classification could be applied in interpreting the word for the purpose of development rebate under section 33. We are in entire agreement with the assessee in regard to this approach to the question. Except that section 33 is applicable to priority industries whereas depreciation is allowed in respect of every category and not restricted to priority industries, we are not able to see any distinction between sections 32 and 33 in so far as the meaning of the word "ship" is concerned. In these circumstances, we are of the view that trawlers are covered by the expression "ship" in section 33 and, therefore, the assessee is entitled to development rebate at 40 per cent. of its cost. Accordingly, we answer the reference in the affirmative and in favour of the assessee. The assessee will be entitled to its costs. Counsel's fee Rs. 500.