Income Tax Appellate Tribunal - Mumbai
First Income-Tax Officer vs Kolhapur Oxygen And Acetylene (P.) Ltd. on 2 March, 1987
Equivalent citations: [1987]22ITD20(MUM)
ORDER
A.V. Balasubramanyam, Judicial Member
1. These cross appeals, one by the revenue and the other by the assesses, pertain to the assessment year 1982-83.
2. The assesses is a company carrying on a certain business activity. In the assessment, a claim for depreciation and investment allowance had been made in respect of certain barges which had been acquired during the relevant accounting year on an investment of more than Rs. 20 lakhs. The Income-tax Officer rejected both the claims. The Commissioner of Income-tax (Appeals) allowed depreciation under Section 32 but sustained the disallowance for investment allowance under Section 32A. Objecting to the allowance given under Section 32, the revenue is in appeal. Aggrieved by the disallowance of investment allowance, the assessee has preferred an appeal.
3. We will first of all take up the question of depreciation. The ITO rejected the claim mainly on the reason that hiring of barges is not business of the assessee. The CIT(A) did not accept the view of the ITO. At the hearing, Shri Inamdar made available to us the Articles of Association. One of the main objects of the company is to carry on business of ship owners and carriers as per Article 6. As incidental or ancillary to the main objects, the company had resolved to conduct the following :
(14) To purchase, lease, hire, charter, build, or otherwise acquire or provide roads, ways, railways, tramways, bridges, reservoirs, docks, water course, jetties, wharves, piers, ships, steamers, boats, barges, or other vessels, engines, transport facilities....
(15) To let out on hire any of the property of the Company (whether real or personal) including every description of apparatus and appliances of the Company.
It is clear from the above that barge hiring was one of the business activities of the company.
4. The company had given on hire these barges and earned income. Therefore, depreciation is available under Section 32. For argument sake, if it should be assumed that the barge hiring was not a business activity of the assessee, still this income should be classified under the head 'Income from Other Sources' in which event also a claim for depreciation can be sustained. We, therefore, affirm the order of the CIT(A) recorded, in this behalf.
5. Investment allowance was disallowed by the authorities below on the simple reason that barges are not ships. One thing we may mention here alone. The barges owned by the assessee are not self-propelled by any mechanical force. They are without engines. In these barges goods are loaded and towed by tug.
6. The first point was met by Shri Inamdar by citing the decision of the Gujarat High Court in the case of CIT v. Shri Digvijay Cement Co, Ltd. [1986] 159 ITR 253. In this case a claim for development rebate had been made in respect of pontoons and the question was whether the expression 'ship' covers pontoons also. Their Lordships rejected the contention of the revenue that pontoons need not be self-propelled in order to be within the meaning of the term 'ship'. Pontoon, which is a flat-bottomed boat used as ferry boat, was held to be a ship, taking the dictionary meaning of 'ship' inasmuch as there is no legislative dictionary in the Income-Tax Act for this term.
7. Ship is a large sea-going vessel, propelled by sails, steam or other mechanical means, according to dictionary. The barge also sails on water and is capable of being used for goods transport overseas. It need not be self-propelled as pointed out in Shri Digvijay Cement Co. Ltd.'s case (supra). In olden days, ships were operated with the help of sails and wind current. The movement of the vessel by an external force (like wind) did not detract it from being a ship. It follows that the source of power by which the boat or vessel moves, is not the criterion for its classification. In that event, a barge towed by a tug should be considered as a ship or vessel.
8. Arguing for the revenue, Shri Keshaw Prasad relied upon the wordings in Clause (a) of Section 32A(2) to say that the assessee must have been engaged in the business of operation of ships to be entitled to relief under Sub-section (1). His point was that the assessee must have conducted the business before the investment in respect of which investment allowance is claimed. We cannot accede to this view.
9. A ship or aircraft or machinery or plant owned by the assessee should have been used for the business carried on by him in order to be eligible for relief under Section 32A. It is in that sense the words 'assessees engaged in the business of operation of ships...are found in Sub-section (2)(a). An assessee may make an investment and get himself engaged in the business and that is sufficient requirement of the law.
10. For all the above reasons, we hold that the assessee is entitled to investment allowance under Section 32A in respect of the barges and we reverse the concurrent finding recorded by the authorities below and hold the issue in favour of the assessee.
11. In the result, the revenue's appeal is dismissed. The assessee's appeal is allowed.