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The assessment year under reference is 1971-72. The assessee is a limited company, which carries on business, inter alia, of manufacturing and sale of cement. It has got its factory situated at village Seeka, near Jamnagar. The assessee claimed before the Income-tax Officer development rebate at the rate of 40% on pontoons, since in the submission of the assessee-company, the pontoons, for all intents and purposes, were ships. This claim did not find favour with the Income-tax Officer, who was of the opinion that pontoons could not be treated as ships, since they are incapable of movement by themselves because they have no engines. He, therefore, allowed development rebate at the rate of 25% instead of 40%, treating pontoons as "plant".

"Any vessel of considerable size navigating in deep water and not propelled by oars, paddles, - or the like I distinguished from boat..."

9. It is, therefore. difficult to consider pontoons as ships in its ordinary literal sense. We have, therefore, to consider as to whether the Tribunal was right in treating pontoons as ships for the purpose under the Income-tax Act, including that of development rebate.

10. The Appellate Assistant Commissioner accepted the submission of the assessee-company that pontoons should be treated for all intents and purposes under the Income-tax Act as ships. The Revenue was resisting this claim on the ground that the pontoons by themselves were motionless since they were not self-propelled. This counter-submission of the Revenue did not impress the Appellate Assistant Commissioner. While rejecting this counter-submission, he recorded his finding in the following terms :

"In the Income-tax Rules, depreciation has to be allowed on ships which are ocean ships or inland ships. In the category of inland ships as per the Income-tax Rules 4(b), item (iii) (sic) is described as "Iron or steel flats for cargo". It is evident from item (iii) that the flats for cargo are categorised under inland ships, pontoons in the case of the appellant company are used for transporting cargo and, in my opinion, the pontoons clearly fall within the category of ship."

11. The Appellate Tribunal while agreeing with the view of the Appellate Assistant Commissioner referred to the classification under the head "Ships" as set out in the rules governing depreciation. In this connection, the Tribunal referred to rule 5 of the Income-tax Rules, 1962, where ships have been classified into two broad categories, namely, (1) ocean-going ships, and (2) vessels ordinarily operating in inland waters. Now, this second category of vessels for inland navigation are further sub-divided into subcategories, namely, (1) speed boats, and (2) other vessels. The Tribunal referred to the dictionary meaning as given in Shorter Oxford English Dictonary, where the word "pontoon" has been defined as "a flat-bottomed boat used as a lighter ferry-boat or the like". The Tribunal observed that pontoon being a flat-bottomed boat used as a lighter ferry boat, etc., operate in inland waters and, therefore, it is entitled to be included in the term "ships".

12. It is no doubt true that so far as the term "ships" is concerned, there is no legislative dictionary in the Income-tax Act. It is also equally true that in its ordinary literal meaning, a pontoon cannot be considered as ship. But having regard to the legislative intent, as clearly manifested in the Income-tax Rules, 1962, since the Appellate Tribunal referred to the material part of the amended rule 5 of the said Rules, inserted by the Income-tax (Sixth Amendment) Rules, 1969, which came into force with effect from April 1, 1970, it is clear that the sub-category of other vessels takes in its sweep all the vessels including pontoons, which are being operated in inland waters. There is an inherent indication in the broad classification which fortifies our view. The broad classification is ocean-going ships and vessels operating in inland waters and the term "vessels" means crafts or ships, and crafts are not necessarily self-propelled (See Shorter Oxford English Dictionary, page 2351). The Tribunal, therefore, was justified in treating pontoons as ships for purposes of deciding as to what should be the appropriate rate of development rebate. We should remind ourselves that the Appellate Assistant Commissioner has referred to these very rules before they were amended by the Income-tax (Sixth Amendment) Rules 1969. At that time, rule 4(b)(iii) (sic) included in the category of inland ships "Iron or steel flats for cargo" which, in the opinion of the Appellate Assistant Commissioner, did not warrant the view of the Department that pontoons in order to be within the meaning of the term "ships" should be self-propelled. In other words, the legislative intent appears to be that such boats, whether they are flat-bottomed or otherwise, if they are capable of floating and used in inland navigation, including in the use for transport of cargo inside the harbour, as contra-distinguished from ocean-going ships, partake of the character of ships. The concept which was sought to be introduced by the Income-tax Officer that they should be self-propelled is not warranted from the scheme of the classification adopted by the Legislature in the Income-tax Rules. We, therefore, answer question No. 1 referred to us at the instance of the Commissioner, that pontoons are covered by the expression "ships" and therefore, they are entitled to development rebate at the rate of 40%. We answer the question accordingly in favour of the assessee and against the Revenue.