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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1735 of 1972. 1972.

From the Judgement and Order dated the 29th October 1971 of the High Court of Goa, Daman and Diu in S.C.A. No. 31 of 1970.

V. S. Desai and Miss A. Subhashini for the, Appellant. S. T. Desai, M. V. Shah and R. P. Kapur for Respondent. The Judgment of the Court was delivered by CHANDRACHUD, C.J.-The respondent, Gosalia Shipping Private Limited, which is a company incorporated under the Indian Companies Act does the business of Clearing and Forwarding and as Steamship Agents. In 1970, respondent acted as the shipping agent of 'Aluminium Company of Canada, Limited' which is a non-resident company. The, Aluminium Company time-chartered a ship "M. V. Sparto" belonging to a non- resident company called Sparto Compania Naviera of Panama. The said ship called at the port of Betul, Goa, on March 1, 1970 where it loaded 13,000 long tons of bauxite belonging to the time-charterers, the Aluminium Company. On March 20, 1970 the ship left for Alfred port, Canada. The ship was allowed to leave the port of Betul on the basis of a guarantee bond executed by the respondent in favour of the President of India, undertaking to pay the income-tax payable by the time-charterers under section 172 of the Income-tax Act, 1961. On April 15, 1970, the First Income- tax Officer, Margao, Goa, issued a demand notice to the respondent for payment of Rs. 51,191 by way of income-tax under the aforesaid provision. The respondent filed Special Civil Application No. 31 of 1970 in the Court of the Judicial Commissioner, 'boa, asking for a writ of Mandamus directing the Income-tax Officer to withdraw the demand notice. By a judgment dated October 29, 1971, the learned Judicial Commissioner allowed the respondent's Writ Petition and passed an order quashing the demand notice. Having obtained from the Judicial Commissioner a certificate of fitness to appeal to this Court under article 133(1)(b) and (c) of the constitution, the Union of India has filed this appeal.

The charging provision it contained in sub-section (2) of section 172, the relevant part of which provides that where a ship belonging to or chartered by a nonresident carries goods shipped at a port in India, one-sixth of the amount paid or payable "on account of such carriage" to the owner or the charterer or to any person on his behalf shall be deemed to be income accruing in India to the owner or char- terer on account of such carriage. The ship was delivered to the time-charterers at Betul, Goa, whereupon they loaded it with their own goods to the fullest capacity of the ship. Under the charter party, the charterer had agreed to pay to the owners of the ship a sum of 4.50 U.S. dollars per ton on the total dead weight carrying capacity per calendar month, commencing on and from the date of the delivery of the ship. The short question for consideration is whether the amount which the time-charterers had agreed to pay to the owners of the ship was payable "on account of" the carriage of goods.

Indeed, the other terms of the charterparty and the general tenor of the document show that the payment was in fact to be made by the time-charterers for use and hire of the ship. Under the agreement, charterers had the "liberty to sublet" the vessel for all or any part of the time covered by the agreement. The Captain of the ship was to be under the orders and directions of the, charterers as regards employment and agency. And if the vessel be lost, money paid in advance and not earned was to be returned by the owners to the charterers at once. These terms and conditions of the contract between the parties are not consistent with the theory that-the charterers were liable to pay to the owners any amount on account of the carriage of goods. In order that it may be said that the amount was payable on account of the carriage of goods. Under the terms of charterparty, the the consideration for the other, that is to say, that the payment which the charterers had agreed to make to the owners of the ship was in consideration of the carriage of goods. If the charterers are liable to pay the amount irrespective of whether they carry the goods or not, it would be difficult to say that the amount was payable on account of the carriage of goods. Under the terms of Charterparty, the owners of the ship received the amount as charges for the use and hire of the ship. The character of the payment cannot change according to the use to which the charterers put the ship or according as to whether the ship is loaded with goods in a port in India. What is payable as hire charges for the use of the ship cannot transform itself into an amount payable on account of the carriage of goods, by reason of the circumstance that the ship was loaded with goods in India. It is relevant, for the decision of the question under consideration. that the time-charterers loaded the ship at Betul, Goa, with their own goods. They did not sub-let the ship for the purpose of carriage of goods nor did they load the ship with, goods belonging to a third party in which event they might have earned some freight on account of the carriage of goods. They paid hire charges to the owner of the ship for the use of the ship and since they loaded the ship with their own goods, they received nothing on account of the carriage of the goods. Neither the one nor the other, therefore, received any amount on account of the carriage of the goods.

(iii) voyage charters. Sometimes categories (i) and (ii) are both referred to as time charters as distinguished from category (iii), and they have this in common that the shipowner's remuneration is reckoned by the time during which the charterer is entitled to the use of services of his ship." The contract in the instant case is of the nature of time-charterparty, whether there is a demise of the ship or not being immaterial. Clause 4 of the charterparty provides for the payment by the charterers "for the use and hire" of the vessel at the rate of U.S. 4.50 dollars per ton on vessel's total dead weight carrying capacity, per calender month, commencing on and from the date of deliver of the ship, "hire to continue until the hour of the day of her redelivery." These clauses of the charterparty show that the Aluminium company took the ship from its owners on a time-charterparty, that the owners were entitled to payment for the use and hire of the ship, that the amount was payable irrespective of what use the ship was put to by the time-charterers or indeed, whether it was put to any use at all and that no part of the payment can be said to have been made on account of the carriage of goods. Similies can be misleading but if a hall is hired for a marriage, the charges payable to the owner of the place are for the use and hire of the place, not on account of marriage.