May 2008
S. 33AC : Profit from business means profit generated during course of business of operation of ships and not only from operation of ships
By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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8 (2007) 17 SOT 54 (Mum.)
Mercator Lines Ltd. v. Dy. CIT
ITA Nos. 8045 to 8047 (Mum.) of 2003
and 53 (Mum.) of 2004
A.Ys. 1997-1998, 1999-2000 and 2001-02. Dated : 25-6-2007
S. 33AC of the Income-tax Act, 1961 — Profit from business
means any profit generated during course of business of operation of ships and
is not confined only to income from operations of ships — Sale of
scrap is an income derived from business of shipping operation and was eligible
for deduction u/s.33AC.
The Assessing Officer and the CIT(A) disallowed the
assessee’s claim for deduction u/s.33AC in respect of income from sale of scrap
and income from interest on FDRs.
The Tribunal allowed the claim of the assessee and noted as
under :
(1) ‘Profit derived from business’ used in S. 33AC means
any profit generated during the course of business of operation of ships and
does not confine only to operation of ships.
(2) Income from sale of scrap is certainly an income
generated during the course of business of operation of ships — it is an
income derived from the business of shipping operation and is eligible for
deduction u/s.33AC.
(3) In respect of interest earned on FDRs, since nothing
had been placed on record by the assessee regarding whether it was received
during the course of business of operation of ships, the matter was restored
to the file of the Assessing Officer to re-adjudicate the issue. However, if
the FDRs were purchased to obtain the credit limit or on account of business
exigencies, the interest generated thereon would certainly be business income
and was eligible for deduction u/s.33AC. In case surplus funds were put in
FDRs and interest was generated thereon, that interest income would not
qualify to be business income of the assessee and also would not be eligible
for deduction u/s.33AC.
