By K. B. Bhujle, Advocate
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[CIT v. Oceanic Shipping Service of M. T. Suhail, 334 ITR 132 (Guj.)] A merchant vessel came to an Indian port for discharging cargo. While at the Indian port it developed engine trouble and hence it had to be towed away. It entered into an agreement with the assessee, a non-resident for towing away the ship. The agreement was made outside India and payment was also made outside India. The assessee received US $ 1,00,000 as towing charges. The Assessing Officer held that the towing charges was assessable u/s.172 of the Income-tax Act, 1961. The Tribunal held that section 172 was not applicable. On appeal by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and held as under: “(i) Section 172 requires in the first instance that a ship should belong to or be chartered by a non-resident; secondly, the ship should carry passengers, livestock, mail or goods; and thirdly, such cargo of passengers, etc., should be shipped at a port in India. (ii) The provision stipulates a ship which carries passengers, livestock, mail or goods. Therefore, the term ‘goods’ has to take colour from the preceding words/terms and one cannot visualise either passengers or livestock or mail being towed away and they have to be carried by a ship aboard a ship. Thus, goods also have to be carried by ship aboard a ship. (iii) The term ‘goods’ as used in the provision has to be understood in ordinary commercial parlance and usage, i.e., as articles or things which can be bought and sold. A vessel which due to mechanical fault that it has developed, cannot propel itself on its own, does not become ‘goods’ for the purpose of being carried by a ship for the purpose of trade. Therefore, it cannot be stated that a tug, though a vessel/ship for a limited purpose, carries goods when it pulls a ship by way of tow. (iv) The Tribunal was right in law in holding that the provisions of section 172 were not applicable and hence tax was not leviable u/s. 172(2) in respect of US $ 1,00,000 received by the assessee for towing away the merchant vessel.”
