1. The only point involved in these appeals is as to whether the assessee would be entitled to deduction under Section 80-J of the Act in respect of Barges owned by it.
2. The assessee is a company. The assessment years are 1980-81 and 1981-82 and the relevant previous years are the financial years ended on 31st March, 1980 and 31st March, 1981 respectively.
3. The facts in brief are that the assessee is carrying on mining operations and shipping the ore with the help of barges owned by it.
The assessee also hires out barges to other parties. These barges are ranging between 750 and 1000 dwt. and are self-propelled.
4. On the aforesaid facts, the assessee claimed deduction Under Section 80-J of the Act in respect of the barges owned by it which the I.T.O.had accepted in the assessments framed Under Section 143(3) read with Section 144B of the Act. However, the only dispute between the assessee and the I.T.O. was in respect of the treatment to be given to liabilities in working out the 'capital employed'. The assessee's contention was that the liabilities should be ignored while the I.T.O.was of the opinion that in view of the retrospective amendment made in Section 80-J of the Act by the Taxation Laws (Amendment) Act, 1980, the liability has to be considered in determining the capital employed. The I.T.O. therefore, deducted the amount of liabilities from the value of the barges and granted deduction Under Section 80-J of the Act accordingly.
5. Against the aforesaid action of the I.T.O., the assessee went up in appeal and contended before the Commissioner of Income-tax (Appeals) that the deduction Under Section 80-J of the Act should have been given with reference to the gross value of the capital employed and not the net value of the capital employed after deducting the liabilities as was done by the I.T.O. In view of the decision of the Hon'ble Supreme Court in the case of Lohia Machines Ltd. v. Union of India [1985] 152 ITR 308/20 Taxman 9, the C.I.T. (A) had no hesitation in upholding the action of the I.T.O.6. The C.I.T. (A), however, was of the opinion that since a barge is not a ship, the assessee was not entitled to deduction Under Section 80-J of the Act in respect of the barges owned by it. In order to better appreciate the rival submissions of the parties, it would be necessary to reproduce below the relevant portion of the order of the C.I.T. (A) on this issue : '5. It was found at the time of hearing that the ITO allowed relief under Section 80J in both the years on the capital investment on barges. This action is not sanctioned by law. Section 80J contemplates relief on account of investment on new ships. A barge can never be a ship and hence the relief Under Section 80J is not available to the same. To this extent the ITO under-assessed the assessee's income.
6. Therefore, an enhancement notice has been issued to the assessee on 13-3-1985 for both the years. The appellant replied that a barge should be considered as a ship in view of the definition given in the General Clauses Act, 1897. According to sub-section 55 of Section 3 of that Act a ship includes every description of vessel used in navigation not exclusively propelled by oars.
7. I am unable to agree with the appellant. The General Clauses Act refers only to the ship as a vessel used for 'navigation'. Further the Shorter Oxford Dictionary never included a barge under the word 'ship'.
'i. A small sea-going vessel with sails specially one next in size above a Balinger.
ii. A flat-bottomed freight-boat or lighter, chiefly for canal and river navigation, iv. The second boat of a man of war; a long narrow boat for the use of the chief officers.
i. A large sea-going vessel; a vessel having a bowsprit and three masts, each of which consists of a lower, top and top gallant mast.
In rowing parlance, applied to the racing eight-oar boat; also used playfully of other craft 1878.
iv. Applied to various objects that are or are conceived to be, navigated (late ME).
v. A vessel, utensil, ornament etc. shaped like a ship (late ME), vi. A ship's company or crew (ME).
10. Thus the word barge never meant an ocean going ship carrying heavy weights. Under Section 80J therefore there is no scope for allowing deduction on a boat or a small vessel sailing in the coastal waters or rivers.
11. In accordance with these facts, a barge can never be allowed relief as a ship. The ITO is directed to withdraw the 80J relief already granted on barges.
7. Being aggrieved by the order of C.I.T. (A), the assessee has come up in appeal before the Tribunal. The learned representative for the assessee strongly argued that the CIT (A) was not justified in withdrawing the deduction already granted by the I.T.O. Under Section 80J of the Act in respect of the barges owned by the assessee. In this connection, he stated before us the nature of business carried on by the assessee (already reproduced above) and the fact that in the assessment years 1978-79 and 1979-80 the I.T.O. had allowed deduction Under Section 80J of the Act in respect of the barges owned by the assessee on the net value of the capital employed by the assessee. Till to-date no remedial action has been taken by the Revenue either Under Section 154 or 263 of the Act. For the years under appeal also the I.T.O. had granted relief Under Section 80J of the Act, as he was of the view that a barge is nothing but a ship to which the provisions of Section 80J of the Act would be applicable.
Thereafter, the learned representative for the assessee invited our attention to the definition of "ship" containing in the following Act/Dictionaries: Ship" shall include every description of vessel used in navigation not exclusively propelled by oars.
2. In KJ. Aiyer's JUDICIAL DICTIONARY- 8th Edition 1980 at page 879 The definition of "ship" as given in General Clauses Act is reiterated.
3. The OXFORD COMPANION TO LAW By David M. Walker at page 1142 Ships include every description of vessel used in navigation not propelled by oars.
4. WEBSTER'S NEW WORLD DICTIONARY- Second College Edition at page 1314 (2) A sailing vessel with a bowsprit and at least three square-rigged masts, each composed of lower, top and top gallant members.
He also referred to pages 1188 and 1189 of the Law Lexicon by Shri P.Ramanatha Aiyar (Reprint Edition 1987) containing various meanings of "Ship" under the General Clauses Act, Carriage of Goods by Sea Act, etc. etc. He also referred to Part I of Appendix I to the Income-tax Rules, 1962 containing different meanings of "ship" as a class of vessel under the head "ships" with a view to impress upon us that the CIT (A) was not justified in holding that a barge was not a ship and, therefore, the assessee was not entitled to deduction Under Section 80J of the Act in respect of the value of such barges.
Placing before us a copy of the order of the CIT (A) dated 18-5-1987 in the assessee's own case for the assessment year 1983-84, more particularly paragraph 4 thereof which reads as under: - 4. The next contention is regarding the non-allowance of investment allowance on the Barge acquired this year. The Income-tax Officer has not allowed investment allowance on the Barge on the ground that it was not a Ship. It has been clarified that the Barge is a ship in Board's Instruction No. F.202/4/86-ITA.II dated 29-1-1987.
Therefore, the appellant is entitled to investment allowance on the Barge if it has been engaged in the business of operation of Ships.
,It was clarified on behalf of the appellant that besides the usage of the Barge for transportation of own ore, the appellant had received Rs. 9,28,460 as freight earned from the Barge. This amount was earned by the appellant in the operation of the Barge for others on hire. In view of this fact it has to be held that the appellant was engaged in the business of operation of ships. The Income-tax Officer is therefore, directed to allow the investment allowance on the Barge.
The learned representative for the assessee made a statement at the Bar that the said order of the C.I.T. (A) has been accepted by the Revenue.
Inasmuch as, no appeal has been filed by the Revenue against the decision of the C.I.T. (A) directing the I.T.O. to allow investment allowance on the Barges treating them as ship.
Thereafter, he invited our attention to the decision of the Hon'ble Gujarat High Court in the case of CIT v. Shri Digvijay Cement Company Ltd. [1986] 159 ITR 253/25 Taxman 269 wherein the High Court had held that "Pontoon" is a "ship" for the purposes of granting higher rate of development rebate Under Section 33 of the Act. He also highlighted the fact that in coming to this conclusion, the High Court had referred to Part I of Schedule I to the Income-tax Rules, 1962. Similarly, the Hon'ble Madras High Court in the case of Chola Fish & Farms (P.) Ltd. v. CIT [1987] 166 ITR 600, has held that the assessee would be entitled to claim higher rate of development rebate Under Section 33 of the Act in respect of "trawlers" which would come within the meaning of the word "ship". Here also he pointed out that the Hon'ble High Court has referred to Part I of Appendix I to the Income-tax Rules, 1962, which describes the "ship" as a class of vessel under the head "ships" Relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Mir Mohammad Ali [1964] 53 ITR 165, the learned representative for the assessee submitted that since in the instant case barges are self-propelled vessels, the same should be treated as a "ship" for the purpose of granting deduction Under Section 80J of the Act. Finally, he relied on the order of the Tribunal, Bombay Bench 'D' in the case of First ITO v. Kolhapur Oxygen & Acetylene (P.) Ltd. [1987] 22 ITD 20, wherein after referring to the decision in the case of Shri Digvijay Cement Co. Ltd. (supra) ; the Tribunal was pleased to hold that the assessee would be entitled to claim investment allowance on barges treating them to be "ship" irrespective of the fact that the barges were not self-propelled by any mechanical force. The learned representative for the assessee submitted that since in the instant case the barges were self-propelled, the assessee's case is much stronger than the one considered by the Tribunal in the said order. He, therefore, urged that the order of the C.I.T. (A) on this issue should be set aside.
8. The learned representative for the department, on the other hand, strongly supported the action of the C.I.T. (A). According to him, the decisions in Shri Digvijay Cement Co. Ltd. 's case (supra) and Chola Fish & Farms (P.) Ltd.'s case (supra) would not be of much help to the assessee, as in those cases the Hon'ble High Courts had considered the issue as to whether higher rate of development rebate would be allowable on "Pontoon" and "Trawlers" respectively. However in the instant case we are concerned with the deduction contemplated Under Section 80J of the Act.
9. We have carefully considered the rival submissions of the parties and various statutory/dictionary meanings of the word "ship" as well as gone through the aforesaid reported decisions and we find considerable force in the submissions made on behalf of the assessee. It is to be noted that the word "ship" is nowhere defined in the Act and the Rules made thereunder. Therefore, it would be necessary to refer to the meaning of "ship" appearing in other statutes like General Clauses Act, Carriage of Goods Act, Marine Insurance Act as well as in the dictionary. When one refers to these Acts/Dictionary, one finds that very wide meaning is given to the word "ship". The judicial as well as dictionary meaning of the word "ship" mentioned above also supports the stand taken on behalf of the assessee that a barge should be considered as a ship for the purposes of deduction contemplated Under Section 80J of the Act. In our considered opinion the descriptive meaning of the word "ship" contained in Part I of Appendix I to the I.T. Rules, 1962, clinches the issue involved in the present appeals. We find that for the purpose of Section 32 of the Act, which provides for depreciation in respect of certain classes of vessels, the said Part describes 'ship' as a class of vessels and under the heading "ships" four different classes of ships are mentioned viz., In fact though in the reported decisions the Hon'ble High Courts were called upon to decide the issue regarding granting of higher rate of development rebate on "Pontoon" and "Trawlers" on the ground that they are "ships", they had referred to the descriptive meaning given to the word "ship" in Part I of Annexure I to the I.T. Rules, 1962 and opined that there is indication of broad classification of vessels which will come within the word "ship" for the purposes of the Act. It is pertinent to note that in his order for the assessment year 1983-84 the CIT (A) has granted investment allowance on the barge on the ground that it is a "ship" in view of the instructions issued by the C.B.D.T.mentioned in his appellate order (reproduced above). In the case of Kolhapur Oxygen & Acetylene (P.) Ltd. (supra), the Tribunal has held that barges should be treated as "ships" irrespective of the fact that they are not self-propelled by any mechanical force. However, in the instant case, it is not in dispute that the barges owned by the assessee are self-propelled. In this view of the matter, we are in full agreement with the stand taken on behalf of the assessee that its case is much stronger than that decided by the Tribunal in Kolhapur Oxygen & Acetylene (P.) Ltd.'s case (supra). For all these reasons, we hold that the barges owned by the assessee should be treated as "ships" for the purpose of granting relief contemplated Under Section 80J of the Act.
In this view of the matter, we have no hesitation in setting aside that part of the order of the CIT (A), wherein he has directed the I.T.O."to withdraw the 80J relief already granted on the barges".