1. There are three appeals for two assessment years, namely, 1995-96 and 1996-97, by the assessee, Sirius Shipping Company Limited, Chennai, against the respective appellate orders. I. T. A. No. 1043 (Mds) of 1999 relates to the assessment year 1995-96 and is against the order of the Commissioner (Appeals) rejecting the rectification petition filed by the assessee under Section 154 of the Income-tax Act, 1961, and this appeal was filed in time. I. T. A. No. 1044 (Mds) of 1999, is the appeal filed by the assessee for the assessment year 1995-96 against the appellate order dated December 31, 1998, of the Commissioner (Appeals)-IV, Chennai, dealing with the order passed by the Assessing Officer under Section 143(3) of the Act. This appeal is barred by time by 113 days and the assessee had filed the necessary affidavit and petition for the condonation of delay in filing this appeal, which are dealt with elsewhere in our order. I. T. A. No. 1773 (Mds) of 1999 is for the assessment year 1996-97 against the appellate order dated October 28, 1999, of the Commissioner (Appeals)-IV, Chennai, dealing with the assessment order passed under Section 143(3) of the Act. As, in effect there are appeals on identical issue for the two consecutive assessment years 1995-96 and 1996-97 in the case of the same assessee, these appeals were clubbed together, heard together and are being disposed of by this common and consolidated order for the sake of convenience and brevity.
2. Let us take up the appeal in I. T. A. No. 1044 (Mds) of 1999, for the assessment year 1995-96. This is an appeal preferred by the assessee against the appellate order dated December 21, 1998, of the Commissioner (Appeals)-IV, Chennai, wherein the subject-matter was the assessment order for the relevant assessment year passed by the Assessing Officer under Section 143(3) of the Act. There is a delay of 113 days in filing this appeal by the assessee-company. The assessee had also filed a condonation petition along with the necessary affidavit by the director of the company. The contents of the affidavit are extracted below : "2. I state that the appellate order was passed by the first appellate authority for the assessment year 1995-96 after hearing our authorised representative on December 29, 1998, on December 31, 1998. The said order was served on the appellant company herein on January 21, 1999. An appeal against the said order ought to have been filed within 60 days from the date of receipt of the order.
3. I state that the said appellate authority rejected the appellant's claim for deduction under Section 33AC of the Act thereby sustained the order of the Assessing Officer.
4. I state that on consultation with our authorised representative the appellant preferred a petition for rectification on March 17, 1999, praying for rectification of the impugned order on the ground that the said authority has not considered each and every contentions raised before him in a proper manner. A copy of the rectification petition is enclosed. Decision to approach the appellate authority by way of filing rectification petition instead of filing an appeal as guaranteed under the statute was purely taken on the basis of the advice rendered by the authorised representative at the relevant point of time. It is to be stated that acting on the advice received should be viewed as a bona fide act.
5. I state that on consideration of the said rectification petition the said first appellate authority rejected the prayer for rectification vide his order dated April 12, 1999.
6. I state that on the receipt of the order I approached Subbaraya Aiyar, Padmanabhan and Ramamani, advocates, for taking their advice for further course of action. I state that the appellant company was advised to file an appeal against the order passed by the appellate authority under Section 154 as well as against the original order passed by him. I further state that the appeal against the Section 154 order was filed on July 13, 1999, which was well within the prescribed time limit. However, an appeal against the original order passed by the first appellate authority based on the advice was filed on the same date belatedly by 113 days. It was advised by Subbaraya Aiyar, Padmanabhan and Ramamani, advocates, that challenging the issue under normal assessment proceeding is very wider in scope than challenging the order passed under Section 154.
It was further advised that the scope and powers of the concerned authority are very limited under rectification proceedings than the powers and scope of the said authority in normal regular proceedings. It is submitted that the subtle distinction between the scope of the relevant provisions cannot be understood by an assessee. I further state that a number of cases rendered under the relevant sections outlining the scope of the power of the concerned authority will be a definite indicator of the cloudy nature of the relevant provisions.
7. Under these circumstances it is prayed that the delay of 113 days in filing the above appeal may be condoned in the interest of justice.
9. It is further submitted that pursuing the remedy as suggested by the authorised representative which in turn not using the appellant remedy as guaranteed under the statute is definitely a bona fide act and in view of the principles of legitimate expectation, equity and justice require sympathetic consideration from the Bench for the admission of the said appeal in order to render justice." 3. Learned counsel for the assessee, Shri S. Sridhar, of Subbaraya Aiyar, Padmanabhan and Ramamani, advocates, representing the assessee at the time of hearing placed on record a xerox copy of the decision of the Cochin Bench of the Tribunal reported in Auloser (P.) Ltd. v. Asst.
C1T [1998] 101 Tax-man-Mag. 70 (Coch), and strongly relied on the said decision for the condonation of the delay of 113 days in filing this appeal. He also reiterated the contents of the affidavit (which are extracted above) and drew our attention to the decision relied upon by him, wherein also similar circumstances existed. On the other hand, the learned Departmental Representative, Shri R. Venkata-raman, contended that the affidavit was filed by the director of the company and not by the assessee's advocate who advised the assessee as claimed in the affidavit of the director. He also contended that unilateral affidavit by the assessee alone is not sufficient for considering condonation of delay in filing the appeal.
4. We have heard the rival submissions and considered the facts and the materials on record. In the decision of the Cochin Bench of this Tribunal reported in Autoser (P.) Ltd. v. Asst. CIT [1998] 101 Taxman-Mag. 70 (Coch), the Tribunal has observed as under (page 71) : "The assessee's version that it was under a bona fide belief that the miscellaneous petition filed by it before the Commissioner (Appeals) would be taken up immediately and disposed of and that this had resulted in filing the appeal before the Tribunal belatedly, appeared to be correct. The Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC) ; 35 Taxman 17, held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a no deliberate delay. The Supreme Court, in the case of Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi [1979] 118 ITR 507, held that it is a settled principle that mistake of counsel may in certain circumstances be taken into account in condoning the delay although there is no general proposition that mistake of counsel by itself is always a sufficient ground. According to the Supreme Court, what is to be looked into is whether there is any taint of mala fide or element of recklessness or ruse and if neither is present legal advice honestly sought and actually given, must be treated as sufficient cause for condoning the delay. Further, the Calcutta High Court in the case of CIT v. India Capacitors Ltd. [1989] 180 ITR 641, held that a litigant should not suffer for the laches on the part of his lawyer. Accordingly, it was to be held that the assessee acted on the advice of its authorised representative to await the order of the Commissioner (Appeals) on the miscellaneous petition filed by it and since there was no decision forthcoming, the assessee hastened to file the appeal before the Tribunal. In this process, delay was caused in filing the appeal and since the reasons adduced by the assessee were satisfactory, the delay was condoned." 5. In the above said case a delay of 2,116 days was condoned by the Tribunal. In the case on hand the delay is only 113 days and the assessee acted bona fide on the advice of its counsel. Regarding the objection of the learned Departmental Representative that there was no affidavit filed by the concerned advocate, we would like to mention that the very same advocate was appearing before us in this appeal and also vouched for the truth of the contents of the affidavit filed by the director. In such circumstances, we find that the decision of the Cochin Bench of the Tribunal reported in Autoser (P.) Ltd. v. Asst. CIT [1998] 101 Taxman-Mag. 70, squarely supports the contention of the assessee for the condonation of delay in filing the appeal in 113 days.
Hence, we are inclined to condone the delay of 113 days in filing the appeal in I. T. A. No. 1044 (Mds) of 1999 before the Tribunal and admit the same for further proceedings.
6. Now, in effect there are three appeals for two assessment years, i.e., two appeals for the assessment year 1995-96, and one appeal for the assessment year 1996-97. In all these appeals the issue is one and the same, i.e., whether the assessee-company was entitled to the deduction under Section 33AC of the Income-tax Act or not. Now let us take up the merits of the appeals.
7. Briefly stated, the facts of the case are that the assessee is a limited company engaged in the business of shipping. The assessee had filed its nil return of income for the assessment year 1995-96 on March 29, 1996, after claiming deduction under Section 33AC of the Act to the extent of Rs. 25,06,155. This return was accepted under Section 143(1)(a) without making any prima facie adjustment. Later on, the case was selected for scrutiny assessment under Section 143(3). In the course of processing the assessment under Section 143(3) of the Act, the Assessing Officer found that in the return of income the assessee-company had claimed an amount of Rs. 25,06,155, i,.e., the total income of the assessee as deduction under Section 33AC. On inspection of the auditors report, the profit and loss account and the balance-sheet it was noticed by the Assessing Officer that the assessee-company was not owning any ships. It was only providing some services to Reliance Industries Ltd., in the operation of ships owned by Reliance Industries Ltd., according to the Assessing Officer. In the auditors report as per the Companies Act it was clearly mentioned that the company is a "service company". As per Section 33AC, "in the case of an assessee-company, a Government company or a public company formed and registered in India with the main object of carrying on the business of operation of ships, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount, not exceeding the total income as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilised in the manner laid down in Sub-section (2)". After quoting the section as above the Assessing Officer observed that as per the provisions of Section 33AC it is quite clear that to avail the deduction under Section 33AC the assessee should engage in the business of operation of ships, i.e., either it should own the ship or hire for the purpose of doing the business of operation of ships. In the present case, the assessee-company is not owning any ships and it has not taken any ships on hire or lease also. It is only rendering some services to the ships owned by Reliance Industries Ltd. as per the terms and conditions of the agreement. As per the agreement entered into between the Reliance Industries Ltd. and the assessee-company the assessee is acting as a "technical manager" for the purpose of ensuring efficient running and maintenance including providing of necessary personnel. Other than this the assessee-company is not having any other right on the ships owned by Reliance Industries Ltd, Towards the services rendered, the assessee is eligible for "service charges" from Reliance Industries Ltd. in accordance with the agreement. For the reasons above mentioned, according to the Assessing Officer, since the assessee-company was not doing any business of operation of ships except providing some services to the ships owned by Reliance Industries Ltd., the deduction under Section 33AC claimed by the assessee was not allowable. Thus, the assessee's claim for deduction of Rs. 25,06,155 under Section 33AC was disallowed by the Assessing Officer.
8. Aggrieved, the assessee appealed to the first appellate authority, who dismissed the appeal of the assessee for the following reasons : "The thrust of Section 33AC(1) and its proviso is to the effect that the concerned company seeking deduction under Section 33AC should have as its main object carrying on the business of operation of ships. In the present case, it is an admitted fact that the appellant-company is only rendering services for and on behalf of Reliance Industries Ltd. in the operation of the ships owned by the latter. In other words, the appellant is not carrying on the business of operation of ships nor its main object appears to be to carry on the business of operation of ships. Rendering services to another company owning ships or managing the affairs of the other company is not contemplated under Section 33AC for the purpose of claiming deduction under that section. As the appellant-company's profits are not derived from its business of operation of ships but only from rendering services to another company owning ships, the appellant is not entitled to deduction under Section 33AC in respect of its profits which are in the nature of profits derived from services rendered to another company owning ships. Holding so, I confirm the disallowance of Rs. 25,06,155 effected by the Assessing Officer in the order in appeal." 9. Subsequently, the assessee's petition for rectification under Section 154 filed for rectification of the above appellate order of the Commissioner (Appeals) was also rejected by the Commissioner (Appeals), which is also the subject-matter of appeal before the Tribunal in I. T.A. No. 1043 (Mds) of 1999. Thus, the subject-matter of appeals in I. T.A. Nos. 1043 and 1044 (Mds) of 1999 for the assessment year 1995-96 is boiling down to the issue of allow-ability of deduction under Section 33AC claimed by the assessee in a sum of Rs. 25,06,155.
10. Before us learned counsel for the assessee placed on record a paper book, consisting of the following : 11. It was also stated that the above materials were available in the records of the Department. Learned counsel for the assessee vehemently contended that the Commissioner (Appeals) and the Assessing Officer were wrong in disallowing the claim under Section 33AC of the Income-tax Act made by the assessee, and to say in brief, he contended that : The order of the Commissioner (Appeals) is contrary to the principles of legitimate expectation. He erred in sustaining the action of the Assessing Officer in denying deduction as claimed under Section 33AC of the Act. He failed to appreciate that claiming deduction under Section 33AC on the profits received from the operation of the ships was perfectly justifiable with reference to the intention of the Legislature. The Commissioner (Appeals) failed to appreciate that the Assessing Officer's interpretation of the said section would defeat the purposeful approach in understanding the said section and further failed to appreciate that the taxing statutes should be interpreted in a purposive manner. He ought to have appreciated that the deduction as claimed by the appellant under Section 33AC of the Act was properly justifiable in the eyes of law. He failed to appreciate that the main object of the appellant-company was to operate ships using the expertise possessed. He failed to appreciate that the memorandum of association as available with the Registrar of Companies would prove the factum of the main object of the appellant, viz., operating the ships. He erred in wrongly interpreting the particular provision which according to the appellant would defeat the purpose, nature and content for which the said provision was introduced by the Legislature. He erred in sustaining the action of the Assessing Officer in denying the said deduction solely on the ground that the appellant did not own any ships. The Commissioner (Appeals) failed to appreciate that the said Section never contemplated owning of ships as to be eligible for the said deduction. The Commissioner (Appeals) ought to have appreciated that the contemplation of crediting an equal amount of deduction claimed under the section to the reserve account for utilisation of purchasing new ships would clearly prove that deduction need not necessarily based on the ownership of ships at any point of time. He ought to have appreciated that the said deduction was introduced to encourage shipping operations with an ultimate view of investment in ships. He further failed to appreciate that for claim of depreciation, investment allowance, etc., the ownership of assets was a pre-condition as embodied in the relevant sections and whereas the Commissioner (Appeals) erred in not appreciating that Section 33AC did not envisage any such pre-condition, viz., ownership of ships for claiming the said deduction as against the other provisions highlighted hereinabove. He failed to consider the memorandum explaining the relevant provision when it was introduced by Parliament, which, according to the appellant, is very relevant and pertinent to this issue. He failed to appreciate that if the interpretation of the appellant is accepted, it will not result in double claim as presumed in the appellate order. The relief under Section 33AC is based on profits and not on assets and therefore no question of double deduction would arise. There is no condition specifically as to the replacement of ships also. The memorandum of association of the appellant-company (page 7 of the paperbook) would clearly go to show that the main objects of the company enlisted under III.A, more especially against serial Nos. 1, 2 and 5 thereat are exactly the same as contemplated in Sections 33AC of the Act. Nowhere in the section it is said that the assessee should own the ship. As such there is no ambiguity in the section, wherever the ownership of the assets was a must for claiming any deduction (such as depreciation under Section 32 and investment allowance under Section 32A) the Legislature has specifically and explicitly mentioned that the assets should be owned by the assessee, whereas the Legislature consciously has not mentioned about the ownership of the asset for claiming the deduction under Section 33AC of the Act. Even under Section 28 the ownership of the business is not the main criteria for levy of tax. In this connection reference is invited to page 1368 of the Commentary by Chaturvedi and Pithisaria (page 16 of the compilation filed). The letter dated March 11, 1999, of the assessee-company addressed to the Commissioner of Income-tax (Appeals) in connection with the rectification petition may be seen, wherein the meaning of the word "operation" has been given elaborately. The word "operation" is a term not defined anywhere in the Act nor covered by any explanation any where. In respect of such term the conventional practice is to adopt the common dictionary meaning. According to the Oxford Dictionary the meaning of the word "operation" includes : (7) A strategic movement of troops, ships, etc., for military action.
12. According to the legal dictionary the term "operate" means "to take effect", "to be in activity", "to work", etc., and "operation" means the condition of being in force, (Section 41 of the Indian Evidence Act), the act or process of operating, action or movements (Section 3(1)(a), Army Act) working Section 2(d) of the Transfer of Property Act (Section 12(a) Damodar Valley Corporation Act) a surgical operation (Section 88(iii) I. P. C.) working to keep running (Section 63A(2)(a) of the Motor Vehicles Act). The various meanings given in the different dictionaries point to the one and only fact that the term "operation" is not used in the sense that something should be owned for getting some relief, deduction, etc. The true contextual meaning of the term is that any work or activity connected with the ships is covered by the term "operation". Hence, in view of the above, the assessee need not own a ship or take a ship on lease or rent for engaging in the business of operation of ships. The agreement entered into by the appellant-company with Reliance Industries Ltd. (Shipping Division), Bombay (page No. 48 onwards of the paperbook filed) comprises therein the various covenants. The terms under the head "Responsibilities" would go to show that the appellant had control of the entire ship taken by the assessee under the agreement. Though the assessee-company has been termed as technical manager in the agreement, practically the assessee was having the full control over the operation of the ships entrusted to it by Reliance Industries Ltd. so as to ensure its efficient running and maintenance including provision of necessary personnel. Thus even though the appellant-company was not owning the ship it was responsible for the efficient running of the ships and maintenance of the ships including the management of the personnel. The responsibilities of the owner of the ships, namely, Reliance Industries Ltd., are all found under the head "Responsibilities of the owner" in the agreement. Page 12 of the agreement against para. 5 of the terms of payment are mentioned.
13. Replacement of ships is not contemplated in Section 33AC. Circular No. 554, dated 13th February 1990 (see [1990] 183 ITR (St.) 130) (page No. 1765 of the commentary by Chaturvedi and Pithisaria) (copy filed by the assessee), states that with a view to provide tax incentives to the public companies engaged in the business of operation of ships for generation of resources internally to augment their fleet, a new Section 33AC has been inserted in the Income-tax Act, 1961. But nothing is said about the ownership of the ship in the said circular.
"Augmentation" means, according to the Oxford Dictionary, enlarging, having the power to increase.
14. The section talks about "profits derived from business of operation". Thus, the exemption is based on profits and not on the assets. The management fees minus the expenses incurred by the assessee-company is only the profit. The duplication of exemption is possible as the exemption is only based on profits and not on assets.
The rule of interpretation and harmonious construction are more relevant to understand the provisions of this particular section.
15. In a nutshell, as the section is not mentioning anything about the ownership of ships the Revenue authorities cannot insist that the assessee should own the ship for claiming deduction under Section 33AC of the Act. On the other hand, the deduction is profit based and not asset based like the claim of depreciation or investment allowance.
Hence, the Revenue authorities were totally adopting a wrong approach and hence their orders deserve to be quashed.
16. On the other hand, the learned Departmental Representative placed on record extracts from the commentary by Charurvedi and Pithisaria (pages 1765 and 1768), extracts from Webster's Third International Dictionary, comprising therein the meanings of "fleet" and "augment" and copies of the following decisions :CIT v. Tamil Nadu Industrial Investment Corporation Ltd. [1999] 240 ITR 573 (Mad), 17. He vehemently supported the orders of the authorities below and countered, to say in brief, that : Adverting to para. 4 of page 4 of the Commissioner (Appeals)s order for the assessment year 1995-96 it can be seen that the Assessing Officer had made out a point that the appellant made credit entries under the head miscellaneous income in the names of various persons totalling to Rs. 17,34,153 and when during the assessment the appellant was confronted with explanation of the credit entries as well as confirmation letters from the creditors in whose names the credits appear, the appellant was not able to substantiate the details and basis of credits to the satisfaction of the Assessing Officer and so the Assessing Officer concluded that by introducing this unaccounted income to the extent of Rs. 17,34,153 the appellant had deviced a method to convert the same into profits and attempted to get away with the deduction under Section 33AC on the same. The appellant's learned representative did not rebut these findings of the Assessing Officer in the grounds of appeal or statement of facts before the Commissioner (Appeals) or during the course of the proceedings before the Commissioner (Appeals). Thus, the assessee sought to misuse the benefits of Section 33AC. This is the background of the case. The assessee was only managing the operation of the ships and it was not owning the ships. Section 36(1)(viii) is analogous to Section 33AC. The Madras High Court while deciding an issue in the context of Section 36(1)(viii) which is analogous to Section 33AC in the case of CIT v. Tamil Nadu Industrial Investment Corporation Ltd. [1999] 240 ITR 573 had observed as under (page 578) : "The object of granting deduction under Section 36(1)(viii) is to strengthen the financial resources of the financial corporation or the joint financial corporation and the deduction is granted out of the total income before making any deduction under Chapter VI-A of the Act. The section provides for a higher deduction and the section also enjoins that the amount must be carried to a special reserve account and once a special reserve was created and the amount was carried to the special reserve account, it is not open to the assessee to draw from such special reserve and make up the deficiency in the succeeding assessment years. If such a contention of the assessee is accepted, the whole purpose behind the creation of the reserve in strengthening the financial position would be defeated." 18. Thus it can be seen from the above finding of the Madras High Court that while interpreting the provisions of Section 36(1)(viii) that the purpose behind the creation of the reserve is to be taken note of.
Similarly, we have to refer to the object of Section 33AC in this case on hand. The extract from the book Income-tax Law by Chaturvedi and Pithisaria (pages 1765 to 1768) (page Nos. 1 to 4 of the Department's paperbook) contains the scope and effect of Section 33AC when it was introduced. In the Circular No. 554 dated February 13, 1990 (see [1990] 183 ITR (St.) 130), it is mentioned that this new section has been inserted in the Income-tax Act, 1961, with a view to provide tax incentives to the public companies engaged in the business of operation of ships for generation of resources internally to augment their fleet.
Thus, the object of bringing in this section into the statute book was for augmenting their fleet and not for augmenting anybody's fleet. The meaning for the word "fleet" as appearing in Webster's Third International Dictionary is as under : "1 : a number of warships under a single command : a naval force : a : an organisation of ships and air planes under a flag officer and suitable for undertaking major naval operations b : the whole naval forces afloat of a particular country 2 ; a group of boats in company or engaged in the same business (the whaling--) (the--of small craft now in the harbour) 3. now chiefly dial ; a group (as of birds) moving or acting together (a--of crows pulling at the corn) 4. a Brit : a line of fishing nets joined together b : a fishing line having a hundred hooks 5 : a group (as of airplanes or trucks) comparable to a fleet of ships (a--of clouds overhead) ; esp : such a group operated under unified control (as by a commercial or military organisation) (three separate taxi--s operating in one area) (a--fleet of 500 haulage units) 6 : a group of affiliated insurance companies esp. when handling fire insurance." 19. It is an admitted fact that at the relevant time the assessee was not owning even a single ship. Without anything how the assessee could augment its fleet Fleet denotes plural. In other words it denotes a group of similar items. Already the assessee should possess more than one ship to hold that the assessee was owning a fleet of ships. In this case on hand as the assessee was not even having a single ship it could not have augmented its fleet. The Legislature later on extended the benefits of this section, namely, Section 33AC, to Government shipping companies by amending the Act suitably. Circular No. 636 dated August 31, 1992 (see [1992] 198 ITR (St.) 1), deals with the scope and effect of the amendment made in the Finance Act, 1992. In the said circular against paragraph No. 24.2 it is mentioned as under : "It was noticed that shipping companies have diversified into trading, real estate business, etc., and are claiming deduction under this section even in respect of their income from activities other than shipping. There is no justification for allowing 100 per cent, deduction with reference to income from activities other than operation of ships." 20. In the same circular against paragraph 24.3 it is mentioned as under : "Section 33AC has been amended to restrict the deduction to 50 per cent. of the income derived from the business of operation of ships only, this takes outside the purview of the deduction any income arising from businesses other than shipping business ; or from sources other than business." 21.The above contents of the Departmental circular are to be considered as declaratory and are to be given retrospective effect.
22. The Supreme Court of India in the case of CIT v. Podar Cement Pvt.
Ltd. [1997] 226 ITR 625, while dealing with the income from house property, has made the following observations (page 648) : "In construing an ongoing Act, the interpreter is to presume that Parliament intended the Act to be applied at any future time in such a way as to give effect to the true original intention. Accordingly the interpreter is to make allowances for any relevant changes that have occurred, since the Act's passing, in law, social conditions, technology, the meaning of words, and other matters'." 23. The very same apex court in the case of Oxford University Press v.CIT [2001] 247 ITR 658, while dealing with the exemption under Section 10(22), has observed as under (headnote) : "A university established in a foreign country is not excluded from the ambit of Section 10(22) in case it is imparting education in India or has some educational activity in India. It is evident that for the purposes of granting exemption under Section 10(22) the Legislature assumed the existence of educational activity in India by a university or other educational institution. The basic requirement of the section is the existence of 'educational purpose' which, in other words, means the imparting of education which has to be in India. The absence of the words 'India' in this provision is inconsequential. It has to be read into Section 10(22)." 24. From the above two decisions of the apex court it would be crystal clear that a purposeful interpretation is to be given to the sections for which they are intended. In Section 33AC the words "owned by the assessee" are not there. Applying the ratio of the apex court cited supra it is to be inferred that the ships should be owned by the assessee for claiming the deduction under Section 33AC. It can be seen that in Section 10(22), as observed by the Supreme Court, the phrase "in India" was absent. But the apex court has observed that such absence of the phrase "in India" was inconsequential and it has to be read into Section 10(22). Applying the same analogy in the case on hand we have to construe that it is imperative that the assessee should own the ship or at least kept one ship for augmenting its fleet. The mere text or the language employed in the section alone is not conclusive one and the context of the insertion of a particular section into the statute book is also to be borne in mind. In this connection, the Full Bench decision of the Madras High Court in the case of CIT/CWT v. P.Manonmani [2000] 245 ITR 48 would be of help to the Tribunal. In that decision while dealing with Section 168 of the Income-tax Act it was observed as under (page 55) : "While ascertaining the true scope of a provision in a statute, attention must necessarily be paid not only to the text, viz., the words employed in the relevant provision, but also the context. The Supreme Court in the case of RBI v. Peerless General Finance and Investment Co. Ltd. [1987] 61 Comp Cas 663, observed (page 692) : 'Interpretation must depend on the text and the context. They are the bases of interpretation . . .'." 25. In every case the object of bringing in a particular section is to be borne in mind while interpreting the same.
26. If Section 33AC deduction is allowed to the assessee it would amount to double deduction because the owner of the ship would also have claimed such deduction. It was not the intention of the Legislature to give double deduction. In this connection, Section 80HHC may be referred to, wherein the export house and the supporting manufacturers both are involved but the deduction under Section 80HHC is given only to one unit and not to both the entities.
27. In this case on hand the assessee was only the technical manager who was receiving fees for certain services rendered to the owner of the ship and there is no dispute about this fact. Shipping business was not the assessee's business. There is no relevance for considering Section 28 in this context. The assessee not even owning a single ship cannot be said to have augmented its fleet. Subsequent owning of ship will not have any effect for the relevant assessment year.
28. The provisions of Sections 33AC, 44B (special provision for computing profits and gains of shipping business in the case of non-residents), the legis- lative history, the intention for insertion of this section into the statute book and the decisions relied upon supra would go to show that the assessee was not at all entitled to the deduction under Section 33AC and thus the Revenue authorities were correct in disallowing the claim of the assessee and no interference is warranted with the orders of the Commissioner (Appeals).
29. We have heard the parties at length and considered in entirety the rival submissions and the facts and the materials on record including the papers submitted by both the sides and the case laws relied on as well. To understand the point at issue it would be better to consider the relevant section, namely, Section 33AC, which reads as under : "33AC. Reserves for shipping business. -- (1) In the case of an assessee, being a Government company or a public company formed and registered in India with the main object of carrying on the business of operation of ships, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount not exceeding the total income (computed before making any deduction under this section and Chapter VI-A), as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilised in the manner laid down in Sub-section (2) : Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid-up share capital (excluding the amounts capitalised from reserves) of the assessee, no allowance under this sub-section shall be made in respect of such excess.
(2) The amount credited to the reserve account under Sub-section (1) shall be utilised by the assessee before the expiry of a period of eight years next following the previous year in which the amount was credited- (a) for acquiring a new ship for the purposes of the business of the assessee ; and (b) until the acquisition of a new ship, for the purposes of the business of the assessee other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India.
(3) Where any amount credited to the reserve account under Sub-section (1),- (a) has been utilised for any purpose other than that referred to in Clause (a) or Clause (b) of Sub-section (2), the amount so utilised ; or (b) has not been utilised for the purpose specified in Clause (a) of subsection (2), the amount not so utilised ; or (c) has been utilised for the purpose of acquiring a new ship as specified in Clause (a) of Sub-section (2), but such ship is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired, the amount so utilised in acquiring the ship, (i) in a case referred to in Clause (a), in the year in which the amount was so utilised ; or (ii) in a case referred to in Clause (b), in the year immediately following the period of eight years specified in Sub-section (2) ; or (iii) in a case referred to in Clause (c), in the year in which the sale or transfer took place, (a) 'public company' shall have the meaning assigned to it in Section 3 of the Companies Act, 1956 (1 of 1956) ; (aa) 'Government company' shall have the meaning assigned to it in Section 617 of the Companies Act, 1956 (1 of 1956) ; (b) 'new ship' shall have the same meaning as in Clause (ii) of subsection (2) of Section 32AB." 30. A wholesome reading of Sub-sections (1), (2) and (3) with relevant provisions and the Explanation of Section 33AC it is to be understood as follows : (i) For claiming deduction under Section 33AC the assessee should be a Government company or a public company formed and registered in India with the main object of carrying on the business of operation of ships.
(ii) A deduction of an amount, not exceeding the total income (50 per cent, of total income with effect from April 1, 1996) (computed before making any deduction under this section and Chapter VI-A as is debited to the profit and loss account of the previous year shall be allowed as deduction subject to crediting of such amount to a reserve account to be utilised in the manner laid down in Sub-section (2).
(iii) The aggregate of the amounts carried to such reserve account from time to time shall not exceed twice the amount of paid up capital (excluding the amounts capitalised from reserves) of the assessee.
(iv) The amount credited to the reserve account under Sub-section (1) has to be utilised by the assessee before the expiry of a period of eight years next following the previous year in which the amount was so credited in the following manner : (a) For acquiring a new ship for the purpose of the business of the assessee.
(b) Until the acquisition of a new ship, for the purposes of the business of the assessee other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India.
(v) Sub-section (3) deals with the manner in which the amount so utilised in the way other than those mentioned in Sub-section (2) shall be dealt with by the Income-tax Department.
31. Thus, on a careful analysis of the whole section with the relevant provisos and the Explanation it transpires that the deduction contemplated under Section 33AC is related not to the asset possessed at the time of claiming of this deduction by the assessee but to the total income debited to the profit and loss account and credited to the special reserve in the relevant previous year. Thus, it can be seen that the deduction is only income-based and not asset-related. Further Clause fb) of Sub-section (2) of Section 33AC gives a licence to the assessee to utilise the amount credited to the special reserve for the purposes of the business of the assessee other than for distribution of dividends or profits or for remittance outside India as profits or for creation of any asset outside India until the acquisition of a new ship as contemplated in Clause (a) of Sub-section (2) of Section 33AC. Thus, the assessee is entitled and empowered by Clause (b) of Sub-section (2) of Section 33AC to utilise the profits credited to the special reserve for the purposes of its business (other than for acquiring the ship) until the acquisition of a new ship except by way of distribution of dividends or profits or for remittance outside India as profits or for creation of any asset outside India. In other words, except the prohibited items in Clause (b) of Sub-section (2) the assessee is free to use the amount credited to the special reserve for the general purposes of the business of the assessee till it acquires a new ship.
Thus, it can be seen that it is not a pre-condition at the threshold level that the assessee should own a ship for claiming the deduction under Section 33AC, but the assessee should be a Government company or a public company with the main object of carrying on the business of operation of ships. In our considered opinion for an assessee to engage in the business of operation of ships it need not possess any ship of its own. In case the assessee is not at all acquiring the ship within the specified period mentioned in the section the assessee shall lose the exemption and the exemption already allowed would be brought to tax on the expiry of the prescribed time limit. This can be seen from Sub-section (3) of Section 33AC. That means even though the assessee need not possess a ship to start with to claim this exemption under Section 33AC, no doubt the assessee has to acquire a new ship within a period of eight years or it has to use the amount credited to the special reserve only for the purposes of the business of the assessee other than the prohibited items mentioned in Clause (b) of Sub-section (2) until the acquisition of a new ship. In effect the assessee either has to acquire a new ship within the specified period of eight years or can use the amount credited to the reserve for the general purposes of the business of the assessee other than the prohibited items until acquisition of new ship within eight years. In other words there is no pre-condition of owning a ship for claiming this deduction at the threshold level. It is to be noted that in this case on hand the assessee also has acquired a ship subsequently.
32. Now let us consider whether it is permissible for the Revenue or any court to read into a taxing provision any words which are not there or exclude any words which are there.
33. The apex court in the case of CED v. R. Kanakasabai [1973] 89 ITR 251 (SC), and in the case of Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC), has held that : "It is impermissible for the court to read into a taxing provision any words which are not there or exclude words which are there. The words found in the provision must be given their natural meaning.
There is no scope for importing into the statute words which are not there. Such importation would be not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation. The normal rule of construction is that the intention of the Legislature is primarily to be gathered from the words used in the statute." 34. The apex court in the case of CWT v. Hashmatunnisa Begam [1989] 176 ITR 98 has held as under (page 106) : "One of the pillars of statutory interpretation, viz., the literal rule, demands that, if the meaning of the statutory provision is plain, the courts must apply it regardless of the result.
The very concept of interpretation connotes the introduction of elements which are necessarily extrinsic to the words in the statute. Though the words 'interpretation' and 'construction' are used interchangeably, the idea is some what different . . . The rule of construction that if the statutory provision is susceptible to, or admits of, two reasonably possible views, then the one which would promote its constitutionality should be preferred on the ground that the Legislature is presumed not to have intended an excess of its own jurisdiction, is subject to the further rule that it applies only where two views are reasonably possible on the statutory language." 35. So long as the literal meaning is clear, one need not bother any more for the intention or the purpose as held by the apex court in the case of CBDT v. Aditya V. Birla [1988] 170 ITR 137.Anandji Haridas and Co. Pvt. Ltd. v. Engineering Mazdoor Sangh [1975] 99 ITR 592 the Supreme Court has held as under (page 595) : "As a general principle of interpretation, where the words of a statute are plain, precise and unambiguous, the intention of the legislature is to be gathered from the language of the statute itself and no external evidence such as Parliamentary Debates, Reports of the Committees of the Legislature or even the statement made by the Minister on the introduction of a measure or by the framers of the Act is admissible to construe those words. It is only where a statute is not exhaustive or where its language is ambiguous, uncer- tain, clouded or susceptible of more than one meaning or shades of meaning, that external evidence as to the evils, if any, which the statute was intended to remedy, or of the circumstances which led to the passing of the statute may be looked into for the purpose of ascertaining the object which the Legislature had in view in using the words in question." 37. The apex court in the case of CGT v. N. S. Getti Chettiar [1971] 82 ITR 599 held as under (page 605) : "Words in the section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose that they are intended to serve." 38. Applying the ratio decidendi of the summit court on various occasions as extracted above, we are unable to appreciate both the assessee's learned counsel and the learned Departmental Representative, who were harping upon the theory of interpretation and on the dictionary meanings of certain words for interpreting the section having plain language without any ambiguity or uncertainty. Wherever the Legislature wanted to insist for the ownership of an asset it has specifically mentioned so, as in Sections 32, 32A, 32AB, 33 and 33A. As nothing is mentioned in Section 33AC about the ownership of ships, we have to conclude that the Legislature was not intending to make the ownership of ship a pre-condition at the threshold level for claiming deduction under Section 33AC. Even in the circulars issued by the Central Board of Direct Taxes, namely, Circular No. 554 of February 13, 1990 (see [1990] 183 ITR (St.) 130) and No. 636 of August 31, 1992 (see [1992] 198 ITR (St.) 1), wherein certain amendments of Section 33AC have been explained, the Board has been silent about the ownership of ship by the assessee at the threshold level. In our considered opinion as it is not permissible for any court or Tribunal to read into the section any words which are not available in the section and when the section itself consists of plain words without any ambiguity, there is no need for resorting to case laws rendered in different contexts to interpret the plain section.
39. Regarding the learned Departmental Representative's reference to Section 36{l)(viii) of the Income-tax Act we would like to mention that unlike in Section 36(1)(viii), in Section 33AC there is a licence given to the assessee to utilise the amount credited to the reserve for the general purpose of the business till the assessee acquires a ship.
Under Clause (b) of Sub-section (2) of Section 33AC the only prohibition was that such amount credited to the special reserve should not be used for certain prohibited purposes as found in Clause (b) of Sub-section (2) of Section 33AC. In the case on hand the assessee has not utilised the funds on the prohibited items as found in Clause (b) of Sub-section (2) of Section 33AC. In Circular No. 636, dated August 31, 1992 (see [1992] 198 ITR (St.) 1) (paragraph 24.2), the Central Board Direct Taxes has observed that shipping companies have diversified into trading, real estate business, etc., and were claiming deduction under this section even in respect of their income from activities other than shipping and hence the deduction was restricted to 50 per cent, of the income derived from business of operation of ships only. Even in this circular nothing is said about the ownership of the ships at threshold level by the assessee for carrying on the business of operation of ships. Hence the learned Departmental Representative's contention that this departmental circular is to be considered as declaratory and is to be given retrospective effect will not advance the case of the revenue. The case laws relied upon by the learned Departmental Representative in the case of CIT v. Podar Cement Pvt. Ltd. [1997] 226 ITR 625 (SC) and in the case of Oxford University Press v. CIT [2001] 247 ITR 658 (SC) are also not of any help to the Revenue because they were rendered in different contexts and on different facts while interpreting different sections. The learned Departmental Representative's contention that the words "owned by the assessee" are to be read into the section cannot be accepted because of the catena of ratios of the apex court mentioned elsewhere in this order. The learned Departmental Representative also relied upon the decision of the Full Bench of the Madras High Court in the case of CIT/CWT v. P. Manonmani [2000] 245 ITR 48 and argued that the object of bringing in a particular section is to be borne in mind while interpreting the same. Of course this decision, wherein it was held that while ascertaining the true scope of a provision in a statute attention must necessarily be paid not only to the text, viz., the words employed in the relevant provision, but also the context, is not of much relevance in deciding the matter, wherein the section is plain and consists of unambiguous words.
40. As regards the theory of double deduction we do not find force in the contention of the learned Departmental Representative, because in the case of Section 33AC the deduction is profit or income oriented and not asset oriented. The reliance on Section 80HHC by the learned Departmental Representative is not advancing the Revenue's case, because there is no restriction in Section 33AC to the number of assessees who could claim such deduction and further the deduction under Section 33AC is with reference to the profit or income of each and every assessee and not linked to any particular turnover like in Section 80HHC. The reference to Section 44B by the learned Departmental Representative also cannot advance the Revenue's case because in that section also nothing is said about the ownership of ships. On the contrary, that section also speaks about profits only with certain conditions.
41. We have also gone through the contents of the agreement entered into by the assessee with Reliance Industries Ltd. (Shipping Division).
In the preamble of the agreement we find the following paragraph : "And whereas the 'owner' is desirous of appointing the 'technical manager' with the intention of entrusting to the 'technical manager' the vessel for management so as to ensure its efficient running and maintenance including provision of the necessary personnel." 42. Thus, the assessee (technical manager) has been engaged by the owner (Reliance Industries Ltd.) for the management of the vessel so as to ensure its efficient running and maintenance including provision of the necessary personnel. In our considered opinion, the phrase 'running and maintenance' is nothing but 'operation of ships', as envisaged by Section 33AC. The nomenclature found in the agreement, namely, 'technical manager', cannot change the nature of the business done by the assessee-company in operation of ships of Reliance Industries Ltd. 43. In a nutshell on a consideration of the totality of the facts and the circumstances of the case in its entirety in the light of the above discussion and of the various case laws discussed we are of the considered opinion that for claiming deduction under Section 33AC the assessee need not be the owner of the ship at the threshold level itself even though the assessee has acquired the ship within the specified period. So long as the assessee has not contravened the provisions of Section 33AC(2)(b), the assessee cannot be denied the claim of deduction under Section 33AC. In this case on hand since the assessee has not contravened the provisions of Section 33AC(2)(b) we do not find any reason to deny the assessee the exemption claimed under Section 33AC only on the reason that the assessee was not owning a ship at the threshold level, which is not a pre-condition for allowing this deduction, as already observed by us. If at all the assessee is to lose the exemption it is only after the specified period of eight years if the assessee is not acquiring a new ship as contemplated under this section. In this case on hand the assessee has already bought a new ship within the specified period of eight years, as pointed out by learned counsel for the assessee. Hence, we do not find any reason to deny the assessee the exemption claimed under Section 33AC. Hence, we are inclined to quash the orders of the authorities below and allow the appeal of the assessee.
44. In the result, the appeal in I. T. A. No. 1044 (Mds) of 1999 for the assessment year 1995-96 is allowed.
45. For the same reasonings the appeal of the assessee for the assessment year 1996-97 (I. T. A. No. 1773 (Mds) of 1999) is also allowed. The appeal in I. T. A. No. 1043 (Mds) of 1999 against the Commissioner (Appeals) order refusing to rectify under Section 154 has become infructuous in view of our decision in I. T. A. No. 1044 (Mds) of 1999 above.
46. Before parting with, we would be failing in our duties if we are not recording our appreciation for the way in which the learned representatives of both the sides, more especially the learned Departmental Representative, have taken pains to put forth their respective cases before the Tribunal by bringing in the various case laws in the interest of interpreting Section 33AC and assisting the court by tendering patient and strenuous arguments.
47. In the result, the appeals in I. T. A. No. 1044 (Mds) of 1999 for the assessment year 1995-96 and 1773 (Mds) of 1999 for the assessment year 1996-97 are allowed and the appeal in I. T. A. No. 1043 (Mds) of 1999 for the assessment year 1995-96 is dismissed as infructuous.