CALCUTTA HIGH COURT

                                        Commissioner of Income-Tax

                                                         Vs

                                          Swedish East Asia Co Ltd

                                           (Sabyasachi Mukharji, J.)

                                                   28.04.1980

                                                 JUDGEMENT

Sabyasachi Mukharji, J.

( 1. ) IN this judgment, we propose to deal with these two references, because these relate to a
common question relating to the same assessee for different assessment years. We shall,
however, have to refer to a slight difference in the findings of the AAC in respect of one year,
viz., the order passed by the AAC in INcome-tax Reference No. 670A of 1972, which would be
relevant and to which we shall refer at the relevant time.

( 2. ) THE assessee is a non-resident shipping company registered in Sweden. So far as the first
reference in concerned, the assessment year under consideration is 1963-64, the corresponding
accounting year being the year ending December 31, 1962. THE ITO had not allowed
depreciation on the two ships, viz., Bali and Mindore, which were acquired in the year 1941 on
the ground that these two ships were acquired more than twenty years ago. THE ITO computed
the total income at Rs. 1,63,572. It will be relevant for the present purpose to refer to certain
portions of the order of the ITO. Dealing with the depreciation on these two vessels, the ITO
observed, inter alia, as follows : "Deduct : Depreciation on vessels for reasons discussed in the
assessment order for 1962-63, depreciation is not allowable on two vessels, viz., Bali and
Mindore, which were acquired in 1941 and have, therefore, completed twenty years in the
assessment year 1961-62.Depreciation is allowed as under : He, thereafter compueted the total
income as under: With the other items, we are not concerned. There was an appeal before the
AAC. Before the AAC, it was contended on behalf of the assessee that these two ships were
purchased in 1941 and normally the depreciation should have been up to and including
assessment year 1961-62 only, since the claim could be made only for 20 years. However, it was
stated that during the war years, these two ships did not touch any Indian port between April,
1940, and December, 1945. Hence, it was urged that the depreciation on these ships should be
allowed up to and including the assessment year 1966-67. On this question for the preceding
year, the AAC noted that the contention of the assessee had been accepted. Therefore, he held
that depreciation on the two ships in question was to be allowed for the year tinder appeal. The
AAC, however, directed that the assessee should produce before the ITO evidence to show that
no depreciation had been claimed or allowed during the war years on these two ships. He
disposed of the contention before him in the manner indicated before. Thereafter, there was an
appeal before the Tribunal. The Tribunal found that in I.T. Appeal No. 11628 of 1960-61 which
was the appeal relating to the assessment year 1958-59, this point had been disposed of by the
Tribunal in favour of the assessee. It is necessary to refer in detail to that order later because of
the contention that was urged before us regarding the effect of the decision of the Calcutta High
Court, which we shall refer to presently. Before we do so, in disposing of the instant appeal
before the Tribunal, the Tribunal referred to a portion of the previous order as under :"In the case
of a foreign shipping company like that of the appellant-company there may be ships which are
borne more than 20 years on the total world fleet and many of the ships might not have been
used at all in the Indian waters but there is no prohibition under the Indian Income-tax Act,
against allowing depreciation on such ships simply on the ground that the ship had formed a part
of the company's fleet for more than 20 years. We, therefore, hold in favour of the appellant-
company, viz., that depreciation allowance as provided in Rule 8 should be allowed on all ships
employed in connection with the company's Indian trade subject only to the limitation imposed
under proviso (c) to Section 10(2)(vi). Accordingly, in our opinion, the assessee-company is
entitled to depreciation allowance on the aforesaid two ships as prescribed in Appendix I in terms
of Rule 5 of the Income-tax Rules, 1962, and subject only to the limitation prescribed by Section
34(2)(i) of the I.T. Act, 1961."

( 3. ) IN the premises, the Tribunal in Reference No. 506 of 1972 has referred the following
question for our consideration : "Whether, on the facts and in the circumstances of the case, the
Tribunal was right in holding that the assessee was entitled to depreciation allowance under Rule
5 of the INcome-tax Rules, 1962, even in respect of the ships, Bali and Mindore, for the
assessment year 1963-64 ?" ;