NETHERLANDS STEAM NAVIGATION COMPANY LTD. versus THE COMMISSIONER OF INCOME-TAX, WEST BENGAL

Citation: [1970] 1 S.C.R. 1 · Decided: 14-03-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

' 
A 
NETHERLANDS STEAM NAVIGATION COMPANY LTD. 
B 
c 
D 
E 
F 
G 
H 
v. 
THE COMMISSIONER OF INCOME-TAX, WEST BENGAL 
March 14, 1969 
[J. C. SHAH AND V. R.AMASWAMI, JJ.J 
Income-tax Act 1922 section 10(2) (vi-a)-Non-resident-Company 
-Taxable profits computed by special formula 
evolved by Income-tax 
Officer and not under second method in rule 33 
Income.tax Rules of 
1922-Whether initial and additional depreciation admissible. 
The appellant is a non-resident shipping oompal\Y with its local office 
in. Calcutta. 
For its assessment to income-tax for the yea:rs 1952-53 to 
1956-57 the appellant filed returns disclosing taxable income computed on 
the basis of its annual turn-over in its Indian trade but did not furnish 
particulars of its world income. 
The Income-tax Officer computed the 
taxable busine&s income for each year by application of a special formula 
which was accepted by the appellant. However, in computing the income, 
the Income-tax Officer only allowed n.ormal depreciation and other trade 
allowances admissible under the Income-tax Act 1922 and did not allow 
any initial depreciation or additional depreciation. in respect of the ships 
of the appellant in any of the assessment years, because the ships acquired 
by the, appellant were not introduced into the Indian business in the years 
in which they were newly acquired. 1'he orders of assessment were con-
firmed by the Appellate Assistant Commissioner but the Tribunal 
held 
that in respect of all the four ships, additional depreciation was admissible 
under section 10(2) (vi-a) of the Act, as claimed. The High Court, on a 
re.ference, answered the question against the assessee., 
HELD : Additional depreciation was not admiss;ble to the appellant as 
an allowance in the computation df the taxable inl!ome by the 
special 
formula adopted by the Income-tax Offi.oer. 
It was common ground that the appropriate method for determining 
the pr.:ifits was the second methqd in r. 33. 
But that method was never 
apphed; if it was applied in the computation of the world profits of the 
assessee, it would have been necessary to allow the various depreciation 
allowances. 
The assessee could not, while accepting 
determination of 
taxable profits in a manner not warranted by the se.cQild method under 
r. 33, claim that additional depreciation should be allowed, [8 E] 
. . T~e . Supreme Court in the present appeal was exercising an advisory 
1unsd1ction and could not decide whether the computation of taxable income 
by the IncomMax Officer by the application of the formula evolved by 
him was correct. 
Additional de.preciation is a statutory allowance in the 
determin.ation of taxable profit under S. 10 of the Act and in the case of 
a non-resident 'Where, actual income cannot be deter~ined. and resort is 
had to r. 33, not when. an empirical method is adopted for computation 
of the taxable income. [7 HI 
· 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1622 
to 1626 of 1968. 
Appeals from the judgment and order dated February 11, 1964 
of the Calcutta High Court in Income-tax Reference No. 100 
1960. 
{ 
\ 
2 
SUPREME COURT REPORTS 
[1970] I S.C.R. 
Sachin Chaudhuri, T. A. Ramachandran and D. N. Gupta, for 
A 
the appellant (in all the appeals). 
S. T. Desai, S. A. L. Narayan Rao, R.H. Dhebar, R. N. Sach-
they and B. D. Sharma, for the respondent (in al! the appeals). 
The Judgment of the Court was delivered by 
B 
1
t • 
Shah, J. Netherlands Steam Navigation Company Ltd.-
hereinafter called "the assessee"-is a non-resident Company en-
gaged in shipping business. For the. assessment years 1952-53 to 
·,;;;;,j 
1956·57 the assessee filed its return of income for the relevant 
accounting years disclosing taxable income computed <ln the basis 
of its annual turnover in its Indian trade i.e. "round voyages" to 
c 
1
and from Indian Ports. The assessee did not furnish particulars 
of its world income. The Income-tax Officer computed the tax-
able business income of the assessee for each year hy the applica-
tion of the following formula ; 
Indian trade profits X Indi:in Port receipts 
Total Port receipts 
By the expression "Indian trade profits" in the formula was meant 
profit earned in "round voyages" made by the assessee's ships which 
touched Indian ports. Operation of the formula may be illustrated 
by taking a sample computation by the Income-tax Officer for the 
year 1953-54 : 
~·T vt'll gros~ earnings in Indi<'..n Trade 
Deduct:-
(1) Total expenses in

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