Itta/111/2002 Of Tci Industries Ltd v. The Asst.commi.of Income Tax Hyd

THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYANDTHE HON’BLE SRI JUSTICE T.SUNIL CHOWDARYI..T.T.A.No.111 of 2002 JUDGMENT: (Per LNR,J) The appellant is a Company involved in the activityof transport. The transport activity in turn is undertaken notonly on the surface, but also in the water and in air,through the respective modes of transport. Being anassessee under the Income Tax Act, 1961 (for short ‘theAct’), the appellant has been submitting the returns yearafter year. The Parliament introduced Section 33AC ofthe Act in the year 1989 providing for deduction of the totalincome derived by the Government or public companiesregistered in India with the main object of carrying onbusiness of operation of ships. For the assessment year 1993-94, the appellant hasshown the turn over of Rs.4.82 crores from the activity ofshipping and claimed deduction of Rs.1,97,94,400/- underSection 33AC of the Act. The Assessing Officerdisallowed the claim, observing that the operation of shipsis not the main activity of the appellant. The view taken bythe Assessing Officer was upheld in the appeal preferredbefore the Commissioner of Appeals as well as inI.T.A.No.684/HYD/97 by the Hyderabad Bench of theIncome Tax Appellate Tribunal. Hence, this appeal underSection 260A of the Act. Sri Y.Ratnakar, learned counsel for the appellantsubmits that the necessity for a company incorporatedunder the Indian Companies Act to indicate the mainobjects, incidental objects and other objects has arisenonly when Section 13 of the Companies Act was amended in the year 1964 and since the appellant wasincorporated earlier to that, no such indication of mainobjects was made. He submits that once it is evident fromthe Memorandum of Association that the appellantundertakes the activity of transport of different modes, onthe surface, water and air, it qualifies to claim deductionunder Section 33AC of the Act. Learned counsel for the respondent, on the otherhand, submits that the appellant is an ordinary transportcompany carrying on business activity through thetransport on road and the mere fact that part of the activitywas carried out through shipping does not bring it withinthe purview of Section 33AC of the Act. He submits thatthe Parliament was clear in its mind while enactingSection 33AC and it was specifically mentioned that it isonly the companies which have the main object ofcarrying on business of operation of ships that areextended the benefit. The only question that arises for consideration is asto whether the appellant is entitled to the benefit underSection 33AC of the Act. The provision as it stood thenreads: “Reserves for shipping business. 33AC. (1) In the case of an assesee, being a Government company or a public company formedand registered in India with the main object ofcarrying on the business of operation of ships, thereshall, in accordance with and subject to theprovisions of this section, be allowed a deduction ofan amount, not exceeding the total income (computedbefore making any deduction under this section andChapter VI-A), as is debited to the profit and lossaccount of the previous year in respect of which thededuction is to be allowed and credited to a reserveaccount to be utilised in the manner laid down in sub-section (2): Provided that where the aggregate of theamounts carried to such reserve account from time totime exceeds twice the amount of the paid-up sharecapital (excluding the amounts capitalised fromreserves) of the assessee, no allowance under thissub-section shall be made in respect of suchexcess.” Provided that where the aggregate of theamounts carried to such reserve account from time totime exceeds twice the amount of the paid-up sharecapital (excluding the amounts capitalised fromreserves) of the assessee, no allowance under thissub-section shall be made in respect of suchexcess.” From a perusal of it, it is evident that the deduction ofprofit from the activity of operation of ships is permitted, ifonly the public company has “the main object of carryingon the business of operation of ships”. It is not in disputethat the appellant does not have, as the main object, ofoperation of ships. Whether one goes by theMemorandum of Association or by the volume of businessthrough shipping, it clearly emerges that the main activitywas the surface transport. A small fraction of the turnoverof the appellant is through shipping. The Tribunal hastaken the correct view of the matter. We do not find anybasis to interfere with the same. The ITTA is accordingly dismissed. Themiscellaneous petitions pending in this appeal shall alsostand disposed of. There shall be no order as to costs. _____________________ L. NARASIMHA REDDY, J 12-08-2014JSU/ks _____________________ T. SUNIL CHOWDARY, J