Dismissing the appeals the Court held that the deduction under section 33AC was towards creating a reserve in order to acquire a new ship and was not linked to whether shipping operations had yielded a profit, but linked to enabling acquisition of a new ship for business purposes, i. e., purely for shipping business operations. That the usage of the phrase total income in section 33AC enabled indicating the numerical cap applicable to the allowance amount. No allowance could have been claimed in excess of the total income. That the Tribunal was right in noticing that the amendment of 1996 was only in connection with the computation of the cap on the amount of the allowance and did not throw any fresh light on interpretation of the provisions of section 33AC that existed prior to the amendment (between 1991 and 1993). The deduction allowed under section 33AC was directly linked to shipping operations and aimed at sustaining earnings from shipping operations (by enabling a reserve in order to acquire a new ship). A deduction for such purpose, not only met the nexus test, but was also reasonable, logical and commercially commonsensical. That by the very design of section 33AC, there was a nexus between the deduction allowed under section 33AC and the shipping business operations. That the reference to a ship would need to be regarded as a reference to any ship that qualifies under section 80-I(1) which uses the phrase to which this section applies. Section 80-I(3) provides that the section would apply to any ship that meets the three criteria stipulated in that sub-section. Therefore, applying section 80-I(6), the qualifying ship PD must be treated as the only source of income, but it could not be stated that the reserve created under section 33AC could never be attributed to the ship PD. It would not be possible to make adjustments at this stage by apportionment between qualifying and non-qualifying ships and the court could not provide the basis and proportions for such apportionment in an appeal under section 260A.(AY.1992-93, 1993-94)
Tolani Ltd. v. Dy. CIT (2025)472 ITR 121/ 165 taxmann.com 697 (Bom)(HC)
S. 80I : Industrial undertaking- For computing deduction under section 80I, it would be necessary to give effect to, and factor in, deduction allowed under section 33AC and if result of such deduction under section 33AC was that there was no profit from ship-Deduction under section 80I is allowable-Shipping business-Reserves-Reserve created to be primarily used for acquiring new ship- Cannot partake character of profit-Deduction inextricably linked to business of shipping with direct nexus to shipping operations brought out in provision itself-Total income-Income from capital gains and other sources contribute merely in computation of scale of cap on deduction-Profits of ship to be given effect to and factored in for computation of deduction under Sectionm80I- Provision for creating reserve to acquire new ship-Amendment not applicable to relevant assessment years prior to effective date-Proportionate allocation- Court cannot provide own basis and proportions for apportionment in appeal- Interpretation of meaning of word Ship in provision.[S.80I(3), 80I(6),260A]
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