JUDGMENT [The judgement of the Court was delivered by Muhammad Zahoorul Haq, J.].-This is an application under Section 66(1) of the Income Tax Act, 1922 challenging the orders passed by the Income Tax Officer for the assessm ent year 1953-54 disallowing the depreciation for the ship s. S. Safina-e-Millat. The said order was confirmed: in appeal by the Appellate Assistant Commissioner of Income Tax and eventually the same decision was upheld by the Income Tax Appellate Tribunal, Karachi by its order dated 25th January, 1971.
2. The relevant facts are that in February, 1952 the applicants purchased a Japanese Ship named Tsukushi Maru and got the same repaired. After the repairs the ship was surveyed by the surveyors, who found the ship in good and efficient condition and worthy of the classification 100-A-l. The ship was thereafter insured and then sailed for Kobe on its own steam. The applicants alleged to have made efforts to obtain Cargo at Singapore, but before the ship could reach Singapore, the ship met with a typhoon at Some distance from Hong Kong, which caused considerable damage to the ship and the ship, therefore, had to be towed to Karachi, where it reached in October, 1952. The ship was being repaired at Karachi, when it caught fire on 14th March, 1953, as a result of which the ship was scrapped.
3. The applicants claimed depreciation for the ship for assessment year 1953-54 ending on 31-12- 1952, but the Income Tax Officer disallowed the same on the ground that depreciation was allowed as a consequence of earning the income and as the ship was not used, therefore, depreciation was not allowable. The appeal of the applicant met the same fate on 31-1-1959. However, the second appeal before the Income Tax Appellate Tribunal met with some success and by its order dated 26-3-1959 the assessm ent was set aside and the matter was remanded to the Income Tax Officer for making a fresh assessm ent on the ground that assessee may be given ah opportunity to place additional facts,
4. Before the Income Tax Officer, the applicants contended that they had made efforts to secure Cargo from Singapore and submitted that "use" implies passive as well as active use of the ship.
The applicants produced before the Income tax Officer copies of the cables sent from Japan to Singapore for obtaining Cargo. The Income Tax Officer came to the conclusion that the ship was not in a fit condition to be made available for hire and at no stage the ship had attained the capacity of rendering the. Services. He, therefore, held that the ship was not used at any time either actively or passively.
5. The Appeal of the applicants on 13-1-1959 met the same fate and the Appellate Assistant Commissioner agreed with the Income Tax Officer that the ship was not used, and therefore, the claim for depreciation was rightly disallowed. The applicants moved the Income Tax Appellate Tribunal again and placed reliance on a number of reported decisions to the effect that actual user of the assets is not necessary in order to claim depreciation. The applicants had contended that the ship had been kept ready for business.
6. The Appellate Tribunal required the applicants to. Produce the certificate of seaworthiness of the ship, the documents of insurance and any other evidence about the capacity of the ship for use.
After that the applicants produced a letter from Eastern Insurance Federal Union Company Limited dated 22-1-1971 stating that the ship was insured with them for the period 20th July, 1952 to 20th July, 1953, but the insurance policy was not produced on the plea that the same bad been surrendered to the Insurance Company. A report of survey for repairs was also produced from the Lloyd Register of Shipping to establish seaworthiness. The Appellate Tribunal has, however, noted that there was no other evidence laid otherwise to establish the seagoing capacity of the ship. The Appellate Tribunal noted the correspondence which had been produced in respect of obtaining the Cargo from Singapore, but they were of the view that if the ship was seaworthy then some efforts should have been made to obtain cargo even from to which was the starting point, or at least from Hong Kong and since no evidence to that effect had been placed before them, therefore, they came to the conclusion that the ship was not capable for use nor it was seaworthy before reaching Singapore. After considering the factual position the Appellate Tribunal came to the conclusion that there was admittedly no evidence on record regarding the seaworthiness of the ship although the Tribunal had specifically called upon the applicant to produce such evidence. The Appellate Tribunal did not consider the certificate of Llyod's Register of Shipping as sufficient to prove the seaworthiness of the ship. They also considered that the letter from the Lloyd's Register of Shipping dated 19-1-1971 merely shows the classification of the ship as 100-A-l, but it does not show its seaworthiness. The Tribunal also considered the certificate of Insurance Company, but they were again of the view that the Insurance Certificate did not throw any light of the capacity of the ship for use. The Tribunal also took into consideration that the ship had not been actually used in any manner during the year under consideration. Their final conclusion was that the ship was at no stage seaworthy or capable of use before it met its ultimate doom.
7. The applicants, therefore, made this application and raised the following question of law:-
(1) Whether in the facts and circumstances of the case the Tribunal is right in holding that the applicant was not entitled to claim depreciation in respect of the ship Safina-e-Millat" for the assessm ent years 1953-54.
(2) Whether in the facts and circumstances of the case the Tribunal was right in holding that the ship "s. S. Safina-e-Millat" was at no time used nor was capable of being used?
(3) Whether in the facts and circumstances of the case the finding of the Tribunal that the ship "s. S. Safina-e-Millat" was at no time used nor was capable of being used based on any material or evidence on record or is this finding in disregard of the evidence produced by the assessee which is on record?"
8. Mr. Ali Athar, the learned counsel for the applicant has contended that use for business includes active as well as passive use and that since this ship was ready for use and was in a position to take the Cargo, therefore, depreciation should have been allowed for the same.
9. Mr. Manzoor Ahmad Khan, the learned counsel for the Department fairly conceded that he did not challenge the position in law that both active and passive use entitled the ship to depreciation, but he contended that the applicants had failed to produce the conclusive evidence to show that the ship had in fact been declared seaworthy by the Custom and Port authority in Japan.
10. Mr. Ali Athar contended that the fact that the ship had sailed on its own steam from Kobe and further that efforts had been made to secure Cargo for the ship from Singapore and further the fact that the survey after repairs had declared the ship in efficient condition coupled with the feet that the ship had been insured conclusively proved that the ship was in a fit condition to take the Cargo and it was, therefore, ready and fit for use and had actually sailed from Kobe towards Singapore via Hong Kong, but it was prevented by the typhoon from taking the Cargo, and therefore, supernatural elements had intervened and hence the ship should be taken to be used.
11. Mr. Ali Athar had relied upon (1963) 49 1 T R 177, where it was held in respect of trucks sold, which were in running order and capable of being put to use, that the expression ''use for the purposes of business" does not necessarily imply that the machinery or plant referred to must have been in active use up to the date of sale.
12. Mr. Mansoor Ahmad Khan submitted that it was a finding of fact by the Tribunal whether the ship was in a fit condition to take the Cargo or not and that being a finding of fact based on proper reasoning and after giving opportunity to the applicants to prove the seaworthiness of the ship the same should not be disturbed by the High Court. (1959) 35 I T R 312 (SC) a case decided by the Supreme Court of India, is a case where the question was whether the trees were of spontaneous growth or were products Of plantation, the Supreme Court of India observed that they were matters of appreciation of evidence on a question of fact and since in that case the Tribunal had given a finding on consideration of all the material evidence, it's finding was final and not open to challenge in a reference under Section 66(1 j of Income-tax Act, 1922.
13. In the facts and circumstances of this case, we are of the view that the Tribunal has taken a reasonably correct view of the facts proved before them, they have rightly discarded the evidence in respect of effort at securing Cargo from Singapore because there was no evidence made available that any effort had been made to secure any Cargo from Kobe or Hong Kong. That was a reasonable view to take. The Tribunal has came to finding that the seaworthiness of the ship had not been proved in spite of opportunity having been given to the applicants to prove the same. We are in agreement with the view of the Tribunal that the mere survey reports of the repair of the ship does not prove the seaworthiness of the ship in view of the fact there was no evidence produced from any Kobe Port Authority in respect of the same. We are not impressed by the statement that mere sailing of the ship on its own steam amounts that it was seaworthy. What was to be proved by the applicants was that it was seaworthy for the purpose of taking Cargo and not merely seaworthy for the purpose of sailing. One cannot understand what prevented the applicants from proving the seaworthiness of the ship by producing certificate from competent authority of the Port of disembarkation particularly when the Tribunal had required the applicants to produce the certificate of the seaworthiness of the ship. The applicants had failed to produce that certificate of( seaworthiness. They had also failed to produce the Insurance Policy and in any case the Insurance Policy could not prove seaworthiness of the ship. We are consequently of the view that since the Tribunal has considered the material evidence produced by the applicant in respect of seaworthiness of the ship, but it has not accepted that evidence and has given reasons for the same then the same cannot be termed as an arbitrary finding or a finding inconsistent with the evidence.
14. Mr. Mansoor Ahmad Khan had drawn our attention to International Conventions on Merchant Shipping by Singh where Japan is shown as a signatory to the International Regime of Maritime Parts and other International Conventions on shipping. We find that the conventions require the issuance of a number of certificates to be issued by the Government Agencies to the ships. But in the present case not a single certificate issued by any Government Agency in Japan has been produced by the applicants certifying the seaworthiness of the ship and that is great drawback in the case of the applicants and consequently the criticism of income-tax Appellate Tribunal appears to be justified. In any case, the decision of the Tribunal is really a decision of question of fact about the seaworthiness of the ship and the same is based on cogent reasons and does not appear either arbitrary or devoid of any reason or inconsistent with the evidence as sufficient evidence was not produced and the evidence has been fairly discussed and has not been found satisfactory. The applicants have failed to produce sufficiently reliable evidence and in these circumstances the decision of the Appellate Tribunal was justified.
15. This application is, therefore, dismissed as the answers to all the three questions are collectively in the affirmative..