M.B. Shah JUDGMENT
M.B. Shah, J.
1. It is the contention of the petitioners that the first petitioner-Arabian Express Line Limited of the United Kingdom - is a company incorporated in the United Kingdom (U. K.). The second petitioner is a director of the first petitioner-company and is a non-resident Indian. The company was incorporated on June 18, 1992, in the name of "Cookquick Trading Limited". The name of the company was changed from "Cookquick Trading Limited" to "Arabian Express Line Limited" with effect from July 10, 1992. Copies of the certificate of incorporation of the company named Cookquick Trading Company and the certificate of incorporation of change of name as Arabian Express Line Limited with effect from July 10, 1992, are produced on record of this petition.
2. In this petition, it is contended that the respondents be directed to give effect to article 9 of the covenant between the Government of India and the Government of the United Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital gains executed under section 90 of the Income Tax Act, 1961. In support of that, it is pointed out that the Assistant Commissioner of Income Tax, Company Circle, Calcutta, has issued a certificate dated June 18, 1993 (annexure "K"), to the effect that M/s. Arabian Express Line Limited, United Kingdom, is a resident of the United Kingdom and that in accordance with article 9(1) of the Agreement for the Avoidance of Double Taxation between the Government of India and the Government of the United Kingdom, the entire shipping income of the United Kingdom company is exempt from tax in India with effect from April 1, 1992. It is also stated that the aforesaid certificate would be in force till the validity of the relevant provisions exempting such income in the double taxation avoidance agreement with the United Kingdom and is subjected to any other order that may be passed subsequently in this behalf. The petitioners have also produced similar certificate dated November 16, 1992, issued by the Assistant Commissioner of Income Tax, Circle 2(1), Bombay. In that certificate, it is also expressly stated that the operation of ships by M/s. Arabian Express Line Limited, United Kingdom, is exempt from the production of the necessary port clearance certificate as required under section 172(6) of the Income Tax Act. It is submitted that, as the first petitioner-company is incorporated in the United Kingdom, under article 9 of the covenant between the Government of India and the Government of the United Kingdom, the petitioners are not liable to be taxed under the provisions of the Indian Income Tax Act. Despite the documentary evidence produced before the Income Tax Officer, the Income Tax Officer, Gandhidham, vide his order dated March 30, 1994, levied tax and imposed penalty. He has also issued notice under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income. That order is challenged before this court by filing this petition.
3. At the time of hearing of this matter, it is submitted by learned counsel, Mr. Shelat, that the provisions of section 172 of the Income Tax Act would not be applicable to the petitioners in view of the covenant entered into between the Government of India and the Government of the United Kingdom and in view of section 90(2) of the Income Tax Act.
4. As against this, it is contended by learned counsel for the respondents that the provisions of section 172 of the Income Tax Act are applicable in the present case, because it is found by the Income Tax Officer that the........