Section 172(7)

Section 172(7) — the law in short

What the courts have decided on section 172(7), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• A.S. Glittre D/5 I/S Garonne v CIT Supreme CourtHelps taxpayer
  We paid tax on each voyage under section 172(4) and then elected under section 172(7) for a regular assessment, which came out much lower and produced a refund. The Department has refunded the tax but refused interest, saying what we paid was not advance tax. Is that right?
  No. Section 172(7) creates a legal fiction by which the payments already made under s.172(4) are treated as a payment in advance of the tax leviable for that assessment year, and the Supreme Court held that in construing that fiction all the consequences flowing from it must be assumed. The ad hoc assessment under s.172(4) is superseded and a regular assessment is made as per the provisions of the Act, so all the provisions of the Act relating to advance tax apply, and on excess payment the assessee is entitled to the excess and to interest on it.
• Statutory position — section 172: the 7.5 per cent freight levy on a non-resident's ship, the master's return, the nine-month limit in s.172(4A), and the owner's election under s.172(7) CBDT Circulars & InstructionsCuts both ways
  A foreign ship loaded our cargo at an Indian port and the Assessing Officer is demanding tax from the master before port clearance. What is the levy, what return has to be filed, is there any time limit on the officer, and can the owner ask instead to be assessed on his year's income?
  Section 172 is a self-contained levy that operates voyage by voyage: where a ship belonging to or chartered by a non-resident carries passengers, livestock, mail or goods shipped at a port in India, s.172(2) deems 7.5 per cent of the amount paid or payable for that carriage — whether paid in or out of India — to be income accruing in India, and s.172(4) makes the tax payable by the master of the ship at the rate applicable to a company that has not made the arrangements referred to in s.194. The master must furnish a return under s.172(3) before the ship's departure, though the officer may accept a return filed within thirty days of departure by an authorised person where satisfactory arrangements have been made; s.172(6) withholds port clearance until the tax is paid or arrangements made; s.172(4A) bars any assessment order under s.172(4) after nine months from the end of the financial year in which the s.172(3) return is furnished; and s.172(7) lets the owner or charterer claim, before the expiry of the assessment year relevant to the previous year in which the date of departure falls, that an assessment be made of his total income under the other provisions of the Act, in which case the s.172 payments are treated as a payment in advance of the tax.
• CBDT Circular No. 9/2001 dated 9 July 2001 — on a regular assessment under section 172(7) the non-resident is liable to interest under sections 234B and 234C and entitled to interest under section 244A; Circular No. 730 withdrawn CBDT Circulars & InstructionsCuts both ways
  Our foreign shipping client elected under section 172(7) for a regular assessment and is now getting a refund. The Department says no interest is payable on it because of an old Board circular. Is that circular still good?
  It is not. Circular No. 9/2001 dated 9 July 2001 withdrew Circular No. 730 dated 14 December 1995 as "no longer legally tenable" in the light of the Supreme Court's decision in A.S. Glittre D/5 I/S Garonne v. CIT, and clarified that on a regular assessment under s.172(7) the non-resident assessee is liable to pay interest under sections 234B and 234C and is also entitled to receive interest under s.244A, as the case may be. Circular No. 730 had said the opposite: that an assessee exercising the s.172(7) option was neither liable to interest under ss.234B and 234C nor entitled to interest under s.244A.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.