JUDGMENT

Y. V. CHANDRACHUD, CJI.:— The respondent, Gosalia Shipping Private Limited, which is a company incorporated under the Indian Companies Act does the business of Clearing and Forwarding and as Steamship Agents. In 1970, respondent acted as the shipping agent of Aluminium Company of Canada, Limited which is a non-resident company. The Aluminium Company time-chartered a ship "M. V. Sparto" belonging to a non-resident company called Sparto Compania Naviera of Panama. The said ship called at the port of Betul, Goa, on March 1, 1970 where it loaded 13,000 long tons of bauxite belonging to the time-charterers, the Aluminium Company. On March 20, 1970 the ship left for Alfred port, Canada. The ship was allowed to leave the port of Betul on the basis of a guarantee bond executed by the respondent in favour of the President of India, undertaking to pay the income-tax payable by the time-charterers under Section 172 of the Income-tax Act, 1961. On April 15, 1970, the First Income-tax Officer, Margao, Goa, issued a demand notice to the respondent for payment of Rs. 51,191 by way of income-tax under the aforesaid provision. The respondent filed Special Civil Application No. 31 of 1970 in the court of the Judicial Commissioner, Goa, asking for a writ of Mandamus directing the Income-tax Officer to withdraw the demand notice. By a judgment dated October 29, 1971, the learned Judicial Commissioner allowed the respondents Writ Petition and passed an order quashing the demand notice. Having obtained from the Judicial Commissioner a certificate of fitness to appeal to this Court under Article 133 (1) (b) and (c) of the Constitution, the Union of India has filed this appeal.

2. The question as to whether the respondent is liable to pay the income-tax demanded of it by the Income-tax Officer, depends for its decision on the construction of S. 172 of the Income-tax Act, 1961, which read as follows at the relevant time:

"172 (1) The provisions of this section, shall, notwithstanding anything contained in the other provisions of this Act, apply for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, live-stock, mail or goods shipped at a port in India.

(2) Where such a ship carries passengers, live-stock, mail or goods shipped at a port in India, one-sixth of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner or charterer on account of such carriage.

(3) Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Income-tax Officer a return of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of the carriage of all passengers, live-stock, mail or goods shipped at that port since the last arrival of the ship thereat :

Provided that where the Income-tax Officer is satisfied that it is not possible for the master of the ship to furnish the return required by this sub-section before the departure of the ship from the port and provided the master of the ship has made satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf, the Income-tax Officer may, if the return is filed within thirty days of the departure of the ship, deem the filing of the return by the person so authorised by the master as sufficient compliance with this sub-section.

(4) On receipt of the return, the Income-tax Officer shall assess the income referred to in sub-section (2) and determine the sum payable as tax thereon at the rate or rates in force applicable to the total income of a company which has not made the arrangements referred to in Section 194 and such sum shall be payable by the master of the ship.

(5) For the purpose of determining the tax payabl