ARIJIT PASAYAT, C.J.

At the instance of the Revenue, the following questions have been referred under s. 18 of the Companies (Profits) Surtax Act, 1964 (in short "the Act"), r/w s. 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the IT Act"), by the Income-tax Appellate Tribunal, Cochin Bench (in short "the Tribunal")

"Whether, on the facts and in the circumstances of the case

(i) the Tribunal is right in law in holding that unless the total income is assessed to tax, there can arise no liability under the provisions of the Companies (Profits) Surtax Act

(ii) is the assessment under the Companies (Profits) Surtax Act wrong and against law ?"

The factual position as set out in the statement of case is as follows : The assessee, Taiyo Gyogyo Kabushiki. Kaisha, is a multinational company of Japan with diverse business interests ranging from shipping to sugar refining. During the previous year relevant to the asst. yr. 1979-80, the assessee's ships visited Indian ports for shipment of cargo. Gross freight earnings of Rs. 2, 75, 06, 151 for shipment of cargo from Indian ports were subjected to tax in accordance with the provisions of s. 172(4) of the IT Act, 1961. The assessee being a non-resident company the assessment was made through its Indian agents, Devshi Dhanji Khona, Cochin. On the basis of the assessment under s. 172(4) of the IT Act, the AO proposed to levy surtax under the Act. The assessee's stand before the AO was that in the absence of any assessment under s. 143 or 144 of the IT Act, there was no question of levy of such tax. Any assessment made under s. 172(4) of the IT Act cannot be said to be computation of total income under the said Act which alone can form the basis of assessment under the Act. The AO did not accept the view. He held that whatever was assessed under s. 172(4) of the IT Act would amount to chargeable profit under s. 2(5) of the Act and attract levy of surtax. In the first appeal filed before the CIT(A), Cochin", the assessee's stand was reiterated. The said authority held that whatever was assessed under sub-s. (4) of s. 172 of the IT Act was not the total income, but was income referred to in sub-s. (2) thereof. There was an option under s. 172(7) of the IT Act, for the owner of ship to have an assessment of his total income for the entire previous year. Therefore, unless an assessment was made under s. 172(7) of the IT Act with the assessee exercising option, there was no assessment on the total income of the ship-owner. Accordingly, the assessment was nullified. The Revenue took up the matter before the Tribunal, which concurred with the view of the CIT(A). At the instance of the Revenue, the questions as set out above, have been referred for opinion of this CourtIn support of the application, learned counsel for the Revenue submitted that a distinction has to be made between an assessment made under s. 172(4) of the IT Act and one made under s. 172(7) of the IT Act. In the absence of an assessment under s. 172(7) of the IT Act, the one made under s. 172(4) has to be treated as assessment for the purpose of levying surtax. Reliance was placed on the observation of the apex Court in A. S. Glittre D/5 I/S Garonne vs. CIT 1997 140 CTR (SC) 97 : 1997 225 ITR 739 (SC) : TC S4.386, wherein it was, inter alia, held as follows

"The scheme of s. 172 of the Act appears to be this : Sec. 172(1) of the Act gives a right to the ITO to levy and recover tax in the case of any ship belonging to a non-resident, in a summary manner (ad hoc assessment) notwithstanding anything contained in the other provisions of the Act. It is an absolute right conferred on the assessing authority. The assessee has no right to object to the same. Normally, this will be the assessment of the assessee for the year."

Learned counsel for the assessee, on the other hand, submitted that the provisions of the Act make the position absolutely clear that it is only the total income as defined under s. 2(45) of the