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17 Union of India v. Gosalia Shipping (P.) Ltd. [1978]
113 ITR 307 (SC): In this case a non-resident shipping company chartered a ship at an
Indian port from another resident company. The ship was loaded with bauxite belonging to
the charterers, and it left the Indian part for Canada. The charter party provided by a
clause that the charterers shall pay a sum @ of 4.50 US dollars on the total dead weight
carrying capacity of the ship, for the use and hire of the said vessel. Under the
agreement charterers were at liberty to sublet the vessels for the use and hire of the
time covered by the agreement. The captain of the ship was to be under the orders and
directions of the charterers as regards employment and agency. And if the vessel lost
money paid in advance and not earned was to be returned by the owners to the charterers.
The question for considerathm was whether the amount which the time-charterers had agreed
to pay to the owner of the ship was payable on account of the carriage of goods.
The Indian Supreme Court held that under the terms of the agreement the owners of the ship
received the amount as charges for the use and hire of the ship. The character of the
payment could not change according to the use to which the charrefers put the ship or
according as to whether the ship was loaded with goods in a port in India. What was
payable as hire charges for the use of the ship could transform itself into an amount
payable on account of the carriage of goods, by reason of the circumstances that the ship
was loaded with goods in India. The Indian Supreme Court illustrated their judgment with a
simile (though issuing a warning that similes can be misleading). If a hall is hired for a
marriage, the charges payable to the owner are for the use and hire of the place, not on
account of marriage.
