These appeals have been preferred by department and are opposed by assessee-company. 2. common ground in all appeals runs as follows: "On facts and in circumstances of case learned Commissioner (Appeals), Calcutta has erred in holding that basis of computation of capital base for purposes of surtax assessment should be Indian income Indian operating revenue in proportion of -as against - World income World operating revenue as adopted in surtax assessment." 3. appellant is non-resident shipping company having its head office in Sweden under section 44B of Income-Tax Act, 1961 ('the Act') amounts referred to clauses (i) and (ii) of sub-section (1) thereof. for assessment years under consideration, i.e., 1977-78 to 1979-80 it filed surtax returns disclosing chargeable profits at Rs. 10,04,610, Rs. 7,50,009 and Rs. 8,01,757 respectively and claimed statutory deduction at Rs. 1,47,66,367, Rs. 1,21,87,040 and Rs. 1,30,19,523 respectively. assessee-company claimed that it incurred loss on non-Indian operations and as such entire would capital of t h e company should be held to have been invested for operations of Indian business and earning income therefrom. assessee-company worked out its capital attributable to Indian income in same proportion as its Indian income bears to its world income following rule 4 of Second Schedule to Companies (Profits) Surtax Act, 1964. But ITO did not accept contention of assessee-company and worked out capital attributable to Indian company by adopting ratio between Indian operating revenue and world operating revenue with reference to its world capital. On appeal, Commissioner (Appeals) directed ITO did not accept contention of assessee-company and worked out capital attributable to Indian company by adopting ratio between Indian operating revenue and world operating revenue with reference to its world capital. On appeal, Commissioner (Appeals) directed ITO to accept computation made by assessee- company on basis of rule 4 of Second Schedule. Being aggrieved department preferred these appeals. 4. It was contended by departmental representative that commissioner (Appeals) was not justified in directing that capital attributable to Indian income of assessee-company should be determined in some proportion as its Indian income bears to its would income. He contended that Surtax Officer was correct in computing capital. This contention was opposed by authorised representative who contended that Commissioner (Appeals) was correct in his conclusion. 5. Rule 4 of Second Schedule runs as follows: "Where part of income, profits and gains of company is not includible in its total income as computed under Income-tax Act, its capital shall be sum ascertained in accordance with rules 1, 2 and 3, diminished by amount which bears to that sum same properation as amount of aforesaid income, profits and gains bears to total amount of its income, porfits and gains." 6. From above, it is apparent that rule 4 laying down computation of capital comes into play only 'where part of income, profits and gains of company is not includible in its total income as computed under Income-tax Act.' Rule 4 shall, therefore, not come into play when this condition, namely, part of income, profits and gains of company is not includible in its total income as computed under Act is not fulfilled. Sections 44B was introduced with effect from 1-4-1976. By this, section 28 to 43A of Act were made inapplicable to case of non-resident engaged in business of operation of ships and 71/2 per cent of aggregate of amounts specified in sub- section (2) thereof was to be taken as profits and gains of such business chargeable to tax under head 'Profits and gains of business or profession.' so on introduction of this section 44B with effect from 1-4-1976 income, profits and gains of non-resident shipping company was no longer computed after excluding part of its income, etc., in accordance with Act. As such, condition for applying rule 4 for computation of capable with effect from 1-4- 1976. Therefore, commissioner (appeals) was not justified in holding that computation of capital was to be made on basis of rule 4. In our opinion, computation of capital has to be made on basis of other rules, namely, rules 1 to 3 of Second Schedule whichever is applicable but rule 4 cannot be resorted to for determining capital of non-resident shipping company whose profits and gains of business are determined in accordance with provisions of section 44B. We direct Surtax Officer to recompute capital in accordance with above direction and consequent surtax, if any, payable by assessee. 7. It was sought to be contended by departmental representative that if this method of computation as directed by us is followed, revenue will be in position worse than that in which it was before filing of appeal. We are not impressed by this argument for following two reasons. Firstly, it has not been shown to our satisfaction that by our order revenue will be in more disadvantageous position than that it was in before filing of appeal. Secondly, according to decision of Supreme Court it is our duty to correct all errors in proceeding under appeal. This is evident from following principle of law laid down by Supreme Court in case of Kapurchand Shrimal v. CIT  131 ITR 451: ".... It is well known that appellate authority has jurisdiction as well as duty to correct all errors in proceedings under appeal and to issue, if necessary, appropriate directions to authority against whose decision appeal is preferred to dispose of whole or any part of matter afresh unless forbidden from doing so by statute ...." (P. 460) 8. For above reasons we set aside order of Commissioner (Appeals) but for different reasons. 9. As result, appeals are allowed for statistical purpose. *** INSPECTING ASSISTANT COMMISSIONER v. SWEDISH EAST ASIA CO. LTD.