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Issues Involved:
1. Assessability of the sum of Rs. 62,009 to excess profits tax for the chargeable accounting period ending on March 31, 1944. 2. Whether the sum was assessable in the hands of the assessee at all. Issue-wise Detailed Analysis: 1. Assessability of the sum of Rs. 62,009 to excess profits tax for the chargeable accounting period ending on March 31, 1944: The primary issue was whether the sum of Rs. 62,009 received by the assessee in 1946 could be assessed to excess profits tax for the chargeable accounting period ending on March 31, 1944. The assessee argued that the payments made by the military authorities did not flow from any contractual obligation but were made ex gratia and therefore were not related to the contract under which the supplies were effected. The department, however, pointed out clause 11 of the special conditions of the contract, which provided for a review of the rates specified in the schedule to the contract, suggesting that the rates were enhanced pursuant to that clause. Clause 11 stated: "The rates referred to in the schedule are subject to revision every three months proportionately according to any increase or decrease that may have occurred in the market rates, provided that such fluctuation is not less than 10% above or below the market prevailing at the time of conclusion of the contract. Fluctuation of 10% or less will be disregarded." However, the Appellate Tribunal did not find that the subsequent enhancement of the rates and the consequent payments were made by virtue of this clause. The department failed to establish before the Appellate Tribunal that the enhancement of rates was effected pursuant to this clause. The Tribunal concluded that the payments in question were ex gratia and did not arise consequent to a revision of the rates made obligatory under the contract. The court held that the contract obliged the assessee to ensure the supply of goods at the scheduled rates and did not entitle the assessee to any rates higher than those specified in the schedule. The right to receive the payments accrued only after the military authorities decided to raise the rates to a higher figure. The court referred to the precedent set in Commissioner of Income-tax v. Kalicharan Jagannath, where it was held that unless the rates were enhanced by virtue of a right in the assessee under the contract, the right to receive payment consequent upon enhancement of the rates could not be said to have accrued during the period when the contract was executed. The court also referred to the Supreme Court's decision in Commissioner of Income-tax v. Gajapathy Naidu, which held that the circumstance that the income arose out of an earlier transaction could not empower the Income-tax Officer to relate it back to the year in which the transaction took place. The income, profits, and gains could be included in the total income of a previous year if they accrued or arose during that year. The court concluded that the "profits during the chargeable accounting period" are those profits respecting which a right to receive has accrued or arisen during that period. Since the right to receive the sum of Rs. 62,009 accrued after the military authorities decided to enhance the rates in 1946 and 1947, it could not be treated as the profits of the chargeable accounting period ending on March 31, 1944. 2. Whether the sum was assessable in the hands of the assessee at all: The second contention raised by the assessee was that the sum was not assessable in its hands at all because it was entitled merely to a commission of Rs. 600 per mensem. The court did not allow the assessee to raise this contention as it was not raised before the Appellate Tribunal nor decided by it. The court confined itself to the consideration of the first contention only. Conclusion: The court answered the question in the negative, concluding that the sum of Rs. 62,009 received by the assessee did not constitute profits liable to be considered in its hands in the chargeable accounting period ending March 31, 1944, for the purpose of determining the excess profits tax for that period. The assessee was entitled to its costs, assessed at Rs. 200.
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