1991 (6) TMI 11 - HC - Income Tax

Summary

Issues Involved:

1. Jurisdiction of the Income-tax Officer to reopen assessments u/s 147 of the Income-tax Act, 1961.
2. Accrual or arising of income from export incentives in Pondicherry.
3. Applicability of the Pondicherry (Taxation Concessions) Order, 1964, to the assessee's income.

Summary:

1. Jurisdiction of the Income-tax Officer to Reopen Assessments u/s 147:

The Income-tax Officer initiated proceedings u/s 147 read with section 148 to reassess the income of the assessee, a public limited company incorporated under French laws in Pondicherry, for the assessment years 1960-61 to 1963-64. The officer believed the company had taxable income but failed to file returns. The assessee filed "Nil" returns, arguing that no income accrued or arose in India and that the income had already been taxed under French law. The officer, however, taxed the income from export incentives, claiming it accrued in India but outside Pondicherry. The Appellate Assistant Commissioner and the Tribunal later found that the right to receive the income arose in Pondicherry, and reassessment was precluded by the Concessions Order, which protected income already taxed under French law.

2. Accrual or Arising of Income from Export Incentives in Pondicherry:

The Tribunal held that the export incentive receipts accrued or arose in Pondicherry. The assessee's activities, including manufacturing and exporting textiles, were confined to Pondicherry. The Tribunal found that the incentive accrued when the export sale was completed in Pondicherry, despite the quantification of the incentive occurring outside Pondicherry. The Tribunal also determined that the posting of cheques from Bombay did not constitute receipt outside Pondicherry, as the assessee had requested payment in Pondicherry. The High Court affirmed this view, stating that the right to receive the income arose in Pondicherry upon fulfilling the export activity.

3. Applicability of the Pondicherry (Taxation Concessions) Order, 1964:

The Tribunal found that the Concessions Order applied to the assessee's entire income, not just the income accruing in Pondicherry. The High Court agreed, noting that the Concessions Order did not distinguish between income accruing inside or outside Pondicherry. The court emphasized that the assessee, having carried on business in Pondicherry before the merger with India, was entitled to the benefits of the Concessions Order for its entire income. The High Court concluded that the Tribunal was correct in allowing the assessee's claim for tax concessions for the assessment years 1964-65 to 1969-70.

Conclusion:

The High Court affirmed the Tribunal's decisions, holding that the income from export incentives accrued or arose in Pondicherry and that the Concessions Order applied to the assessee's entire income. The Revenue's appeals were dismissed, and the assessee's claims were upheld.