1990 (2) TMI 21 - HC - Income Tax

Summary

Issues:
1. Determination of whether the assessee paid a commission for repatriation of funds from Ceylon.
2. Interpretation of circular issued by the Central Board of Direct Taxes regarding repatriation of funds from Ceylon.
3. Assessment of the quantum of commission paid by the assessee for repatriation.

Analysis:
The judgment delivered by the High Court of Madras involved tax case references under section 256(2) of the Income-tax Act, 1961, concerning the payment of a commission by the assessee for repatriation of funds from Ceylon. The initial dispute arose when the Income-tax Officer estimated a commission of 50% on the repatriated amount, leading to the inclusion of Rs. 1,15,000 under the head "Other sources." The Appellate Assistant Commissioner later ruled in favor of the assessee, citing a circular by the Central Board of Direct Taxes that exempted the assessee from proving the exact repatriation amount. However, the Tribunal upheld the addition of Rs. 40,000 as commission, stating that the funds were brought into India clandestinely, necessitating a commission payment for repatriation.

The judgment analyzed the circular issued by the Central Board of Direct Taxes, emphasizing that while it allowed for repatriation without direct evidence, it did not preclude the authorities from determining the quantum of repatriated funds through irregular channels. The court highlighted that the circular aimed to prevent inconvenience to repatriates but did not restrict the assessment of the repatriation amount. Therefore, the Revenue was entitled to ascertain the exact quantum of funds repatriated through unconventional means.

Regarding the claim of commission payment in Ceylon, the court noted discrepancies in the assessee's statements and lack of evidence supporting commission payments abroad. The Tribunal's estimation of Rs. 40,000 as the commission for repatriation was deemed reasonable, considering the circumstances. The judgment concluded that the commission would have been paid in India after the funds were repatriated, supporting the Tribunal's decision to sustain the addition under the head "Other sources." Consequently, the court ruled in favor of the Revenue, affirming the Tribunal's decision and ordering costs to be borne by the assessee.