1931 (12) TMI 13 - HC - Income Tax

Summary

Issues:
1. Whether the amount borrowed and transferred between branches should be considered a remittance from capital or profits for Income Tax assessment.

Analysis:
The case involved a banking business operating in Rangoon and Saigon, facing financial strain in Rangoon in 1927. To meet liabilities, funds were borrowed, including $59,000 from local lenders in Saigon. The borrowed amount, along with additional funds, was remitted to Rangoon. The Saigon branch repaid the lenders within 28 days. The Income Tax Commissioner assessed the $59,000 as a remittance from profits, subject to Income Tax. The petitioners argued it was a remittance of borrowed capital, not profits. The court found that the borrowed funds were repaid from accumulated profits in Saigon, not capital, as there were sufficient profits to cover the Rangoon demand. The petitioners failed to rebut the presumption that payments were made from profits, reducing the accumulated profits by $59,000. Consequently, the court determined it was a remittance of profits, assessable for Income Tax.

Judgment:
The Chief Justice held that the $59,000 remitted between branches was from profits, not capital, and thus subject to Income Tax. Justice Ramesam and Justice Cornish concurred with this decision. The respondents were awarded costs amounting to Rs. 250.