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Issues Involved:
1. Assessability of the refunded excess profits tax. 2. Consideration of the refunded amount for determining the residence of the assessee under section 4A(c)(b) of the Indian Income-tax Act. Issue-wise Detailed Analysis: 1. Assessability of the Refunded Excess Profits Tax: The primary issue was whether the sum of Rs. 2,31,009, refunded under section 28(1) of the Finance Act of 1941 in the United Kingdom, was assessable under the Indian Income-tax Act for the assessment year 1947-48. The assessees argued that the Finance Act of 1946, which provided for such refunds to be taxed, was only applicable to the assessment year 1946-47 and not to 1947-48. The court rejected this contention, stating that the Finance Acts, though annual, contain provisions of a general and permanent nature. Section 11(14) of the Finance Act of 1946 was held to be a provision of permanent operation, applicable whenever relevant circumstances arose, including the assessment year 1947-48. Additionally, the assessees contended that even if section 11(14) applied, it only deemed the refunded amount as income but did not make it assessable. The court disagreed, explaining that the section's purpose was to bring the refunded amount back into the taxable income, compensating for the earlier deduction allowed under section 12(2) of the Excess Profits Tax Act. The court cited English case law to support the view that such refunded amounts retain their taxable character and are to be treated as assessable income for the year of repayment. 2. Consideration of the Refunded Amount for Determining Residence: The second issue was whether the refunded amount could be considered for determining the residence of the assessees under section 4A(c)(b) of the Indian Income-tax Act. The court held that the income contemplated by section 11(14) is sui generis, unrelated to any specific place of accrual or arising. The section does not state that the refunded amount is income arising in India or deemed to be such. Therefore, the refunded amount could not be used to determine the residence of the assessees under section 4A(c)(b). The court reasoned that the refunded amount, though treated as income for assessment purposes, does not satisfy the test of being income arisen in India. The court also noted the practical difficulty of determining how much of the refunded amount, originally deducted from mixed sources of income, could be attributed to income arising in India. Thus, the court concluded that the refunded amount should not be considered for determining the residence of the company. Conclusion: - Question 1: The sum of Rs. 2,31,009 was rightly assessed as income for the assessment year under consideration. - Question 2: The refunded amount should not be taken into consideration for determining the residence of the assessee under section 4A(c)(b). The assessees' application for a direction to refer additional or amended questions was deemed unnecessary.
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