1957 (9) TMI 76 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of profits on sales to the Government of India.
2. Taxability of profits on sales through the company's paid employees in British India.
3. Jurisdiction and powers of the Tribunal under Section 66(5) of the Income-tax Act.
4. Applicability of Section 4(1)(a) and Section 4(1)(c) of the Income-tax Act to the sales and receipts in British India.

Detailed Analysis:

1. Taxability of Profits on Sales to the Government of India:
The High Court initially addressed whether the profits on the sale of goods to the Government of India, amounting to Rs. 4,21,873, accrued or arose in British India. The Court held that these sales took place at Indore and the sale proceeds were received at Indore. However, the statement of the case did not clarify where the contracts were accepted, which was crucial for determining the place of accrual. The matter was referred back to the Tribunal for further examination.

2. Taxability of Profits on Sales through the Company's Paid Employees in British India:
The second issue concerned the taxability of profits on sales amounting to Rs. 6,02,911, made through the company's paid employees in British India. The High Court noted that the Tribunal had overlooked various documents and directed the Tribunal to reconsider these documents. Additionally, it was pointed out that Rs. 5,80,069 out of the Rs. 6,02,911 was received in British India, a fact that the Tribunal had ignored. The Supreme Court later held that the High Court erred in directing the Tribunal to decide the matter themselves instead of asking for a supplemental statement of the case.

3. Jurisdiction and Powers of the Tribunal under Section 66(5) of the Income-tax Act:
Section 66(5) mandates that the Tribunal must "pass such orders as are necessary to dispose of the case conformably to such judgment" of the High Court. The Tribunal sent the matter back to the Income-tax Officer to reconsider the applicability of Section 4(1)(a) to the sum of Rs. 5,80,069. The petitioner contended that the Tribunal acted without jurisdiction and should have only made a formal order deleting the amounts from the assessment based on the High Court's judgment. However, the High Court held that the Tribunal's role under Section 66(5) is not limited to making formal orders but includes passing necessary orders to dispose of the case conformably to the High Court's judgment.

4. Applicability of Section 4(1)(a) and Section 4(1)(c) of the Income-tax Act to the Sales and Receipts in British India:
The Income-tax Officer initially taxed the amounts under Section 4(1)(c) on the basis of accrual in British India. The Tribunal's subsequent order to reconsider the applicability of Section 4(1)(a) to the sum of Rs. 5,80,069 was challenged. The High Court clarified that the Tribunal's order was not an attempt to circumvent the Supreme Court's judgment but was within its jurisdiction to ensure that the assessment conformed to the High Court's judgment. The High Court further explained that the Tribunal's powers on appeal are not limited to the grounds of appeal but can include reconsideration of facts already canvassed before the Income-tax Officer and the Appellate Assistant Commissioner.

Conclusion:
The High Court concluded that the Tribunal acted within its jurisdiction by directing the Income-tax Officer to reassess the sum of Rs. 6,02,911 under Section 4(1)(a) after determining whether Rs. 5,80,069 was received in British India. The petition was dismissed, and the rule was discharged with costs.