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Issues Involved:
1. Whether a sale and conveyance by a debtor of the assessee in respect of a money-lending business carried on by the assessee out of British India in discharge of the principal and interest of debt due to such business of lands situate in British India amounts to a remittance into British India of profits of the assessee made in that foreign business. 2. Whether the presumption as to foreign remittances being from out of the profits is applicable or available in a case where the dealings between the British and the foreign business consist of large sums of money being more or less regularly repaid by remittances by the foreign business. 3. Whether the said presumption is applicable or available in a case where the moneys remitted are in the current dealings account and debited to such account and not to the personal or profits account of the assessee and where interest earned every year by the British Indian business in respect of such dealings is included in the assessment of the British Indian business. Detailed Analysis: Issue 1: Remittance of Foreign Profits The court held that the assessee could not argue the point of law raised in question (1) because it was not submitted to the Commissioner of Income Tax for reference to the High Court under Section 66 (2) of the Income Tax Act. The court emphasized that Section 66 (1) is not intended to benefit an assessee but to enable the Commissioner to refer a matter to the High Court when he feels difficulty with a question of law. The assessee, having neglected to make an application to the Commissioner within the specified time, could not ask the High Court to direct the Commissioner to refer such a question. The court also noted that Section 45 of the Specific Relief Act was not applicable as the assessee had a specific legal remedy under Section 66 (2) but did not avail himself of it. Issue 2: Presumption of Foreign Remittances from Profits The court observed that the ordinary presumption that money remitted from a foreign business and received in British India is out of profits can be rebutted. The onus of rebutting this presumption lies on the assessee. The court found that the petitioner, who carried on a money-lending business in Tinnevelly and other places outside British India, had drawn money from his foreign businesses in excess of the amount sent by him to those businesses. The Income Tax Officer and the Assistant Commissioner had held that the excess should be regarded as a remittance of foreign profits. However, the court noted that the petitioner had borrowed money in Tinnevelly to lend to his foreign businesses and that the remittances were shown in the accounts to be from capital, not profits. The court concluded that the presumption as to foreign remittances being out of profits had been rebutted by the assessee. Issue 3: Applicability of Presumption in Current Dealings Account The court held that the presumption that money remitted from a foreign business is out of profits could be rebutted by showing that the remittances were from capital. The court noted that the Commissioner of Income Tax had admitted that the assessee acted honestly and intended to remit capital, not profits. The court found that the use of the remitted money for repaying loans taken in Tinnevelly supported the assessee's case rather than weakened it. The court emphasized that the nature of the remittance must depend on what it was in origin and that the use to which the money was put after its receipt in British India could not alter its character. The court concluded that the presumption as to foreign remittances being out of profits had been rebutted by the assessee. Judgment Summary: The court answered questions (2) and (3) in favor of the assessee, holding that the presumption as to foreign remittances being out of profits had been rebutted. The court directed the Commissioner of Income Tax to pay Rs. 300 as costs to the assessee and to return the Rs. 100 deposited by the assessee. The court also held that the assessee could not argue the point of law raised in question (1) as it was not submitted to the Commissioner of Income Tax for reference to the High Court within the specified time.
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