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Issues:
Interpretation of Section 4(1)(b)(iii) regarding taxation of profits accrued in Indian States, presumption of remittances being from profits, applicability of presumption in cases of equal remittances, treatment of remittances in banking business, burden of proof on the Department to establish remittances were from profits, challenge to findings on the course of banking business, examination of specific remittance items, and formulation of the question on remittances constituting profits. Analysis: The judgment concerns the taxation of profits under Section 4(1)(b)(iii) accrued in Indian States and remitted to taxable territories. The Tribunal found a flow of money in the banking business of the assessee, with net remittances to British India. The Appellate Assistant Commissioner and Tribunal relied on precedent to determine that in cases of equal remittances, a weak presumption arises regarding remittances from profits. However, a significant factor in this case is the banking business nature of the remittances, where money is considered stock-in-trade, not conflicting with profits. Thus, the burden lies on the Department to prove remittances were from profits, which they failed to do. The Advocate-General sought to challenge the finding that the remittances were in the course of banking business, despite it being an agreed fact in the case statement. The Court rejected this challenge, emphasizing the uncontested nature of this fact. Additionally, the Advocate-General raised the issue of examining specific remittance items totaling Rs. 1,85,000. However, given the nature of the banking business and the absence of a presumption favoring the Department, the Court concluded that no examination of these items was necessary. The Court re-formulated the question to determine if the four specific remittance items constituted profits remitted to British India under Section 4(1)(b)(iii). Answering in the negative, the Court held that the other questions raised by the assessee were no longer relevant. Consequently, the Commissioner was directed to pay the costs of the reference, and the reference was answered accordingly, in favor of the assessee.
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