1978 (2) TMI 15 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of post-war excess profits tax (EPT) refund received by a non-resident company in the United Kingdom.
2. Applicability of the Indian Income-tax Act, 1961, versus the Indian Income-tax Act, 1922.
3. Interpretation of Section 11(14) of the Finance Act, 1946.
4. Application of Section 8 of the General Clauses Act, 1897.

Issue-wise Detailed Analysis:

1. Taxability of Post-War Excess Profits Tax (EPT) Refund:
The primary issue was whether the post-war EPT refund received by the non-resident company in the United Kingdom was liable to be included in the assessable income of the assessee for the assessment year 1963-64. The Income Tax Officer (ITO) invoked Section 11 of the Finance Act, 1946, which deemed such refunds as income for the purposes of the Indian Income-tax Act, 1922. The Appellate Assistant Commissioner (AAC) and the Tribunal both held that the refund was not taxable under the Income-tax Act, 1961, as there was no specific saving clause in the 1961 Act to apply the provisions of the 1922 Act.

2. Applicability of the Indian Income-tax Act, 1961, versus the Indian Income-tax Act, 1922:
The AAC and the Tribunal concluded that since the Indian Income-tax Act, 1922, had been repealed by the Income-tax Act, 1961, and there was no express saving clause in the 1961 Act, the provisions of the 1922 Act could not apply. The Tribunal further agreed that the post-war EPT refund received in the UK by a non-resident could not be taxed under the 1961 Act.

3. Interpretation of Section 11(14) of the Finance Act, 1946:
The High Court examined whether the amount involved was assessable by virtue of Section 11(14) of the Finance Act, 1946. The court noted that the AAC had incorrectly referred to Section 11(11) instead of Section 11(14). The court emphasized that Section 11(14) made the refund income for the purposes of the Indian Income-tax Act, 1922, and treated it as income of the previous year during which the repayment was made. The court held that the intention of the Legislature was to make the amount in question assessable under the relevant Income-tax Act.

4. Application of Section 8 of the General Clauses Act, 1897:
The court addressed the contention that since the Indian Income-tax Act, 1922, was repealed, the amount repaid could not be made taxable under the Income-tax Act, 1961. The court referred to Section 8 of the General Clauses Act, 1897, which provides that references to repealed enactments should be construed as references to the re-enacted provisions unless a different intention appears. The court concluded that the provisions of Section 11(14) of the Finance Act, 1946, remained applicable, making the refund assessable income under the 1961 Act.

Conclusion:
The High Court held that under Section 11(14) of the Finance Act, 1946, the post-war EPT refund received by the non-resident company in the United Kingdom was assessable and liable to be included in the income of the assessee for the relevant assessment year. The question was answered in the negative and in favor of the revenue, with each party bearing its own costs.