1965 (2) TMI 4 - HC - Income Tax

Whether the customs rebate received by the assessee was liable to be taxed in the hands of the assessee - Whether there is any evidence on the record to justify the finding of the Tribunal that the customs rebate was not received by the assessee on behalf of a third party and it was a revenue receipt of the assessee

Summary

Issues Involved:
1. Taxability of customs rebate received by the assessee.
2. Evidence supporting the Tribunal's finding that the customs rebate was a revenue receipt of the assessee and not received on behalf of a third party.

Issue-wise Detailed Analysis:

1. Taxability of Customs Rebate:
The primary issue was whether the customs rebate amounts of Rs. 25,170 and Rs. 25,230 received by the assessee during the assessment years 1952-53 and 1953-54 were liable to be taxed as income. The assessee, a registered firm engaged in the export of fine and super-fine cloth, received these rebates from the government as an incentive for using imported cotton in the manufacture of exported cloth. The Income-tax Officer included these amounts in the assessee's income, contending that they were revenue receipts. The assessee argued that these rebates were received on behalf of the mills from which it purchased the cloth and were therefore liabilities to the mills, not income. The assessee supported this claim with contract footnotes indicating that rebates would be refunded to the mills if received.

2. Evidence Supporting Tribunal's Finding:
The Tribunal found that the rebates were not received on behalf of the mills but were revenue receipts of the assessee. This conclusion was based on several pieces of evidence:
- The government circular explicitly directed that the rebate be paid to the exporters, with no indication that it was intended for the mills.
- The import duty paid by the mills was passed on to the exporters at the time of sale, negating the mills' right to claim the rebate.
- The assessee's books of account credited the rebate amounts to its "customs rebate account" rather than to the mills' accounts.
- The assessee had not refunded any part of the rebate to the mills, and its representative admitted to having no intention of doing so.

The Tribunal concluded that the real arrangement was that the rebate belonged to the assessee, and the price paid for the cloth included the rebate amount. This finding was supported by the evidence and was not vitiated by any failure to consider relevant material or by considering irrelevant material.

Conclusion:
The Tribunal's finding that the rebates were revenue receipts of the assessee was upheld. The contracts and claims by the mills did not outweigh the evidence supporting the Tribunal's conclusion. The Tribunal's decision was based on a thorough consideration of all material evidence, including the assessee's conduct and entries in its books of account. The court affirmed that the rebates were taxable as income in the hands of the assessee.

Judgment:
The court answered both questions in the affirmative, ruling that the customs rebate amounts were taxable as the assessee's income. The assessee was ordered to pay the costs of the Commissioner.