1973 (7) TMI 6 - HC - Income Tax

Burden of proof - taxable territories - burden of proof that the income had been received in the taxable territories was squarely on the revenue. When no such material is produced then the concerned income cannot be brought to tax

Summary

Issues Involved:
1. Competency of the assessee's contentions for the assessment years 1947-48, 1948-49, and 1949-50.
2. Whether the sale proceeds of cement were received by certain companies on behalf of the assessee in taxable territories.
3. Whether sale proceeds from goods sold in Bikaner were received in British India and assessable under section 4(1)(a) of the Indian Income-tax Act, 1922.

Issue-wise Detailed Analysis:

1. Competency of the Assessee's Contentions:
The first issue was whether the assessee's contentions regarding the assessment years 1947-48, 1948-49, and 1949-50 were competent in light of a High Court decision for the assessment year 1946-47. However, the assessee's counsel, Mr. Mehta, did not press for this reference. Consequently, the court agreed that these questions need not be answered, rendering this issue moot.

2. Receipt of Sale Proceeds in Taxable Territories:
The second issue involved determining if the sale proceeds of cement manufactured by the assessee and sold by Cement Marketing Co. of India Ltd., Dalmia Cement Ltd., or Dalmia Cement and Paper Marketing Co. Ltd. were received by these companies on behalf of the assessee in taxable territories.

The court noted that the assessee had a cement factory in Jind and marketed its entire production through these companies during the relevant years. The agreement dated October 9, 1941, between the assessee and Dadri Marketing Ltd. was deemed a dummy or mere paper transaction. The sale proceeds received by the three companies in taxable territories were indeed on behalf of the assessee, making the income taxable under section 4(1)(a) of the Act. Since Mr. Mehta did not press this reference, the court did not answer these questions, implicitly affirming the Tribunal's view.

3. Sale Proceeds from Sales in Bikaner:
The third issue was whether the sale proceeds from cement sold in the State of Bikaner through sub-agents were received in British India and hence assessable under section 4(1)(a) of the Indian Income-tax Act, 1922.

The assessee contended that sales effected in Bikaner by sub-agents of Cement Marketing Co. of India Ltd. did not result in sale proceeds being received in British India. The Appellate Assistant Commissioner and the Tribunal rejected this claim, stating that the sale proceeds were received by Cement Marketing Co. of India in Bombay, thus taxable under section 4(1)(a). The Tribunal noted the absence of evidence showing that sale proceeds were received in Bikaner.

The court found the Tribunal's approach incorrect, emphasizing that the burden of proof was on the department to show that sale proceeds were received in taxable territories. The court referenced the case of Parimisetti Seetharamamma v. Commissioner of Income-tax, which clarified that the burden lies on the department to prove a receipt is within the taxing provision.

The court concluded that the question required further investigation into the facts to determine where the sale proceeds were received. The question was answered in the negative and in favor of the assessee, but the matter was remitted back to the Tribunal for further factual investigation considering all circumstances, including the agreement dated June 4, 1942.

Conclusion:
The court did not address the first two questions due to the assessee's counsel not pressing them. The third question was answered in favor of the assessee, but the matter was remitted back to the Tribunal for further investigation to determine the exact location of receipt of sale proceeds from Bikaner sales. There was no order as to costs.