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TMI Blog1921 (2) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Branch may be assumed for Incometax purpose's to bear the same proportion to the total profits of the company as its receipts bear to the total receipts. The question referred to us is whether or not in arriving at the total profits for the purposes of the rule Incometax and Excess profits duty payable in England and Incometax payable at stations outside British India are to be deducted. Mr. Aiyangar for the appellant has referred us to Stevens v. Durban Roodeport Gold Mining Company 100 L.T. 481 and to certain dicta in Scottish, etc., Insurance Company v. New Zealand Land Company 89 L.J. (P.C.) 220 and Rover v. South African Breweries (1918) L.R. 2 Ch. 233 which support the proposition that in England when profits arising abroad are liable under the English Income tax Act to pay income tax in England, a deduction is allowed in respect of the income or similar tax levied on such profits in the places where they arose; and if it were a question here of taxing under Section 3(1) of the Act profits arising outside British India on the ground that they were received in British India, those authorities would be applicable, but in my opinion they have no application to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction to give to the word ' profits' a different meaning in the two places, in which it occurs; and, as where it occurs first it is used statedly of profits, on which the tax has to be ascertained, that is of profits before they have been taxed, it must be similarly used where it occurs again and where its meaning is disputed. This entails acceptance of the argument for the Crown and, as it is not disputed that foreign Super-tax and income tax stand on the same footing, an answer to the reference that the deductions claimed are inadmissible. Kumaraswamy Sastri, J. 3. The question referred to us for decision is, whether the Eastern Extension Australasia and China Telegraph Company Limited which is incorporated in England and has branches in India and elsewhere is under Section 33 of the Income tax Act and the rules framed thereunder entitled to deduct from the assessable profits excess profits duty payable in England and income tax payable in England and stations outside British India Section 33 of the Income tax Act renders persons residing out of British India taxable in respect of profits or gains accruing or arising to such persons, whether directly or indirect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no right to deduct the income-tax before you ascertain what the profit really is. These observations have to be kept' in mind in construing the word profit in the rule. 6. The rule in question merely provides the formula for ascertaining the income arising out of the business in British India which is so mixed up with the income arising out of business carried on outside British India that you cannot estimate it with mathematical accuracy. By the very nature of the case the rule is artificial and provides a rough and ready method of arriving at a taxable income. As there can be no deduction of the income tax in arriving at the Indian assessable profits if the Indian income were attempted to be arrived at in the usual way, namely by taking the Indian receipts and deducting the expenditure necessary for the carrying on of the Indian business having regard to the provisions of Section 9 of the Income-tax Act, it seem to me that the word profit cannot be used in two senses in the rule so as to exclude income-tax where one item of the total namely Indian income is concerned and to include it as regards other items. 7. The main contention of Mr. Aiyangar for the company was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of Section 43 of the Finance Act 1916. In considering the questions whether the Colonial Income-tax can be said to have been paid by the preference share-holders Lord Finlay observed. The Colonial income-tax had to be paid in the Colony and the profits could not be remitted to the United Kingdom without paying it. It stands exactly on the same footing with and expenses necessarily incurred in the business of the company in the Colonies.....Payment of the Colonial Income-Tax was part of the expense of carrying on the business in Australasia or New Zealand and the profits were necessarily diminished by the amount so paid just as by any business expenses incurred in the ordinary course. There was no question in the case as to how income-tax was to be assessed and where the only question was as to who should get the benefit of the rebate, there was no reason why the word profits should not be used in the ordinary commercial sense of the sum that remains to be divided after meeting all necessary expenses. On whatever amount you may calculate profits for the purposes of income-tax, profits so far as the share-holders are concerned will always be the sum that remains after deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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