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TMI Blog1938 (9) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... -6-7 and along with the return was submitted a Profit and Loss Account which is printed as Appendix F at p. 26 of the paper book. This return was not accepted as correct by the Income-tax Officer and the assessees were accordingly required to produce account books or any other evidence on which they relied to substantiate their return. During the course of examination of the account books an affidavit was filed by Dip Chand, the Munim of the assessees, in which he stated:- (1)That no profits or interest accruing or arising in Tonk, Jaipur or Kotah branches were received in or brought into British India. (2)That the amount of interest shown as debited to the capital account in the account books of Tonk, Jaipur and Kotah branches was not received in or brought into British India but were mere book entries to find out how the business in those branches was flourishing. It must be pointed out that these contentions were raised for the first time in this affidavit and had never in previous years been put forward by the assessees. After examining the accounts and such evidence as was produced the Income-tax Officer assessed the income of the family at ₹ 2,71,576. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in the capital account of the Ajmere firm in the books of the Jaipur firm has been regarded as profit for the year in question and assessed accordingly. There is no doubt whatsoever that these amounts have been credited to the Ajmere firm in the books of the branches at Tonk and Jaipur. It is, however, to be noted that there are no corresponding entries in the books at the headquarters of the firm in Ajmere. The learned Commissioner of Income-tax was of opinion that the book entries were tantamount to constructive receipt of these sums in British India and accordingly formed part of the profits of the firm which should be assessed for the year in question. It has been contended by Sir Tej Bahadur Sapru on behalf of the assessee that the profits in question did not arise or accrue in British India and as they have not been received or brought into British India, they do not form part of the assessable profits of the assessees. He has contended that the mere fact that these sums are credited to the account of the headquarters at Ajmere which is in British India does not amount to a bringing in or a receipt of these profits in British India. On the other hand it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the tax shall be payable by an assessee under the head Business in respect of profits or gains of any business carried on by him. According to the assessees' contention the sums in question which have been credited to the account of the Ajmere firm in the books of the Tonk and Jaipur firms were profits which arose or accrued outside British India. Further, it is argued that nothing which has occurred in this, case can amount to bringing in of these profits into British India or a receipt of the profits by the assessees in British India. It has been argued that the profits made by the Tonk and Jaipur branches respectively were not profits arising or accruing in British India and reliance is placed upon the case of The Commissioner of Income tax, Bombay v. Chuni Lal B. Mehta, Bombay [1938] 6 ITR 521 . That case the assessee carried on the business of a broker at Bombay and in the course of his business he entered into transactions in cotton in Liverpool, London, New York and elsewhere. Some of those transactions proved profitable but no attempt was made to bring such profits into British India. The Income-tax authorities at Bombay assessed on such profits but their L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that income-tax was not chargeable upon such part of the interest which was not remitted to the United Kingdom. It is to be observed that the English Income-tax Act, 1842, contained a very similar phrase to that contained in Section 4 of the Indian Income-tax Act, viz received in the United Kingdom and there can be no doubt that the House of Lords held that the mere showing of such interest or profits in the balance-sheets prepared in the United Kingdom did not amount to receipt. At page 292 [of 1902 A.C] Lord Macnaghten observed:- I do not understand what is meant by constructive receipt in such a case as this, or how any sums can be said to have been received in the United Kingdom unless they have been brought to the United Kingdom, or unless there has been a remittance 'payable' in the United Kingdom'..............The circumstances that the business of the society is 'one indivisible business' and that the society in the statement of its affairs and in its dealings with its share-holders and customers takes into consideration its foreign assets and liabilities, seems to me to be immaterial to the present question. As my noble and learned friend Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act. As we have already pointed out that sub-section provides that the Act is to apply not only to income, profits or gains accruing or arising or received in British India but also to all such income, profits and gains which are deemed under the provisions of the Act to accrue or arise or be received in British India. There was nothing corresponding to this latter provision in the Income-tax Act, 1842, which was under consideration in the House of Lords case to which we have referred. It has been argued on behalf of the income-tax authorities that though it might be said that the profits of the Tonk and Jaipur branches arose and accrued out of British India they must now be deemed to have accrued or arisen or to have been received in British India. Counsel for the income-tax authorities has to concede that there has been no physical handing over of this sum, but he contends that under the provisions of the Income-tax Act the profits must now be deemed to have accrued or arisen or to have been received in British India. As we have pointed out earlier in this judgment the accounts of the Tonk and Jaipur branches, as indeed the accounts of all the branches of this firm, wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to their books and have treated the balance as a net book income and they have been assessed year after year upon this basis. Counsel for the income-tax authorities therefore contends that as this has been the assessees' own system they cannot now seek to change it. A perusal of the profit and loss account printed at p. 26 of the paper book shows that the assessees have treated as profits sums credited to the account of the Ajmere firm in the books of the branches situate outside British India and further have shown as losses, losses incurred by those firms outside British India. The assessees have by their system of accounting treated the profits made outside British India as profits received in British India and have also treated losses incurred outside British India as losses of the firm in British India. It has been contended on behalf of the Income-tax authorities that no distinction can be drawn between the present case and the case of The Commissioner of Income-tax, Madras v. A.T.K.P.L.S.P. Subramaniam Chettiar [1927] ILR 50 Mad. 765. In that case an assessee who had a business of his own in Rangoon and a partnership business at Penang advanced a sum of money ..... X X X X Extracts X X X X X X X X Extracts X X X X
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