9911796707
TMI Blog1930 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ey being more or less regularly repaid by remittances by the foreign business and (3) whether the said presumption is applicable or available in a case where the moneys remitted are in the current dealings account and debited to such account and not to the personal or profits account of the assessee and where interest earned every year by the British Indian business in respect of such dealings is included in the assessment of the British Indian business. 2. Question (1) was not submitted to the Commissioner of Income Tax for reference to the High Court when the assesses under Section 66 (2), Income Tax Act, required the Commissioner to refer the other two questions to the High Court; and the High Court in directing the Commissioner of Income Tax to refer all the three questions reserved to the Commissioner the right to contend that the reference on the first point did not lie at all by reason of the fact of its not haying been submitted to him under Section 66 (2) of the Act. That question was fully argued on the reference. The Commissioner by his order on the petitioner's application dated the 23rd February 1928 stated that his request could not be granted, that Section 66 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited in that section as to the time in which he had to make his application within one month of the passing of the order under Section 31 or Section 32 and furthermore requires that application to be accompanied by a fee of ₹ 100/-or any such lesser sum as may be prescribed. Mr. Sreenivasa Ayyangar's contention is that the assessee has two remedies open to him, one under Section 66 ( l) and another under 66 (2). We are unable to accept that contention. It is most unlikely that the legislature intended to give an assessee two remedies one within a specified limit of time and another without any such limitation. It cannot seriously be argued that after an order has been made an assessee who has neglected to make an application to the Commissioner to refer a question of law arising out of that order with in; one month of the making of that order can, nevertheless, many months after' wards, ask the Court to require the Commissioner of Income Tax to refer; the same question to the High Court; merely because it is one of importance. Moreover it is clear that Section 66 ( l) is not intended to benefit an assessee but is merely to enable the Commissioner when he feels any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income tax or reject them altogether and decide the real questions of law at issue between the Commissioner and the assesses at the time when application was made to him to refer the question or questions. This question has also been considered by a Full Bench of this Court in Commr. of Income Tax v. Thiruvengada Mudaliar AIR1928Mad889 and it was there held that if a point of law is not raised before the Commissioner of Income Tax within the time specified by Section 66 (2) Income Tax Act, it cannot be raised a all and the Commissioner cannot be required to state a case to the High Court raising that question. It was because the correctness of this decision was questioned that this present reference was directed to be heard by a Bench of five Judges. In my view that decision was correct. In A.K.A.C.T.V. Chettiyar Firm v. Commr. of Income Tax A.I.R. 1928 Rang. 281 and in In the matter of Ishar Dar Dharam Chand 2 Income Tax Cases. 12, a decision of the Lahore High Court a similar view was taken. 7. Obviously Section 45, Specific Relief Act, is of no avail to the assessee because by Sub-section (d) of that section it is subject to the proviso that the applicant has no othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sinesses was sent by means of hundis and money remitted from those foreign businesses to Tinnevelly was also sent by means of hundis. There was a continuous flow of money during the year in both directions. The Tinnevelly business made no profits in the year of account. The Assistant Commissioner held that as the money received from the foreign businesses was in excess of that sent by the petitioner to those foreign businesses, the excess should be regarded as a remittance of foreign profits. He enhanced the assessment by ₹ 68,378 by taking the excess figure of ₹ 89,847 and deducting from it a sum of ₹ 21,469 which had been applied in part by the petitioner towards the discharge of borrowings by him in his Tinnevelly business. The petitioner then preferred an appeal to the Commissioner of Income Tax against the Assistant Commissioner's order of enhancement and succeeded in reducing the assessment. The petitioner applied to him to refer the following question namely: whether or not ₹ 67,209 can be taxed as a remittance of foreign profits under Section 4 (2) Income Tax Act in the facts and circumstances of this case. 11. The Commissioner of Income Tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd place out of principal or capital. I think that rule results from the fact that no prudent man of business will encroach upon his capital for investment when he had income uninvested lying it his disposal. 13. The Commissioner's contention goes to the length of saying that a businessman is not to be allowed to conduct his own business as he chooses. In the present case the Commissioner of Income Tax agrees that the assesses has acted perfectly honestly, that is to say to intended to remit capital and not profits from Quilon to Tinnevelly and kept genuine accounts and made true entries in those accounts but contends that nevertheless as profits were earned in the assessee's foreign business those remittances must be held to be from those profits and not to be capital. It seems to me clear that as the Commissioner of Income Tax admits that the assessee acted honestly in making the entries in the account books and had a bona fide intention of' remitting capital and not profits his argument that the sums remitted are liable to 'be taxed must at once fail, and I am far from saying that the assessee did what a prudent man of business would not do. He had borrowed m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered that this method of treating his funds is available to the party only, once in respect of particular item of capital. Only when another item of advance is made can he claim again to withdraw capital. If once it is conceded that the trader may call back his capital it is for him to choose in what particular year he does so and to indicate his choice by accounts (which there is no reason to suspect) or otherwise. Once the choice is made, the presumption is rebutted. Pandalai, J. 19. I agree with my Lord for the reasons stated by him that it is not open to the assessee to raise before us question (1) which relates to ₹ 43,810. 20. Questions (2) and (3) relate to ₹ 67,209 the amount which the Income Tax Commissioner attributed to foreign profits received in British India in the year of account and they both present different aspects of the same matter whether the Commissioner was justified on the account books and other materials furnished by the assessee and the nature of his business, in thinking; that there was any presumption that the sum in question was profits and if there was any presumption in the matter whether he ought not to have held that it was rebutted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It was also admitted that if the opening balance in the account were taken into consideration there was no excess remittance to Tinnevelly at all the excess of ₹ 89,847 being the result if only the remittances during the year of account were taken. As to this the Commissioner in para 4 says '; I think the appellant is right on this point also. The argument underlying what has been known as the "theory of excess remittances" is that in so far as money brought into British India is found to be in excess of the sum required to replace money previously sent abroad, it should be presumed that the money sent in is a remittance of profit if profit was available for remittance. In this case, there seems to be no doubt that the balance shown as due by the foreign shops at the beginning of the year represent money supplied at some time or other from Tinnevelly. The "net remittance" of ₹ 89,819 in the year of account was not sufficient to replace the sums supplied but not replaced in the previous years. A mere comparison of the amounts of remittance each way is not therefore by itself a sufficient ground for holding that money was sent in otherwise tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Australia for investment and after making the remittance in question there was still more than £1,800.000 in investment there. Apparently in order to escape the British tax, the Australian branch office of the company had according to instructions accompanied each of the disputed remittances with a letter to say that it was towards particular advances, most of them made several years previously. On these facts the Lord President of the Court of Exchequer (Scotland) concluded his judgment: in the lower Court with the observation that under the circumstances indefinite; remittances to this country must be presumed to consist of interest not of capital so long as the amount of capital remitted to Australia for investment still remains invested there. (4 Tax cases 419). Lord Maclaren similarly said that the sound principle is that the source of the fund remitted in the absence of evidence to the contrary, must be determined according to the ordinary course of business in dealing with uninvested funds (p. 420). In the House of Lords, the Lord Chancellor referred to the instructions and letters above referred to as mere nicknaming the sum received and said that the right of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foreign country were more or less than the unreturned capital plus the foreign profits earned more than three years prior to the year of account which are not liable to tax. The important fact on which the presumption was based in that case was therefore lacking in this and I am not sure that in using the presumption in that case care should not be taken to see that the circumstances are similar. 29. In any case, I cannot accede to the contention that even when it is shown that the assessee who has borrowed in British India and carried on a business with such borrowed capital and in foreign parts wants to return his borrowed capital and for that purpose remits that capital to British India and has deliberately and honestly maintained his books in the usual course to show what he has done, there is still a presumption that the source from whence he repays his debt is his foreign profits and not the borrowed capital. So long as it is open to a man to keep his foreign profits abroad, it is not for the Commissioner or anyone else to compel him to do what he is not bound to do by law. After all a man can remit any particular amount of capital from foreign parts into British India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The scheme of Section 66 appears to be this: Sub-section (i) enables the Commissioner to obtain suo motu a determination by the High Court of a question of law. Sub-section (2) enables an assessee who has exhausted his right of appeal under Section 82 to get a determination of a question of law by requiring the Commissioner to state a case and refer the question of law to the High Court; and Sub-section (3) empowers the High Court to require the Commissioner to state a case if the High Court is satisfied, on the assessee's application, that the Commissioner should have referred the question of law which the assessee required him to refer. But clearly the time limit imposed by Sub-section (2) is intended to qualify the assessee's right to require the Commissioner to refer a question of law; and it seems to me equally clear from the language of Sub-section (3) that the question of law which the Commissioner has refused to refer is the only question of law which the High Court can require him to refer on the assessee's application. The Commissioner cannot be called upon under Sub-section (3) to state a case in respect of a question of law which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
