9911796707
TMI Blog1975 (8) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... also at Darsana, formerly in East Pakistan, now Bangladesh. The control and management over all the branches are exercised from the head office of the assessee in Calcutta. All the directors of the assessee reside in Calcutta and the factories are run by managers who periodically send their reports to the directors in Calcutta and take instructions from them. The entire financial arrangements of the assessee are made at the head office at Calcutta where the accounts of the company as a whole are consolidated, though statements of accounts relating to different branches are prepared separately. Before the partition of India the assessee had raise two mortgage debentures, the first being in the year 1938 and the second in 1941. The funds raised by the said debenture in 1938 were utilised for building the factory at Darsan. After the partition of India the said factory at Darsana fell within the territory of East Pakistan. The assessee had overdraft accounts with the State Bank of India both in India and Pakistan. The overdraft arrangements in Calcutta were utilised by the head office of the assessee for financing the transactions of the assessee. Such transactions included remi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the head office. The Appellate Assistant Commissioner held that the entire overdraft and debenture interest should be allowed as deductions. In the appeal from the assessment of the assessment year 1962-63, the then Appellate Assistant Commissioner, however, found that the assessee was claiming deduction in respect of the same amount both in India as also in Pakistan and to allow the assessee such deduction would amount to permitting the assessee to take two different stands in respect of the same claim. On that ground the appeal in respect of this assessment year was rejected. The department being aggrieved went up on appeal from the order of the Appellate Assistant Commissioner for the assessment years 1960-61 and 1961-62 and the assessee similarly preferred an appeal from the order of the Appellate Assistant Commissioner for the assessment year 1962-63. In the said appeals it was noted that there was an agreement for avoidance of double taxation between India and Pakistan. The particular fact, in this case, that there was in allocation of interest countrywise in accordance with law was also noted. The Tribunal came to the conclusion that in order to circumvent the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the assessee was entitled to claim deduction of the interest paid irrespective of the fact whether such interest was allocated in the accounts of the assessee or whether the capital borrowed by the assessee had been invested. In support of his contentions, Mr. Chatterjee relied on a decision of the Supreme Court in the case of Commissioner of Income-tax v. C. Parakh Co. (India) Ltd. This decision had been cited before the authorities below. In this case the assessee was a limited company resident and ordinarily resident in India and had its head office in Bombay. The company maintained a branch at Karachi for purchasing cotton for shipment to Bombay as also for export direct to other places. The managing agents of the company were entitled to a remuneration of 20% of the annual net profits of the company. The company had apportioned the managing agency commission and debited the proportionate amounts in the respective profit and loss accounts for the Bombay head office and the Karachi branch. In computing the Pakistan income of the assessee for the purpose of double taxation relief the Income-tax Officer deducted from the income of the Karachi branch the proportionate mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowed money used at Ipoh was rightly disallowed as a deduction because the business which was being taxed was the business at Madras and not the business at Ipoh. No exception can be taken to the decision but it does not advance the appellant's case because we are concerned with one indivisible business." We have carefully considered this judgment of the High Court of Madras as also the judgment of the Supreme Court which has approved of the same. The facts in the case before the Madras High Court were that the assessee carried on a business in various places including at Madras where the head office was situated and at Ipoh being in the then Federated Malay States. Money had been borrowed by the assessee in Madras and part of the money was sent out at Ipoh and was used as capital in the conduct of the Ipoh business. Deductions for the purpose of income-tax payable by the assessee in India were claimed in respect of the interest paid by the assessee in respect of the moneys borrowed. The interest paid on the amounts which were remitted by way of capital to the Ipoh branch was disallowed by the income-tax authorities in India. The Madras High Court held, considering the sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or arose. Explanation.---Profits and gains accruing or arising without British India shall not be deemed to be received or brought into British India within the meaning of this sub-section by reason only of the fact that they are taken into account in the balance sheet prepared in British India." Mr. Chatterjee argued that the decision of the Madras High Court has to be construed in the background of the old sections of the Act. In the context of the later Act in each case the world income of the assessee has to be computed. It appears to us that there is substance in the contentions of Mr. Chatterjee. From the facts found it cannot be disputed that so far as the assessee is concerned, at all material times prior to the partition of India and thereafter it was running with different branches. The head office, the directors, the financial control and management of the entire business were at all material times at or being done from one place, namely, Calcutta. In that view of the matter it cannot be said that the business at Darsana was a separate business. In the Madras case the business at Ipoh was held to be a separate business for the limited purpose of computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
