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TMI Blog1961 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions called " hedge " transactions in the bullion market at Bhatinda (then a part of the Patiala State, that is, outside the taxable territories of British India). It claimed that it had incurred losses to non-residents there in the sums of Rs. 6,366 and Rs. 16,615 in the said transactions and claimed that these losses should be taken into consideration in determining its income. It appears from the assessment order of the Income-tax Officer, Delhi, dated January 27, 1949, that the firm purchased certain sillies (bars of gold and silver) from a Bhatinda party on the telephone, which purchases were later confirmed by a letter or wire. Similarly, the bars were also sold by the firm through a Bhatinda party on the telephone. Apparently, no delivery was intended to be taken or was taken of the bars bought or sold ; nor did the firm have any branch or agent at Bhatinda. The transactions were in the nature of forward transactions carried out by means of telephone messages, letters or telegrams with parties at Bhatinda. This was the nature of the transactions which resulted in the losses for which the firm claimed deduction The income-tax authorities disallowed the claim on the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax, Delhi, then made two applications asking the Tribunal to refer certain questions of law arising out of its orders to the High Court of Punjab. The Tribunal came to the conclusion that no questions of law arose out of its orders and rejected the applications. The High Court was then moved under section 66(2) of the Indian Income-tax Act, 1922, and the High Court heard the two applications together and directed the Tribunal to state a case on the following two questions which, in the opinion of the High Court, arose out of the Tribunal's orders : " (1) Whether the claim of loss in this case is governed by the provisions of section 10(1) or section 24(1) proviso, read with section 14(2)(c), or by the provisions of section 42 ? (2) Whether on the facts of the case a loss of Rs. 22,981 is allowable in computing the income of the assessee chargeable to the excess profits tax ? " The Tribunal then drew up a statement of case on the two questions aforesaid. By its judgment and order dated January 23, 1957, the High Court answered both the questions in favour of the assessee. Thereafter the Commissioner of Income-tax, Delhi, asked for and obtained a certificate under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been computed in assessing the assessee's income from business in British India. I can only say that in the circumstances it seems to me likely that if the point had arisen, the same view that I have expressed above would have been taken, namely, that whereas for the excess profits tax profits earned in an Indian State could not be taken into consideration at all, such profits could be taken into account if brought into the taxable territories for assessing business profits tax, and that as regards losses they could be taken into account in assessing the income from business whether they occurred in a State or in what was British India." The second ground given by the High Court depended on the facts found. The High Court expressed the view that on the facts found it was doubtful if the losses in question could be deemed to have occurred in Bhatinda. It said : "... it is not in dispute that the only place where the assessee carries on business is Delhi, and that its transactions in other markets are carried out by means of communication by telephone or post. There is no suggestion that the firm has any agent or branch in any native State, and it therefore seems to me that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax v. Bhogilal H. Patel and held that the language used in the third proviso to section 5 of the Excess Profits Tax Act, 1940, was one of exclusion and that Act did not apply to profits etc., of that part of the business which arose in an Indian State. If that part of the business has to be treated as a separate business for the purposes of the Excess Profits Tax Act, it is difficult to see how the losses incurred in an Indian State can be taken into consideration for the same purposes. We think that the High Court was in error in thinking that the third proviso to section 5 of the Excess Profits Tax Act did not touch the question which the High Court had to answer. On the contrary, we think that the proviso answers the question against the assessee. Now, as to the second ground given by the High Court. It seems to us that there can be no doubt that the assessing authorities proceeded on the footing that the losses for which the assessee firm claimed a deduction arose and were incurred at Bhatinda, even though the firm's place of business was Delhi. The Income-tax Officer, as also the Appellate Assistant Commissioner referred to section 14(2)(c) of the Income-tax Act, 1922 ; t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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