Taxability of remittances, foreign-source income, and family credits turns on proof of capital, accrual, and valid trust creation.

A remittance from Penang to Moulmein was treated as taxable profit because the assessee failed to prove that it was a return of capital; the original capital had been absorbed by earlier losses, and the books showed later profits and funds exceeding the initial remittances. Income accruing in Moulmein during the accounting year remained assessable in India even though it was also taxed in Burma, since foreign taxation did not displace Indian liability and double-tax relief depended on the statute. Interest credited to the assessee's sister and daughter was not excluded from business profits, as no valid trust or gift was created by precatory language or mere book entries without appropriation of identifiable property.

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Issues: (i) Whether the remittance of $80,500 from Penang to Moulmein represented a return of capital or taxable profits. (ii) Whether the sum of Rs. 13,247, being profits arising in Moulmein during the accounting year when Moulmein was part of British India, was assessable in India notwithstanding assessment in Burma. (iii) Whether interest credited in the names of the assessee's sister and daughter on sums standing to their credit could be excluded from the assessee's business profits on the footing that valid trusts or gifts had been created.

Issue (i): Whether the remittance of $80,500 from Penang to Moulmein represented a return of capital or taxable profits.

Analysis: The evidence showed that the original remittances sent out in 1919 as capital and working capital to the foreign branches had been absorbed by losses in the early years and could not be traced in any identifiable form at the time of the later remittance. The books also disclosed that the businesses had subsequently earned substantial profits and that the funds lying invested in the branches exceeded the initial capital sent abroad. On a reference under Section 66(3) of the Indian Income-tax Act, 1922, the Court was concerned only with whether there was material to support the finding, not with reappreciating the facts.

Conclusion: The remittance was not proved to be a return of capital and the finding that it constituted taxable profits was upheld against the assessee.

Issue (ii): Whether the sum of Rs. 13,247, being profits arising in Moulmein during the accounting year when Moulmein was part of British India, was assessable in India notwithstanding assessment in Burma.

Analysis: Income that accrued or arose in British India during the previous year remained assessable under the Indian Income-tax Act even if the place of accrual ceased to be within British India in the year of assessment. The fact that the same income was also taxed in Burma did not defeat the Indian assessment, because Burma's levy was by a foreign jurisdiction and any relief for double taxation could arise only under the special statutory provisions for that purpose.

Conclusion: The amount was correctly assessable in India and the answer was against the assessee.

Issue (iii): Whether interest credited in the names of the assessee's sister and daughter on sums standing to their credit could be excluded from the assessee's business profits on the footing that valid trusts or gifts had been created.

Analysis: The will and the later declaration were only precatory in nature and did not show an immediate and irrevocable disposition of the sums in favour of the two ladies. No specific assets or funds had been set apart or appropriated to answer the alleged trust, and the business funds continued to be used as before. Mere book entries, without allocation of identifiable property, were insufficient to create a valid gift or trust capable of excluding the credited sums from the assessee's profits.

Conclusion: The interest could not be excluded and the answer was against the assessee.

Final Conclusion: All the substantive questions were answered in favour of the Revenue and the assessee's challenge to the assessment failed.

Ratio Decidendi: In a reference under the income-tax law, a remittance is taxable as profit where the assessee fails to prove that it represents capital, income accruing in British India remains assessable notwithstanding foreign taxation, and a valid trust or gift of family funds is not created by precatory language or mere credit entries without appropriation of identifiable property.

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