Accounting evidence and old-profit remittances controlled tax treatment; estimate assessment and premature debt write-off were rejected.

The court held that account books for the Indian head-quarters business could not be rejected merely because they lacked details of foreign business, as Section 13 governed the method of accounting and there was no basis for an estimate assessment. Depreciation on machinery in the Wakema rice-mill was disallowed because the statutory particulars required by proviso (a) to Section 10(2) were not furnished. A remittance from Singapore was treated as old Colombo profits, traced through a separate account and written instructions, so it was not assessable as income of the year. The debts were not shown to have required write-off before 12 April 1931, so the earlier deduction claim failed.

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Issues: (i) whether the assessee's account books relating to the Indian head-quarters business could be rejected for want of details of foreign business and whether an estimate-based assessment was justified; (ii) whether depreciation on machinery in the Wakema rice-mill was deductible where the mill was worked by a lessee; (iii) whether the remittance of Rs. 88,834 from Singapore represented remittance of old profits from the Colombo business and was therefore not assessable; and (iv) whether the specified debts ought to have been written off as irrecoverable before 12 April 1931.

Issue (i): whether the assessee's account books relating to the Indian head-quarters business could be rejected for want of details of foreign business and whether an estimate-based assessment was justified.

Analysis: The books were accepted as true and complete so far as they related to the business assessed at the head-quarters. Rejection was based only on the absence of details of capital invested in foreign concerns and other foreign business particulars. Section 13 of the Income-tax Act was held to concern the method of accounting and not to authorise rejection merely because the officer preferred a different method or wanted fuller foreign business details. Since the books were not false or incomplete in relation to the assessed business, there was no evidentiary basis for discarding them or resorting to an estimate.

Conclusion: The rejection of the books was unjustified and the assessment could not be made on estimate; the answer was in favour of the assessee.

Issue (ii): whether depreciation on machinery in the Wakema rice-mill was deductible where the mill was worked by a lessee.

Analysis: The claim failed because the assessee did not supply the particulars required by proviso (a) to Section 10(2) of the Income-tax Act. The fact that the mill was worked by a lessee did not by itself decide the matter; the decisive point was that the statutory conditions for claiming the allowance were not satisfied.

Conclusion: The depreciation claim was not allowable and the answer was against the assessee.

Issue (iii): whether the remittance of Rs. 88,834 from Singapore represented remittance of old profits from the Colombo business and was therefore not assessable.

Analysis: The remittance was traced to a separate account containing profits previously remitted from Colombo, and the evidence showed that the amount remitted in 1934 was specifically debited to that account in accordance with written instructions. The surrounding facts also showed consistent treatment of other remittances from Singapore as old profits, and there was no material basis for treating this remittance differently. On the evidence, the amount was referable to profits earned long before the year of assessment and not to taxable income of the relevant year.

Conclusion: The remittance represented old profits and was not taxable; the answer was in favour of the assessee.

Issue (iv): whether the specified debts ought to have been written off as irrecoverable before 12 April 1931.

Analysis: The debts had not been written off until 1934, but the relevant question was whether the assessee was in a position before 12 April 1931 to know that they were irrecoverable. The facts did not support an earlier write-off date. The treatment of similar debts by the department was inconsistent and did not undermine the conclusion that there were no materials to justify the suggested earlier write-off.

Conclusion: There were no materials to hold that the debts should have been written off before 12 April 1931; the answer was in favour of the assessee.

Final Conclusion: The reference was answered with the assessee succeeding on three issues and failing on one, and he was held entitled to costs.

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