Receipt of foreign profits requires proof they were actually brought into British India; imported stock in trade is not enough.

Cash remittances and timber brought into British India were not presumed to be the profits of the Kashmir business. The court treated the cash transfer as capital, and held that imported timber was stock in trade; mere importation and later sale in British India did not establish receipt of profits there. Account entries in Lahore books also did not by themselves prove that Kashmir profits were received in British India. Because the alleged inward excess rested on an erroneous audit assumption and no actual bringing-in of profits was shown, taxation on receipt failed.

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Issues: (i) Whether, on the facts, any legal presumption arose that the cash remittance and timber brought into British India represented profits of the Kashmir business; (ii) whether the Kashmir profits could be assessed as received in British India on the basis of account entries, the alleged inward excess, or the imported stock-in-trade.

Issue (i): Whether, on the facts, any legal presumption arose that the cash remittance and timber brought into British India represented profits of the Kashmir business.

Analysis: The assessment was not one made by estimate, but on accepted accounts and admitted figures. The remittance of cash was treated by the Court as a transfer of capital rather than a receipt of profits. As to the timber, it was accepted to be stock in trade. No authority supported a presumption that imported stock in trade, merely because it entered British India and was ultimately sold there, must be treated as profits received in India. The fact that profits were entered in the Lahore books did not by itself establish receipt in British India.

Conclusion: No such presumption arose; the issue was answered against the Revenue and in favour of the assessee.

Issue (ii): Whether the Kashmir profits could be assessed as received in British India on the basis of account entries, the alleged inward excess, or the imported stock-in-trade.

Analysis: The supposed inward excess depended on an auditor's admission that was later found erroneous. Once the incorrect assumption was excluded, there was no evidence of any true excess inwards. The profits remained in Kashmir, and the timber imported into British India was capital or stock in trade, not the profits themselves. Since no part of the Kashmir profits was shown to have been brought into British India, the department failed to establish that the assessed sum was income received in British India.

Conclusion: The profits were not proved to have been received in British India and were not assessable on that footing.

Final Conclusion: The reference was resolved in favour of the assessee, and the assessment based on receipt of the Kashmir profits in British India could not stand.

Ratio Decidendi: Imported stock in trade is not, without clear evidence, presumed to be profit received in British India, and taxation on receipt requires proof that the income or profits themselves were actually brought into the taxable territory.

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