Mandatory tax-reference limitation and rebuttable presumption on foreign remittances as profits clarified.

The one-month limit for requiring a tax reference under section 66(2) of the Income-tax Act, 1922 was treated as mandatory, and an assessee could not bypass that remedy by invoking section 66(3) or section 45 of the Specific Relief Act after failing to act in time. The presumption that remittances from a foreign business received in British India are profits was held rebuttable, and on the admitted facts the remittances were found to be return of capital rather than taxable foreign profits. The reference thus succeeded only in part.

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Issues: (i) Whether a question of law not raised before the Commissioner within the time prescribed by section 66(2) of the Income-tax Act, 1922 could nevertheless be compelled to be referred to the High Court under section 66(3), or invoked through section 45 of the Specific Relief Act; (ii) whether remittances from a foreign business to British India are conclusively to be treated as profits, or whether the presumption is rebuttable on the facts of the case.

Issue (i): Whether a question of law not raised before the Commissioner within the time prescribed by section 66(2) of the Income-tax Act, 1922 could nevertheless be compelled to be referred to the High Court under section 66(3), or invoked through section 45 of the Specific Relief Act.

Analysis: The right of an assessee to require a reference was held to be governed by section 66(2), and the one-month limitation was treated as mandatory. Section 66(1) was held to be a provision enabling the Commissioner to act on his own motion and not a further remedy available to the assessee. Section 45 of the Specific Relief Act was held inapplicable because the assessee had an adequate statutory remedy under section 66(2) which he had not pursued in time.

Conclusion: The assessee could not compel a reference of question (1), and the objection to its maintainability was upheld.

Issue (ii): Whether remittances from a foreign business to British India are conclusively to be treated as profits, or whether the presumption is rebuttable on the facts of the case.

Analysis: The presumption that money remitted from a foreign business and received in British India is out of profits was treated as a rebuttable one. On the admitted facts, the accounts were honestly kept, the remittances represented return of capital previously sent out, and the assessee had the liberty to choose the order in which capital and profits were dealt with. The character of the remittance was held to depend on its origin, not on the later use made of it in British India. The materials did not justify treating the remittances as foreign profits.

Conclusion: The presumption was rebutted, and the remittances were not taxable as foreign profits in the circumstances proved.

Final Conclusion: The reference succeeded only in part: the first question was answered against the assessee, while the second and third questions were answered in his favour, with costs awarded to the assessee.

Ratio Decidendi: A statutory right to require a tax reference must be exercised within the prescribed time, and a presumption that foreign remittances are profits remains rebuttable and cannot override admitted facts showing bona fide return of capital.

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