1958 (5) TMI 3 - SC - Income Tax

Supreme Court Upholds Tax on Bombay Forward Contracts

The Supreme Court dismissed the appeals, upholding the findings that the forward contracts were made in Bombay, making the profits taxable under the ... Whether sums of money received by the appellant during the account year 1942-1943 and aggregating to ₹ 27,30,094 are liable to be taxed under the Act? Held that:- We have considered all the contentions urged on behalf of the appellant at some length. We would like to make it clear that we are not sitting here as a court of appeal on facts. We have examined the record only with a view to see whether there is any misdirection or non-direction, such as is likely to have affected the result, and we have come to the conclusion that there is none, and that the finding of the Tribunal is not therefore open to attack. Appeal dismissed. Issues Involved:1. Taxability of the sum of Rs. 27,30,094 received by the appellant.2. Determination of the place where the forward contracts were made.3. Examination of whether the Tribunal's findings were supported by evidence or were perverse.4. Consideration of procedural aspects and evidence evaluation by the Income-tax authorities and the Tribunal.Issue-wise Detailed Analysis:1. Taxability of the sum of Rs. 27,30,094 received by the appellant:The primary issue in these proceedings was whether the sum of Rs. 27,30,094 received by the appellant during the account year 1942-1943 was liable to be taxed under the Indian Income-tax Act, 1922. The appellant admitted receiving this amount as profits from forward contracts in Jarilla cotton but contended that these contracts were entered into at Gwalior and thus, the profits accrued and were received wholly at Gwalior, making them non-taxable under the Act.2. Determination of the place where the forward contracts were made:The Department argued that the contracts resulting in the profits were actually entered into by the managing agents of the appellant with the firm of Jwaladutt Kishanprasad at Bombay, making the profits taxable under the Act. The appellant's contention was that the contracts were made with three brokers in Gwalior and not directly with Jwaladutt Kishanprasad, Bombay. The Income-tax Officer, Appellate Assistant Commissioner, and the Appellate Tribunal, after detailed investigations and examination of witnesses, concluded that the contracts were indeed made at Bombay by the managing agents of the appellant, and the three brokers were mere dummies.3. Examination of whether the Tribunal's findings were supported by evidence or were perverse:The appellant argued that the Tribunal's findings were erroneous in law, claiming there was no evidence to support them or that the findings were perverse. The Supreme Court examined the record to determine if there was evidence to support the Tribunal's findings and whether those findings could be reasonably reached based on the evidence. The Court found that the direct testimony of J. R. Pillani and circumstantial evidence supported the Tribunal's conclusion that the contracts were made in Bombay. The Court also noted that the evidence provided by the appellant's witnesses, such as the brokers and the manager of the appellant, did not convincingly support the claim that the contracts were made in Gwalior.4. Consideration of procedural aspects and evidence evaluation by the Income-tax authorities and the Tribunal:The Supreme Court reviewed the procedural aspects, including the remand order for further investigation and the examination of witnesses. The Court found that the Income-tax authorities and the Tribunal had conducted a thorough investigation and had properly considered the evidence. The appellant's criticisms of the evidence, such as the credibility of J. R. Pillani's testimony and the alleged withholding of accounts, were addressed by the Court. The Court concluded that there was no misdirection or non-direction likely to have affected the result, and the Tribunal's findings were not open to attack.Conclusion:The Supreme Court dismissed the appeals, upholding the findings of the Income-tax authorities and the Tribunal that the forward contracts were made in Bombay, making the profits taxable under the Indian Income-tax Act, 1922. The Court ruled that the appellant's contentions lacked merit and that the evidence supported the conclusion that the contracts were not genuine transactions made in Gwalior. The respondent was awarded costs in Civil Appeal No. 204 of 1954, while the parties were to bear their own costs in Civil Appeal No. 163 of 1958.