Mixed-fund remittances may be apportioned between taxed and untaxed profits where the facts and statute justify it.

In mixed-fund remittances from native States to British India, attribution to previously taxed profits is not automatic. The taxpayer may, in appropriate cases, treat payments as coming from taxed monies, but only where that attribution fits the facts and the statutory scheme. Here, because there was a single fund containing both taxed and untaxed profits, the Tribunal's apportionment method was accepted: one-third of each remittance was excluded to reflect profits already taxed under section 42(3), and the balance was brought to tax under section 14(2)(c). The claim that the entire remittance should be treated as taxed income was rejected.

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Issues: Whether remittances made to British India from a mixed fund comprising taxed and untaxed profits in the native States were liable to be treated, in the first instance, as remittances out of profits already taxed under section 42(3), so as to restrict or exclude further taxation under section 14(2)(c).

Analysis: The assessee had only one fund consisting of both taxed and non-taxed profits, and not two separately identifiable funds. The principle that a taxpayer may, in appropriate cases, attribute a payment to taxed monies was recognised, but its application depended on the facts and the statutory setting. On the facts found, the Tribunal adopted an apportionment approach, excluding one-third of each remittance from tax because one-third of the native-state profits had already been taxed under section 42(3). That view was held to be reasonable and consistent with the facts and the Act.

Conclusion: The claim that the entire remittance, up to the amount already taxed under section 42(3), must be treated as coming out of taxed profits was rejected. The inclusion of the remittances under section 14(2)(c), after allowing one-third exclusion, was upheld and the assessee failed.

Ratio Decidendi: The right of attribution in a mixed fund is not absolute; it applies only so far as it is consistent with the facts found and the statutory scheme, and where the taxing authority reasonably apportions remittances between taxed and untaxed components, no further relief is available.

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