1989 (4) TMI 5

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....in holding that the profits of the glass factory during the relevant accounting year accrued to the assessee-company ? (2) If the answer to question No. 1 is in the affirmative, whether the Tribunal was right in holding that the entire profits and not one-half of the profits of the glass factory during the relevant accounting year accrued to the assessee-company ?" The assessee, Messrs. Vibhuti Glass Works, is a public limited company. It has a glass factory and also carries on other business. The accounts of the glass factory are closed on March 31 of each year while the assessee closes its accounts on September 30 of each year. We are concerned with the assessment year 1962-63. For several years, the glass factory business had be....

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....ass factory business disclosed a profit of Rs. 92,960 while the assessee suffered a loss of Rs. 3,47,656 according to its separate profit and loss account. During assessment proceedings for the assessment year 1962-63, it was contended by the assessee before the Income-tax Officer that the profit of Rs. 92,960 earned by the glass factory business was not assessable in the hands of the assessee but in the hands of the Uttar Pradesh Government which had taken over the factory and was running the business. It was contended that in any event only one-half of the profits could be included in the assessment of the assessee, the remaining profit being assessable in the hands of the State Government which was entitled to 50 per cent. of the profits....

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.... Clause (c) of paragraph 7 of the deed provides "that if, upon the expiration or sooner determination of this demise, it is found that the working of the factory has shown profits after meeting the entire liabilities of the company, the, balance profits, after accounting for all charges and expenses incurred by the State Government, shall be divided between the company and the Government in equal proportion." It was contended by the assessee before the High Court that the income was diverted through an overriding title before it reached the assessee. The High Court, in our opinion, has rightly rejected the contention, holding that there was no overriding title and in fact it was a case of mere application of the income. The proper test t....