TaxTMI 
TaxTMI 
TaxTMI 
1990 (10) TMI 5
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....ish India during the relevant years it had a cotton mill in British India. The cloth manufactured by the mill was sold in British India as well as in the native States. In the assessment for 1944-45, it had been held that, for the sales effected in the native States, one-third of the profit was, in terms of section 42(3) of the Act, deemed to have accrued to the assessee in British India. This profit was considered as the profit attributable to the manufacturing part of the business carried out in British India, although sales were effected in native States. On the same basis, the assessment in terms of section 42(3) was made in respect of the assessment years 1946-46, 1946-47 and 1947-48. In addition to the deemed income in British India, ....
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....ught into British India up to the extent of one-third should be presumed to be that which was attributable to that one-third which had already suffered tax, and the balance remittance, if any, alone should be taxed under section 14(2)(c) of the Act. In other words, according to the assessee, if the remittances made to British India in any accounting year exceeded the amount taxed under section 42(3) of the Act, then it was only so much of that excess which could be taxed under section 14(2) of the Act. The Tribunal did not accept this contention. However, it stated: "... it appears to us that the common sense point of view would be that the remittances to British India include both the assessed as well as the exempt profits in the same pro....
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....-taxed items and a neutral payment was made, i.e., without specifying the exact source of the payment, the taxing authorities, in the absence of any evidence to the contrary, had to proceed on the basis that the payment was made out of that part of the mixed fund which had already borne tax. The High Court, however, observed : ". . . in this case, the assessee did not have two funds but only one fund composed of taxed and non-taxed amounts and as one-third of the entire amount of profits made by the assessee in the Indian States had been subjected to tax, the income-tax authorities took a reasonable view in excluding one-third of the remittance to British India from taxation in each year. There were sufficient profits in each year out of w....
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....allowed by the law. Lord Wright. M. R., in Paton (as Fenton's Trustee) v. CIR [1936] 21 TC 626 at p. 639 (CA), referring to the right of the taxpayer to attribute payment to taxed monies, stated : "In the ordinary course, a person paying interest does not generally appropriate the payment to income or to any particular piece of income or any specific asset: he has the general body of available funds, say his banking account, if he has only one, and he pays by drawings on that account, which may include income, borrowed money, capital and so forth. This is what is meant by payment out of a mixed fund, or payments made out of the general till, or payments made neutrally. The Revenue authorities have no right in such cases to appropriate tho....