1989 (6) TMI 3

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.... relevant year ?" The facts are briefly stated as hereunder : The assessee had income both in India and East Pakistan (now Bangladesh) during the years under reference. Up to October 7, 1960, Messrs. Gillanders Arbuthnot and Co. was the managing agent of the assessee-company. From October 7, 1960, the Pakistan Commodities Ltd. became the managing agent of the assessee in East Pakistan. The managing agent, however, disclosed the carrying on of the business in groundnut and masoor on behalf of the assessee in both the years. The Income-tax Officer in Pakistan required the assessee to produce the articles of association to show that it could carry on business in the commodities but the assessee expressed inability to furnish the same. Th....

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....he assessee's contention and allowed the losses claimed by it for both the years. The Department preferred appeals before the Tribunal and the Tribunal endorsed the view-point of the Appellate Assistant Commissioner by observing that the Income-tax Officer in East Pakistan did not dispute the correctness of the loss claimed by the assessee in both the years. In the circumstances, there is no justification for rejecting the assessee's claim in both the years for non-production of the account books. The doing of the business in groundnuts and masoor was not by itself illegal but it was illegal in so far as it was beyond the authority of the assessee to do such a business in view of the memorandum of association. There is no distinction bet....

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.... itself illegal but was illegal in so far as it was beyond the authority of the assessee to do such a business in view of the memorandum of association of the company. It is now well-settled that, even if the business is illegal, it would still be a business within the meaning of the Income-tax Act ; if any profits are derived from such business, the same are assessable and there cannot be any distinction between the losses and profits of the illegal business. In our view, whether the transaction is or is not within the powers of a company has no bearing upon the nature of the transaction or on the question whether the profits arising from the transactions are assessable as revenue profits or not. Reference may be made to the decision of th....