TaxTMI 
TaxTMI 
1958 (10) TMI 8
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....and at Chistian in the Indian State of Bahawalpur now a part of Pakistan. The central set of accounts of the assessee's business were kept at Khurja. In this set of accounts income received by the assessee from all sources were incorporated. For the accounting year relevant to 1943-44 assessment, the interest account in the said books showed credit entries of Rs. 17,132 as interest received on capital invested in the shop at Chistian. Similarly for the accounting period relevant to 1944-45 assessment Rs. 47,029 had been credited in the said books. The Income-tax Officer took the view that these two amounts represented the assessee's taxable income in India and accordingly he levied tax on them. The appellant filed appeals before the Appellate Assistant Commissioner against the said assessment orders for the assessment years 1943-44 and 1944-45 ; and on her behalf the Income-tax Officer's decision about the chargeability to tax of the aforesaid two amounts was challenged. The appellate authority, however, rejected the appellant's contention and confirmed the order under appeal. The appellant then filed appeals before the Income-tax Appellate Tribunal. The Tribunal agreed with th....
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....en received by the assessee in reality, it can be deemed to be received under the relevant provisions of the Act ; and this constructive receipt can be conveniently described as statutory receipt under the Act. Taxes deducted at source or annual accretion to an employee participating in a recognized firm, for instance, are deemed to be received under section 18(4) and section 58E of the Act respectively. The argument is that there is no relevant provision of the Act under which the two amounts in question can be properly deemed to have been received by the appellant. No provision has been mentioned in the judgment of the High Court nor has any such provision been cited by the Income-tax authorities either. In our opinion, this argument is technically correct. It must be conceded that the present proceedings disclose some confusion in the mind of the appellant in the presentation of her case at all stages hereto, in the findings recorded by the Income-tax authorities, in the form of the question raised by the Tribunal, and in the answer given to it by the High Court. In law and in substance, what the Department has done is to tax the said two amounts not because they are deemed to h....
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....i invited our attention to the decision of the House of Lords in Gresham Life Assurance Society Ltd. v. Bishop (Surveyor of Taxes). This was a case of life assurance society which carried on business at home and abroad with its head office in London. At the bead office accounts and balance-sheets were made up, the profits ascertained and the dividends paid. The interest upon the society's foreign securities paid abroad was received by the agents and part of it was applied abroad for the purposes of the society. All the interest on foreign securities was, however, taken into account in the balance-sheets upon which the profits were ascertained. It was held that taking the interest into account was not equivalent to a receipt in the United Kingdom and that income-tax was not chargeable upon that part of the interest which was not remitted to the United Kingdom. The Fourth Case falling under Schedule 'D' which fell to be considered in this case referred to sums "which have been or will be received in Great Britain during the year for which the duty is payable." Under this provision, the locality of the receipt is naturally very important. As Lord Lindley has observed that "what has be....
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....,68,418. The assessee also received Rs. 4,40,878 from sales to purchasers in British India. The question which arose for decision was whether these two sums were sale proceeds of goods sold by the assessee to merchants in British India and whether they were received in British India and could be included in the assessable income of the assessee in British India. It was held by this court that the said amounts were not received by the assessee nor could be deemed to have been received by it when the entries were made in the books of account at Petlad but that they had merely accrued or arisen to the assessee there ; that they were first received by R. & Co. and by the banks through whom the railway receipts were negotiated on behalf of the company in British India and as such were liable to tax under section 4(1)(a) of the Act as having been received in British India on its behalf. We do not see how this decision can assist the appellant's case before us. We are dealing with the appellant who is a resident in British India and the argument that the credit entries made in the books of account should not be treated as income received or treated by her as received cannot be supported b....
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....received in British India because in law the transfer called in the assessee's books an advance to the Penang firm cannot be a loan. The court came to the conclusion that once the assessee had adopted the mercantile basis of accountancy it was upon that basis and that basis alone that he had to be assessed. Thus this decision would show that the effect of making a credit entry in the interest account would be to treat that amount as income or profits received by the assessee or treated by him as received for the purposes of the tax provided the assessee keeps the accounts according to the mercantile method of book-keeping. We are, therefore, not prepared to accept Mr. Sastri's argument that, despite the concessions made by his client before the Tribunal, it would still be open to her to contend that the relevant entries in her books of account did not justify the inference that the appellant has received the amounts in question by way of interest during the relevant period. Realising the infirmity in his argument on this point, Mr. Sastri contended that the main objection which he wanted to urge before us against the validity of the conclusion reached by the Income-tax authoritie....
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....f Dublin. It was also observed that what was intended to be raised from the citizens was what is enough to pay for the expenses of the water supply and no more and that there was no intention that the corporation should in any sense make a profit from those ratepayers. The said principle has been enunciated very succinctly by Viscount Simon in Ostime (H. M. Inspector of Taxes) v. Pontypridd and Rhondda Joint Water Board when he said that "if the undertaker is a rating authority and the subsidy is the proceeds of rates imposed by it or comes from a fund belonging to the authority, the identity of the source with the recipient prevents any question of profits arising." In Carlisle and Silloth Golf Club v. Smith (Surveyor of Taxes), Buckley, L. J., has adverted to the same rule and has observed that a man cannot make profits or loss out of himself and that was the ground of the decision in New York Life Insurance Company v. Styles (Surveyor of Taxes). In support of the same proposition Mr. Sastri has also relied upon the decision of this court in Sir Kikabhai Premchand v. Commissioner of Income-tax. In this case, the assessee carried on business in bullion and shares and kept his ac....
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....) that "where a person carrying on a trade disposes of part of his stock in trade not by way of sale in the course of trade but for his own use, enjoyment, or recreation : he must bring into his trading account for income-tax purposes the market value of that stock in trade at the time of such disposition, and that, accordingly, the amount to be credited to the stud farm accounts on the transfer of the horses was their market value and not the cost of breeding them." It would be noticed that this decision proceeds on the fictional or notional assumption that the transfer of the five horses from the stud farm of the assessee to her racing stables was a commercial transaction ; and that according to the Solicitor-General, is a clear case where an exception is recognized to the general rule that a person cannot trade with himself. In his speech, Viscount Simonds observed that "if there are commodities which are the subject of a man's trade but may also be the subject of his use and enjoyment, I do not know how his account as a trader can properly be made up so as to ascertain his annual profits and gains unless his trading account is credited with a receipt in respect of those goods w....
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.... sold the potatoes as wholesale merchants in London. The assessees admitted their liability to pay the tax on the commission in question ; but the admission did not seem a strange one to Mr. Justice Rowlatt whose only comment was "but that, on the whole, is the limit of their liability." In regard to this decision, Lord Radcliffe has remarked that the limit mentioned by Rowlatt, J., required the assessees to include in the receipts of their London business a commission from themselves which of course they never paid for selling themselves their own potatoes. From the decisions examined by him, Lord Radcliffe drew the inference that they afford instances of the disintegration for tax purpose of a profitable business carried on by a taxpayer in two departments. The respondent's argument is that having regard to the decision of the House of Lords in the case of Sharkey v. Wernher it would be necessary for a larger Bench of this court to reconsider the view expressed by the majority decision in the case of Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax. It is urged that the minority view expressed by Bhagwati, J., appears to be more consistent with the decision of the Hous....
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.... the appellant is a resident in the taxable territories and her income wherever received would be normally taxable, she would be entitled to the benefit of the exception prescribed by the provisions of section 14(2)(c). Nevertheless the appellant's profits from her shop at Chistian would be relevant for the purpose of determining the rates at which income-tax was payable by the appellant. They would also be relevant in deciding which part of the profits were received or could be deemed to be received within the meaning of section 14(2)(c). If it is held that the entries in respect of the two items of interest in question do not represent in law any profits received by the appellant, then appropriate changes would have to be made in the appellant's account books kept at Khurja as well as at Chistian. The appellant has been keeping accounts on the mercantile basis for all the years and it is very unlikely that the two entries before us are the only ones which may be affected if it is held that the appellant could not have traded with herself. It is clear that the profits made by the appellant in her shop at Chistian have been determined all these years on the basis of credit and debi....