COMMISSIONER OF INCOME TAX MADRAS Vs. ARUNACHALAM CHETTIAR

JUDGEMENT

(1.) These two consolidated appeals are directed against the judgment and order made on 11-1-1950 by the High Court of Judicature at Madras in References No. 80 of 1946 and No. 38 of 1948 under S. 66, Income-tax Act, whereby the High Court relying on its earlier decision in - 'The Commr. of Income-tax, Madras v. Sevugan', 1948-16 ITR 59: 1948- 1 Mad LJ 157: AIR 1948 Mad 418 held that the references were incompetent and accordingly refused to answer the questions raised therein. The facts are shortly as follows:

(2.) The respondent who is a Nattukoti Chettitar had his headquarters at Karaikudi in India and also carried on his money-lending business at branches at Maubin, Kualalumpur and Singapore. He also had income from properties at Maubin and Singapore. For the Assessment year 1942 the Income-tax Officer calculated the assessee's accrued foreign income as Rs. 29,403, at Maubin Rs. 27,731 at Kualalumpur and Rs. 34,584 at Singapore, in all Rs. 91,718. After deducting out of this amount Rs. 4,500 allowed under the 3rd proviso to S. 4(1) at the Act, the Income-tax Officer computed the total assessable foreign income at Rs. 87,218. Out of the total remittances of Rs. 84,352 the income-tax Officer allocated Rs. 7,900 to the accrued income of Maubin and Rs. 62,315 to those of Kualalumpur and Singapore and the balance of Rs. 14,137 to the taxed income of earlier years. The Income-tax Officer disallowed the claim of the assessee to deductions under several heads. On the basis of the total foreign income of Rs. 67,218 and income from other sources the Income-tax Officer calculated Rs. 23,266-8-0 to be due by the assessee on account of Income-tax, Super Tax and Surcharges thereon and by his assessment order dated 31-1-1942 made this amount payable on or before 25-2-1952. The assessee preferred an appeal to the Appellate Assistant Commissioner against the disallowance of the several items of his claim including the claim for replantation expenses amounting to Dol. 498 incurred at Kualalumpur and a bad debt of Dol 15,472 at Singapore. The Appellate Assistant Commissioner by his order dated 25-5-1942 allowed some of the several objections but disallowed the items of replantation expenses and bad debt and reduced the assessment to Rs. 22, 548. The assessee took a further appeal before the Appellate Tribunal against the disallowance of the several claims by the Appellate Assistant Commissioner including the two items mentioned above. The Appellate Tribunal by its order dated 20-8-1943 held that the replantation expenses "will be allowed to the appellant as expenses." As regards the bad debt the Tribunal held that it was permissible and that "the deduction claimed will, therefore, be allowed." The result was that the appeal was partly allowed.

(3.) The matter came back before the Income-tax Officer on 26-9-1945. Deducting Rs. 778 on account of replantation expenses the Kualalumpur income was reduced to Rs. 26,953 and after deducting Rs. 24,175 on account of the bad debt the Singapore income came down to Rs. 10,409. These two reduced amounts together with Rs. 29,403 being the income from Maubin made up the total accrued income of Rs. 66,76. Out of this amount Rs. 4,500 was deducted on account of un-remitted profits of Maubin under the 3rd proviso to S. 4(1) of the Act, leaving a balance of Rs. 62,265. Out of the remittances the Income-tax Officer allocated Rs. 7,000 towards the accrued income of Rs. 29,403 from Maubin and Rs. 37,362 against the total accrued income of Kualalumpur and Singapore. He also allocated Rs. 24,549 as remittances out of assessed profits of previous years, leaving a balance of Rs. 13,541. This amount the Income-tax Officer considered as remittances out of earlier years' unassessed income and held it to be assessable to tax. After adding Rs. 13,541 to Rs. 62,265 being the net accrued income of the year 'from Maubin; Kualalumpur and Singapore the Income-tax Officer arrived at the total foreign income of Rs. 75,806. On the basis of this foreign income together with other income the Income-tax Officer recalculated the amount of Income-tax Super Tax and Surcharges thereon at Rs. 22,802/6/- and after giving credit for certain amounts found Rs. 21,211/14/- as the balance due which by his order date 26-9-1945 was made payable in equal moiety on or before 30-9-1947 and 31-3-1948. He, however, did not issue any notice of demand under S. 29 of the Act.