LAWS(MAD)-1961-2-6

S NARAYANASWAMI Vs. COMMISSIONER OF INCOME TAX MADRAS

Decided On February 14, 1961
S.NARAYANASWAMI Appellant
V/S
COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

(1.) THE reference under section 66(2) of the Act, that was directed in C.M.P. No. 7015 of 1956, was itself necessitated during the course of the arguments into R.C. No. 26 of 1953, when an alternative contention of the assessee had to be dealt with to dispose of the controversy between the parties which constituted the subject matter of R. C. No. 26 of 1953. To comply with the directions given in C.M.P. No. 7015 of 1956 a statement of the case has been submitted which has been separately numbered as R.C. No. 73 of 1957 but the questions that arise both in R.C. Nos. 26 of 1953 and 73 of 1957 relate to the same set of assessment proceedings and, as we said, they are really alternative positions to be considered before the questions at issue between the assessee and the department are ultimately disposed of It is rather unfortunate that the specific findings required have not been recorded in the statement of the case submitted in R.C. No. 73 of 1957. THE department filed T.C.M.P. No. 41 of 1959 to call upon the Appellate Tribunal to submit a further statement of the case with reference to the questions which they were directed to refer to this court in C.M.P. No. 7015 of 1956.

(2.) LEARNED counsel for the assessee took time for consideration and eventually represented that the assessee was not opposing the application to call for a further statement of the case The scope of the enquiry which was expected of the Tribunal, on the basis of which findings had to be incorporated in the statement of the case, is indicated in the affidavit filed in T.C.M.P. No. 41 of 1959, a copy of which will be forwarded to the Tribunal. Apparently, the Tribunal was of the view that, since the question that was referred in R.C. No. 73 of 1957 had not been argued before the Tribunal at the stage of the appeal, the Tribunal could not, and should not, record any specific findings for the disposal of the question referred to this court for decision. That view is erroneous. Material for recording specific findings was apparently already before the Tribunal. If that material is not complete the Tribunal will afford an opportunity both to the department and to the assessee to place all the available material, so that the questions at issue can be satisfactorily disposed ofLEARNED counsel for the department specifically wanted an enquiry into the question, whether the funds were remitted to the head office of the firm at Madras only to enable the head office of the firm to carry on its business. That the moneys belonged to the individual partners would still be a factor, but an equally relevant factor would be whether the sale of the securities held by each of the two partners was only to see that the firm had funds at Madras at that stage to carry on its business.

(3.) IN this case also the further statement of the case should be submitted within six weeks from the date of receipt of the record by the Tribunal(After the return of the statement from the Tribunal, this reference coming on for hearing, the court delivered the following judgment) RAJAGOPALAN J.--Mr. Narayanaswami and Mr. Subramanian were partners in Swastik and Company till May, 1946. Thereafter they traded in partnership under the name of Chitra and Company. Chitra and Co., a firm of stock-brokers, had its head office at Madras and a branch at Trivandrum. Out of the profits earned and accumulated at Trivandrum in Travancore, which was outside British INdia which then constituted the taxable territories, and which profits were therefore not assessed, each of the partners purchased Mysore Securities which were held at Trivandrum. They desired to change the investment to Travancore Securities. Each of them sold the Mysore Securities to the firm, Chitra and Co., on August 6, 1947, under what was styled a broker's contract. It was common ground that facilities for purchase and sale of securities were better at Madras, where the firm had its head office. On August 7, 1947, the firm entered into a contract at Madras to sell those Mysore Securities to a broker in Bombay at the very price at which the firm had bought the shares from the partners. On August 8, 1947, the firm entered into contracts to purchase Travancore Securities of the same face value as the Mysore Securities that had been sold. The Mysore bonds themselves were sent from Trivandrum later and were taken delivery of by the firm at Madras on August 21, 1947, and they were in due course forwarded to the buyer at Bombay. Each of the partners was credited with the sale proceeds of the Mysore bonds on August 23, 1947, in the books of the firm at Trivandrum. The necessary entries were also apparently made when the amount was utilised for the purchase of Travancore bonds. The amounts were Rs. 37, 006, in the case of Mr. Narayanaswami and Rs. 32, 652 in the case of Mr. SubramanianIN the proceedings to assess each of the partners in the assessment year 1949-50, the INcome-tax Officer held that these transactions constituted remittances of unassessed profits to British INdia and he assessed these amounts to tax on that basis.