(1.) THIS is a reference under S. 21, Excess Profits Tax Act read with S. 66, Income -tax Act. The following two questions have been referred to us:
(2.) NO one has appeared in this reference to argue on behalf of the assessee. The facts stated by the Tribunal show that the assessee had been carrying on business for a number of years at Kanpur and shifted the business temporarily to Wankaner. This business was shifted, according to the Tribunal, for the specific purpose of avoiding liability to excess profits tax. These are questions of fact on which there is no reference before us. On these findings, the Tribunal has held that the transaction which resulted in shifting the business from Kanpur to Wankaner could be considered for making adjustment by the Excess Profits Tax Officer under S. 10A and, as a result of the adjustment, it could be held that the whole business carried on at Wankaner must be deemed to be business carried on at Kanpur. There is no doubt at all that any transaction which is entered into with the specific purpose of avoiding liability to excess profits tax can be avoided by the Excess Profits Tax Officer under S. 10A of the Act, irrespective of the circumstance whether the effect of that transaction is to make the Act altogether inapplicable to the business or part of the business or whether it merely reduces the liability to the tax or the rate of the tax. In the present case, the transfer of the business to Wankaner had the effect of taking away part of the business from British India and making the income of that business exempt from the operation of the provisions of the Excess Profits Tax Act. If the transaction is ignored under S. 10A, all the business done in Wankaner and the profits arising there would be subject to the operation of the Act. On the findings of fact given by the Tribunal, the transaction can be avoided and consequently, Proviso 3 to S. 5, Excess Profits Tax Act did not prevent the applicability of the provisions of S. 10A of the Act to the assessment in this particular case. It may also be noticed that the bulk of the business even while the firm was working at Wankaner was actually carried out at Kanpur in British India. Oar answer to the first question, therefore, is that Proviso 3 to S. 5, Excess Profits Tax Act, does not prevent the applicability of the provisions of S. 10A of the Act to the assessment in the fourth chargeable accounting period.