GANESHILAL AND SONS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 66 (1) of the Indian Income-tax Act, made by the Income-tax Appellate Tribunal in relation to an assessment made under Section 23 (2) read with section 34 of that Act, for the assessment year 1938-39. The question of law which has been referred for out decision is as follows :-

(2.) THE assessee is a Hindu undivided family carrying on business in Agra. It has also got a branch business at Cairo in Egypt. It may be noted that the year of account for the business at Cairo ended October 1937 and that for the business at Agra head office ended March 20, 1938. THE material facts appearing from the statement of the case are these :-

(3.) IT is clear from the language of sub-section (2) that it is a "deeming" provision and it means that income, profits and gains which have accrued or arisen without British India to a person resident in British India shall be treated as having accrued or arisen in British India, provided they are received in or brought into British India. There is no question that the sum of Rs. 50,258 was brought into British India. The only question, therefore, is whether this sum represents income, profits and gains which accrued or arose to the assessee at Cairo. IT is manifest from the language used in sub-section (1) that the Income-tax Act shall apply to "income, profits or gains, as described or comprised in Section 6." In other words, only such income, profits and gains attract income-tax as have been computed in the manner provided in Sections 7 to 12. As we are concerned with income under the head "business," profits and gains have to be computed in accordance with Section 10 and it is obvious that only those allowances which are mentioned in sub-section (2) of Section 10 can be deducted in the computation of the profits and gains chargeable to income-tax. Thus the question as to what was the income, profits or gains made by the Cairo branch which attracted income-tax can be answered by stating that only the sum of Rs. 1,24,685 could be deducted from the trade receipts.