LAXMI CO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference under Section 21 of the Excess Profits Tax Act, 1940, read with Section 66(2) of the INdian INcome Tax Act, 1922, the following two questions have been referred for the opinion of this Court :

(2.) BEFORE we proceed to express our opinion on the questions which have been referred to us, we may take notice of the arguments of learned counsel for the assesses that the findings of fact recorded by the Tribunal on items Nos. 5, 6 and 7 are vitiated and should not, therefore, be accepted by us. All these three items deal with questions of fact and the Tribunal was the final authority to give findings on these questions of fact. Learned counsel's contention was that the findings on items Nos. 6 and 7 were vitiated by an error of law when the Tribunal recorded those findings relying on the statement of Sanwal Ram who had an interest in the assessee firm, being a partner in a firm which itself was a partner in the assessee firm.

(3.) ON item No. 5, the finding recorded by the Tribunal is challenged by learned counsel on two grounds : ONe ground is that the Tribunal committed an error in relying on a custom about payment of interest between the supplier of goods and the purchaser of goods on amounts standing to the credit or debit of each other in the books of account from time to time. In an income-tax proceeding, the provisions of the Indian Evidence Act do not apply. A well known mercantile custom can always be relied upon by the Income Tax Officer or the Tribunal. The custom, according to the Tribunal, was that, often enough, the supplier of goods gave goods to the purchaser on credit and charged interests on amounts outstanding against the purchaser. At the same time, the purchaser may make advance deposits against future supplies in which case he would receive interest on the amount standing to his credit with the supplier for being used for future supplies.