AHMEDABAD MANUFACTURING AND CALICO PRINTING CO LTD Vs. COMMISSIONER OF EXCESS PROFITS TAX BOMBAY NORTH

JUDGEMENT

(1.) THE assessee company is a textile mill and in the assessment years 1940-41 and 1941-42 and in the assessment years prior thereto the company valued its opening stock and the closing stock irrespective of the cost price or the market value and it valued it on a fixed rate basis. THE assessment for the two years was made on that basis. Subsequently the department challenged the basis and it attempted to reopen the matter under Section 34, but that attempt failed. When it came to the question of excess profits tax, it assessed the profits for the corresponding charging period on a different basis and the result was that whereas in 1940-41 the income was assessed at Rs. 11,16,664 and in 1941-42 at Rs. 12,15,698, on the other basis the income for 1940-41 was assessed at Rs. 13,31,648 and for the year 1941-42 at Rs. 24,64,646. Having assessed the income on the proper basis as far as the standard period (sic) was concerned, the department assessed the profits during the standard period on the basis adopted by the assessee, viz. , the fixed rate basis. THE result of this was that for the purpose of comparing the profits in the standard period and the profits in the charging period two different bases were adopted, one was the fixed rate basis and the other was the other basis adopted and accepted by the department. THE contention of the assessee was that as the income had been assessed during the charging period on the fixed rate basis, for the purpose of excess profits tax the same income should be accepted and there should be no re-assessment of the income. It was also contended that as far as the standard period was concerned, if the assessment during the charging period was on a different basis, the profit for the standard period should be assessed on the same basis. THEse were the two contentions that were pressed before the Tribunal and which have been pressed before us by Sir Jamshedji. THE Tribunal rejected the contention of the assessee and accepted the assessment made by the department.

(2.) NOW, in order to decide whether the contention of the assessee is sound, we have got to construe certain provisions of the Excess Profits Tax Act. The profits which have got to be assessed under the Excess Profits Tax Act according to the definition in Section 2 (17) are as determined in accordance with the first Schedule and therefore we have to turn to the rules under the First Schedule in order to decide what the profits are. The relevant rules for the purpose of this reference are Rule 1, the second proviso to that Rule, and Rule 2 . Rule 1 provide : "the profits of a business during the standard period, or during any chargeable accounting period, shall be separately compute, and shall, subject to the provisions of this Schedule, be computed on the principles on which the profits of business are computed for the purposes of income-tax under section 10 of the Indian Income-tax Act, 1922. " Therefore, this rule applies both to the profits during the standard period and profits during the chargeable accounting period, and the rule lays down that they are to be separately computed and it also lays down how they are to be computed. They are to be computed on the principles on which profits of the business are computed under the Indian Income-tax Act, 1922. Then comes proviso 2 and that proviso only relates to the profits during any standard period and that proviso lays down that if these profits have already been determined for the purpose of an assessment under the Indian Income-tax Act, 1922, such profits as so determined shall, subject to the adjustments required by this Schedule, be taken as the profits during that period for the purpose of excess profits tax. Then we come to Rule 2 and that Rule applies to profits shall be computed on the same basis and in the same manner as the profits of that business are under the Indian Income-tax Act, 1922, as amended by the Indian Income-tax (Amendment), Act, 1939, computed for the chargeable accounting period, notwithstanding that the Indian Income-tax (Amendment) Act, 1939, may not have been in force in the standard period.

(3.) REFERENCE answered accordingly. .