JOHARIMAL RAMLAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN compliance with the requisition of this Court, the Tribunal has stated the case under Sub -S. (2) of S. 66 of the IT Act on the following two questions :

(2.) WE are here concerned with the two asst. yrs. 1952 -53 and 1953 - 54, the relevant assessment years being Maru years 2007/8 and 2008/9. The assessee is a registered firm and, at the material time, was carrying on business in cloth including export of fine and super -fine cloth. There was import duty leviable on the cotton imported into India which was being used for manufacture of fine and super -fine cloth. As a result of representation made by various traders, the Government of India decided to allow some rebate on customs duty in respect of foreign cotton on which import duty had been paid and which had been used for the manufacture of fine and super -fine cloth. By a circular letter dt. 8th March, 1950, the Government of India declared that with a view to encourage export of fine and super -fine cloth of Indian manufacture, it decided to grant from 1st Feb., 1950, a rebate, out of the import duty paid on foreign cotton which had entered into the production of such cloth, at a flat rate of 2 annas per pound on the net weight of all such export to certain specified countries. The said letter further directed that the rebate be paid by the Collector of Central Excise to the exporter. It may also be stated that, since February, 1950, there was no price control on sales by mills to exporters. The Government of India by its letter of 27th Feb., 1950, had lifted the said price control. In the relevant assessment years, the assessee had purchased fine and superfine cloth from the mills and had exported it to certain countries. In respect of this exported cloth, the assessee had from time to time received various amounts of rebate. The total amount of rebate received by the assessee in the assessment year 1952 -53 was Rs. 25,170, and in the next assessment year the amount was Rs. 25,230.

(3.) THE assessee filed appeals before the AAC. Before the AAC also it had been contended on behalf of the assessee that the said amounts of rebate received by the assessee were its liability to the mills and not its income, and therefore, not liable to tax. In support of its claim, the assessee had placed reliance on Morley vs. Tattersal (1939) 7 ITR 316. The AAC also rejected the claim of the assessee and dismissed the appeals. Further appeals were taken to the Tribunal. On the material placed before it, the Tribunal took the view that the real arrangement between the mills and the assessee was that the amount of rebate or refund belonged to the assessee. In this view of the matter, the Tribunal held that the said amounts were income of the assessee and not its liability, and, therefore, dismissed both the appeals. An application made to it by the assessee under S. 66 (1) was rejected by the Tribunal, and, as already stated, in compliance of the order made by this Court under S. 66(2), the Tribunal has stated the case on the aforesaid two questions. Now, it is not in dispute that if the answer to the second question goes against the assessee, the answer to the first question also would go against the assessee. If, on the other hand, the answer to the second question goes in favour of the assessee, the answer to the first question also must necessarily go in favour of the assessee. We would, therefore, proceed to deal with the second question first, and that question is whether there is any evidence on record to justify the finding of the Tribunal that the customs rebate was not received by the assessee on behalf of the third party (viz., the mills) and it was a revenue receipt of the assessee.