COMMISSIONER OF INCOME TAX CENTRAL Vs. SOORAJMULL NAGARMULL

JUDGEMENT

(1.) The present reference relates to the assessment year 1949-50, for which the relevant accounting year is R. N. 2005. The assessee is M/s. Soorajmull Nagarmull which is a firm.

(2.) During the relevant accounting year, the assessee-firm, inter alia, was the managing agent of two sugar mills situated in East Pakistan, namely, North Bengal Sugar Mills Ltd., Sitabgunj Sugar Mills Ltd. and a concern styled as Sitabgunj Agricultural Farm Ltd.

(3.) Undisputed facts are that the assessee lent money to the managed companies in East Pakistan and that money was lent at Calcutta in their head office and then was brought into East Pakistan for the business of the managed companies of the assessee. The claim of the assessee before the ITO was that a sum of Rs. 2,07,028 was the income of the assessee in Pakistan as interest on borrowed money, as the managed companies of the assessee-firm utilised the assessee's money for which interest had been charged. The account of the assessee's managed companies was debited with the sum of Rs. 2,07,028 and the assessee's account was credited. But after crediting the amount of interest accrued to East Pakistan of lending money to the two sugar mills on interest account of the assessee, there had been a total loss in interest account of the assessee in its books of accounts. Having found a net debit of Rs. 9,01,262 in a single interest account and having found that there were no particular loans which could be identified as the advances made by the assessee to the managed companies, the ITO was of the opinion that the interest account could be considered as a whole and no allocation of income to Pakistan was necessary. Secondly, he also held that as the advances to the managed companies in Pakistan were made by the assessee at Calcutta where these two companies had their head offices at the material time, and as the companies utilised the borrowed capital in Pakistan, the assessee could not be made liable for income-tax on that account (sic).