COMMISSIONER OF INCOME TAX Vs. SHALIMAR WORKS LTD

JUDGEMENT

(1.) This reference arises out of the assessment for the assessment year 1959-60, for which the relevant previous year is the calendar year 1958. The assessee is a resident company. The original assessment" was made on the 30th October, 1959, on a total income of Rs. 12,28,734. This income was subsequently reduced in appeal. Thereafter, the Income-tax Officer found that the profits made by the assessee in the United Kingdom, in so far as they had been exempted under the third proviso to Section 4(1) of the Indian Income-tax Act, 1922, during the assessment years 1939-40 to 1958-59, amounting to Rs. 90,000, had been remitted into India in the previous year. The Income-tax Officer, therefore, reopened the proceedings of the relevant assessment year under Section 34 of the Indian Income-tax Act, 1922. In the course of reassessment proceedings the assessee submitted that the income which had accrued in the United Kingdom during the assessment years 1939-40 to 1958-59 was from interest and dividends, that they were capitalised by the purchase of securities and that after sale the amounts were ultimately brought to India in February, 1958. According to the assessee the sale proceeds of the said investments cannot attract the provision of Section 4(1)(b)(iii) of the Indian Income-tax Act, 1922. The Income-tax Officer negatived the assessee's contention and held that there had been remittances of profit within the meaning of Section 4(1)(b)(iii) of the said Act and included the said sum of Rs. 90,000 in the reassessment made.

(2.) There was an appeal before the Appellate Assistant Commissioner who held that, inasmuch as the assessee was a resident-assessee, he could not, by investing for the time being his income earned abroad, change its character. The Appellate Assistant Commissioner held that the sum of Rs. 90,000 was correctly taxed under Section 4(1)(b)(iii) of the Indian Income-tax Act, 1922.

(3.) There was a further appeal before the Tribunal and it was found by the Tribunal that the exempted income at the rate of Rs. 4,500 per annum for each of the assessment years 1939-40 to 1958-59 were available with the assessee unspent and that those sums had been invested in shares and securities during the years 1950 to 1957. These investments were sold in February, 1958, in the United Kingdom and thereafter the moneys representing the sale proceeds were remitted into India. The Tribunal observed that there was no finding of the Income-tax Officer that the investments made by the assessee in the United Kingdom were of a temporary character and were a prelude to remittances of income into India. The Tribunal has also found that the revenue has accepted that the assessee converted his foreign income into shares and securities and held them by way of "capital assets". The Tribunal was of the opinion that the investments were not of a purely temporary character and was not a device which had been resorted to for the purpose of avoiding tax. The Tribunal was further of the opinion that the investments were made out of the foreign income and held for some considerable time and thereafter these investments were converted into cash and the sale proceeds of these investments were sent to India. The Tribunal was, therefore, of the opinion that there have been remittances of sale proceeds of capital assets in the facts and circumstances of the case and as such the same would not attract the provision of Section 4(1)(b)(iii) of the Indian Income-tax Act, 1922. The Tribunal, accordingly, held that the sum of Rs. 90,000 was not liable to be included in the assessee's total income.