MOTIRAM MADANLAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BOTH the Income-tax References Nos. 19 and 21 of 1960 shall stand disposed of by this judgment.

(2.) THE second question relates to the assessment for the year 1947-48 and it arose in this manner. In the facts stated by the Income-tax Appellate Tribunal it a set out that the textile goods were purchased by the assessee from various parties in India through commission agents in Amritsar and Bombay. For the purpose of payment for the purchases made in the Indian taxable territories, the assessee, with the concurrence of his constituents, used to send money by drafts or telegraphic transfers in favour of the commission agents through whom the goods were purchased. According to the order of the Income-tax officer dated 29th June, 1951 which formed a part of the statement of the case, the profits estimated to be available for remittances into British India amounted to Rs. 1,20,000. THE remittances, however, into what was known as British India were much more, e.g. Rs. 2,00,000 sent by telegraphic transfer transfers to Messrs. Balu Ram Jagat Ram, partly for purchase of goods from them and partly "(i) for payment to other parties in India, (ii) for investment in the new business styled Messrs. Kotu Mal Nand Lal started in Amritsar in 1948 and (iii) Rs. 30,299 remaining in credit for the assessee even as far late as 23rd March, 1949". It was held that the entire available profits of Rs. 1,20,000 were remitted to British India and were assessable as such. Before the Appellate Assistant Commissioner it was contended that these remittances were payments against purchase of goods made from the British Indian parties for the Srinagar business. It was also sought to be argued before him that the amounts accumulating in the assessees accounts were not remittances of profits but sale proceeds, of the goods purchased from the merchants or for making further purchases in future. THE Appellate Assistant Commissioner found that the remittances during the accounting year were more than Rs. 4,90,000 but the profits earned in the Kashmir State were Rs. 2,54,500. After deducting from that a sum of Rs. 2,40,500. After deducting from that a sum of Rs. 14,500 as expenses, he arrived at the net figure of the past profits at Rs. 2,40,000 which were more than that covered by the remittances during the accounting year. He thus directed the inclusion of the sum of Rs. 2,40,000 in place of Rs. 1,20,000 in the assessment of the profits. Before the Income-tax Appellate tribunal the only contention raised on this point was that these monies were sent by the Srinagar office directly to certain arhatias at Amritsar who used to make purchases on behalf of the assessee. This argument was rejected as futile as the Tribunal was of the view that such receipts by the arhatias amounted to constructive remittances. THE second question, therefore, is as follows :