The assessee, a person engaged in business, ventured to purchase the property paying a considerable sum, mainly from borrowed funds, fully aware of the price it was going to fetch, having entered into deeds which definitely assured him of the margin he was going to make on the property as a whole. The motive of reselling property at a profit is established and the profits made by the assessee in the transaction is taxable under section 10 as profits from an adventure in the nature of trade.
The petitioner then preferred an appeal before the Appellate Assistant Commissioner of Income-tax who, while affirming the decision of the Income-tax Officer that the cash credit discovered was "income from undisclosed sources", reduced that income to Rs 30,000. An appeal preferred by the petitioner against the decision of the Appellate Assistant Commissioner is still pending before the Income-tax Appellate Tribunal, Bombay.On 19th March, 1962, a notice under section 35 of the Act was issued to the petitioner saying that in the assessment for the year 1956-57 made on 20th February, 1961, there was a mistake apparent from the record in that the business loss of the year 1955-56 had been set off against income from undisclosed sources, registered firm and house property for the assessment year 1956-57, and that as a result of the intended rectification the assessment would be enhanced by Rs 7,866.80 nP. The petitioner was intimated of the date of hearing and asked to appear in person, or by a representative, or to send his reply in time if he did not wish to be heard in person.
the assessment years 1946-47 to 1951-52 the Income-tax Officer had passed orders under section 23A of the Act on March 18, 1952, deeming that a sum of Rs 3,54,716 was distributed as dividends. These amounts were adjusted in the assessee's books of accounts in the accounting year 1955-56 by crediting the shareholders' accounts. A sum of Rs 26,600 was distributed in the accounting year by the assessee to avoid the application of section 23A for 1952-53, 1953-54 and 1954-55. Another sum of Rs 51,000 included in the dividend distribution of the year was unconnected with the provisions of section 23A.
The Income-tax Officer considered the claim but was not satisfied either that the money advanced to Johrimal Sanhilal was a loan in the ordinary course of business or that it had become irrecoverable during the relevant accounting year, his view being that the debt had become irrecoverable long before the year 1948-49 and should have been written off immediately after the debtor-firm was declared insolvent in 1938 or, at the latest, when the first dividend was paid in 1941-42. The assessee appealed against that decision. The Appellate Assistant Commissioner held on the first question that the debt had in fact been advanced to the insolvent-firm in the ordinary course of business.
The complaint that the Hindu undivided families have been picked out for hostile discrimination proceeds on the basis that while the Hindu undivided families are liable to pay tax under the "Act", the other undivided families are exempt from payment of the tax in question. This grievance does not appear to be correct. Section 3, the charging section in the "Act", says: "Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule." (Underlining (Here printed in italics.) is ours)
The sole contention raised by the learned counsel for the assessee is that the decision of the Income-tax Appellate Tribunal as well as that of the Appellate Assistant Commissioner of Income-tax and the Income-tax Officer to the effect that the return filed by her on 3rd September, 1951, was not a valid return is erroneous in law. It is conceded by the learned counsel for the department that if we come to the conclusion that the return filed by the assessee on 3rd September, 1951, was not an invalid return, then in view of the Supreme Court decision in Commissioner of Income-tax v. Ranchhoddas Karsondas [1959] 36 I.T.R. 569; [1960] 1 S.C.R. 114, the first question must be answered in favour of the assessee. Therefore, all that we are required to examine is: Whether the return filed by the assessee on the 3rd September, 1951, was a valid return.
The Appellate Tribunal found that the assessee, in compliance with the notice, filed a return showing his status as "Chandrabhan Johurmull, deceased, represented by Sewlal Daga." According to the Tribunal, the assessee correctly understood the purpose for which the notice under section 34 was issued to him, and, in compliance with the notice, filed a return by showing himself to be the legal representative of his father. The Tribunal was of opinion that this was a case of waiver of the defect in the notice. It has taken note of the decision of the Bombay High Court in Commissioner of Income-tax v. Ramsukh Motilal [1955] 27 ITR 54 as also that of the court in Tarak Nath Bagchi v. Commissioner of Income-tax [1946] 14 ITR 319 . It has followed the decision of this court, and stated that the irregularities in a notice issued under section 34 could be waived by a party. The waiver in this case is evident by the filing of a return according to law without any protest in respect of the income concerned.
The word 'used' has been read in some of the pool cases in a wide sense so as to include a passive as well as active user... It is not necessary, for the purposes of the present appeal, to express any opinion on that point on which the High Courts have expressed different views. It is, however, clear that in order to attract the operation of clauses (v), (vi) and (vii ) the machinery and plant must be such as were used, in whatever sense that word is taken, at least for a part of the accounting year. If the machinery and plant have not at all been used at any time during the accounting year no allowance can be claimed under clause (vii) in respect of them and the second proviso also does not come into operation.
The Tribunal held that common ownership or common management of the businesses or the common staff and the same capital would not be the true test to find out whether they constitute the "same business". It further observed that what was required was interlacing, interdependence or dovetailing or, in other words, the essential condition to be satisfied was that the discontinuance of one business may affect the other, or the existence of one must depend upon the continuance of the other. The fact that the sugar mill was obtained on lease in 1945 and shares purchased in 1946 would not make the two businesses, according to the Tribunal, the "same business". The Tribunal has pointed out that the evidence on record does not show that the two businesses were interconnected or were inextricably connected with each other to constitute the "same business" within the meaning of sub-section (2) of section 24 of the Indian Income-tax Act. The Tribunal, therefore, dismissed the assessee's claim.
The petitioner company was carrying on extensive business as wholesale dealers of various foodgrains, mustard oil and other commodities having its sales depot as well as its own railway siding at the Siding Bazaar, Tinsukia. The petitioner-company was being regularly assessed with income-tax from year to year, by the Income-tax Officer, Dibrugarh, the fourth respondent, and had been duly and regularly paying its taxes in accordance with the orders of assessment passed in respect of its said business from time to time. There was never any default, failure or neglect on the part of the petitioner to produce any of the books, documents and papers necessary for completing the assessment proceedings, and the petitioner gave no occasion for the income-tax authorities at any time to have any complaint regarding the conduct of the petitioner and particularly in the production of the books, documents, etc., in the course of and required for the assessment proceedings from time to time.
The departmental officers acted rightly in holding that the penal provisions of section 28(1)(c) are attracted. There are, however, extenuating circumstances. The assessee has co-operated largely with the department and has offered, through his chartered accountant, to accept assessments by an apportionment of the cash credits over a few years. This attitude should not go unappreciated. The penalties as levied for the offences committed are, in our opinion, somewhat excessive. They are reduced to Rs 250, Rs 250 and Rs 100 for the three years under appeal.
The Appellate Assistant Commissioner accepted the assessee's contention and modified the assessments holding as follows: "........This is a case where the payment of remuneration of royalty is governed by the terms of a written agreement. The quantum of royalty payable to the non-resident company for each year has been specifically fixed and it has also been provided as to where and how the payment has to be made. The only condition imposed in this respect is that the quantum of royalty ascertained in the manner provided for in the agreement should be paid without any deduction for taxes which are to be borne by the resident agent, i.e., Remco. If taxes payable in India are to be borne by the resident agent, it is a payment by the resident on behalf of the nonresident in respect of income accrued to the latter in the taxable territories.
The assessee appealed to the Appellate Assistant Commissioner against the assessment. It was contended before him that the assessment was barred by limitation on the ground that the assessment order ought to have been made within four years from the end of the assessment year, i.e., within March 31, 1960, that the assessment could be said to have been made only on the date on which the order was communicated to the assessee or the date on which the assessee came to know of the assessment. The decision of the Calcutta High Court in Director of Supplies and Disposals v. Member, Board of Revenue, Government of West Bengal ([1960] 11 S. T. C. 589) was relied upon.
The assessee started a film distribution business under the name and style of M/s. Zenith Movies on October 27, 1951. Books of account in respect of the above business were closed on 31st October of every year. In the belief that the assessee would have earned a taxable income in respect of the assessment years 1953-54, 1954-55 and 1955-56, proceedings were initiated by the Income-tax Officer under section 34 in respect of these years by issue of notice dated May 30, 1957, and served on June 3, 1957. These notices were accompanied by forms of return.
The Board contains 33 members including the Chairman. Out of the 33 members two are elected by the House of the People, one is elected by the Council of States, the Chairman is appointed by the Central Government, and the remaining 29 members are nominated by the Central Government to represent the various interests mentioned in section 4(2)(c). In addition to this, any officer of the Central Government when deputed by the Government in that behalf has the right to attend meetings of the Board and take part in the proceedings thereof, but he has no right to vote. Section 10 provides that when the Board is dissolved for any reason, the unexpended balance of all money in the hands of the Board excepting money in the "pool fund" has to be disposed of in such manner as the Central Government may direct.
The Appellate Tribunal held that the activities of the company were well within the objects as enumerated in the memorandum of association and the activity of purchases and sale of hessian and B-Twill could not be for the purpose of investment but was only for carrying out the business of the company. In this view, it held that the losses were incurred in the carrying out of the assessees business and should be set off against the computation of its total income.
The assessee is a company incorporated under the Indian Companies Act, 1943. The certificate of incorporation was obtained on the 28th May, 1945. The company was appointed the managing agent to Reform Flour Mills Ltd. on and from the 1st June, 1945. In the three assessment years referred to above, the assessee carried on certain speculative activities in B-Twills, hessian, etc. In the first year, there was a loss in speculation of Rs 1,38,675. In the second accounting year, there was a loss in speculation of Rs 32,625. Similarly, in the third accounting year, there was a speculative loss of Rs 53,250.
The two brothers installed on the land leased to them plant and machinery and erected buildings and inclines and started working the coal mines. On April 10, 1935, the two brothers constituted themselves into a private limited company called Agabeg Brothers Ltd.
The Income-tax Officer disallowed this claim and an appeal to the Appellate Assistant Commissioner also failed. In the further appeal to the Tribunal, the claim was made as an interest payment on capital borrowed for business purposes. This contention was rejected by the Tribunal and on this head, a question has been referred for the decision of this court.
The objects for establishing the petitioner-corporation are stated to have been laid down in section 3 of the Act and its general duty in section 18. The petitioner took over with effect from October 16, 1956, the undertaking from the Pepsu Roadways which had been operating departmentally the road transport services under the policy of nationalisation of road transport followed by the Pepsu Government.