COMMISSIONER OF INCOME TAX Vs. SHIVNARAYAN HARIGOPAL
HIGH COURT OF MADHYA PRADESH
COMMISSIONER OF INCOME TAX
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(1.) THIS is a reference under section 66 (1) of the Indian Income -tax Act, 1922, at the instance of the Commissioner of Income -tax, M. P. The question which has been formulated by the Income -tax Appellate Tribunal for our decision, is :
'Where, on the facts and in the circumstances of the case, there was any receipt of sale proceeds of Rs. 11,43,712 and Rs. 47,20,885 on behalf of the assessee in the taxable territories so as to justify assessment of the profits include therein under section 4(1) (a) of the Indian Income -tax Act, 1922 ?'
(2.) THE assessee, Shri Shivnarayan Harigopal, Indore, is an unregistered firm. In the accounting year from 20th June, 1947, to 8th July, 1948, it carried on business in the sale and export of cloth at Indore, which was then in non -taxable territory. In that year, there was an all -India control over the disposal of cloth. On receiving allotment orders for supply of cloth in Indore market, paid the price of the same and shocked the cloth purchased in its godowns for some time. Later on, the goods were dispatched by rail to the concerned parties in taxable territories. The relevant bills, which included the assessees commissioner, interest and some nominal profit, along with the bills of exchange and railway receipts, were endorse and handed over to bankers at Indore and to M/s. Laxmichand Muchhal of Indore. The local bankers and M/s. Laxmichand Muchhal allowed full credit to the assessee on the day they received the railway receipts with the D. Ds. or bills of exchange. The bankers and M/s. Laxmichand Muchhal did not charge the assessee any interest for period during which the amount remained unrealised. They, however, realised interest and bank charges and the sale price from purchasers in the taxable territories.
The Income -tax Officer, Indore, taxes the profit made by the assessee as a non -resident on the transactions of these supplies of cloth taking the view that the proceeds of the transactions were received by the assessee in taxable territories. In appeal, the Appellate Assistant Commissioner also came to the conclusion that the sale proceeds were received by the assessee in taxable territories. He, however, made a reduction in the amount of the assessable profit. In the second appeal, which the assessee then preferred before the Appellate Tribunal, it was held that the amount of profit received by the assessee in respect of these transactions was not received in taxable territories.
(3.) THE facts and circumstances in which this reference has been made are similar to those found in Commissioner of Income -tax v. Laxmichand Muchhal In Muchhals case also, a similar question was propounded for decision and that was :
'Where, on the facts and in the circumstances of the case, the profit along with interest of Rs. 33,784 and commissioner of Rs. 19,179 included in the sale proceeds amounting to Rs. 28,93,802 and Rs. 9,31,000 could be said to have been received by the bank on behalf of the assessee in British India so as to attract levy of tax under section 4(1) (a) of the Indian Income -tax Act, 1922 ?' ;
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