- (1.) These appeals by certificate granted by the High court at Calcutta have been filed against the judgment and order of the said High court dated 7/05/1965 in Income Tax Reference Nos. 22 and 73 of 1959. These appeals relate to chargeability of business profits tax under the Business Profits Tax Act, 1947 for the accounting period 1/04/1946 to March 31, 1947.
(2.) The appellant, hereinafter referred to as 'the assessee', was having a textile mill in what was known as British India at the relevant time. The cloth manufactured at the mill of the assessee was sold in British India as well as in some of the former Indian States. Under Section 42 (3 of the Indian Income Tax Act, 1922 (hereinafter referred to as 'the Income Tax Act') out of the total business profit made by the assessee in the Indian States a part was attributed to the assessee's manufacturing operations carried on in British India and it was deemed as income accruing and arising in British India. The remaining part of the profit arising in the Indian States was attributed to its merchanting operations in the said States under S. 14 (2 (c) of the Income Tax Act and the same was exempted from income tax unless it was brought into Britishindia. In the Income tax assessment for the Assessment Year 1947-48 covering the accounting period April 1, 194 6/03/1947 out of the total profits earned by the assessee in the Indian States the manufacturing portion of the profits was determined at Rs. 4,72,778. 00 and the merchanting portion of the profits was determined at Rs. 5,67,206. 00 and on that basis Rs. 4,72,778. 00 was included under S. 42 (3 of the Income Tax Act in business income of the assessee. During the aforesaid accounting period a total amount of Rs. 9,01,363. 00 was remitted by the assessee from the Indian States to British India. While making the income tax assessment the Income Tax Officer held that remittance to the extent of Rs. 1,18,754. 00 should be treated to have come out of the income which accrued or arose in the Indian States in the same period and the remaining part, viz. , Rs. 7,82,609. 00 should be treated to have come out of the income which accrued or arose in the Indian States prior to the accounting period. The Income Tax Officer did not include these sums in his computation of the assessee's British Indian business profits but included the same in the assessee's total income under the head 'other sources'.
(3.) While making assessment for the purpose of business profits tax, the Income Tax Officer took into consideration the materials and information contained in the corresponding income tax proceedings and adopted the assessee's business profits as computed in the said income tax assessment. He, however, included the entire amount of Rs. 5,67,206. 00 which was computed to be the amount of merchanting profits arising in the Indian States in that period for assessing income of the assessee for the purpose of chargeability of business profits tax. The said assessment was upheld in appeal by the Appellate tribunal. The assessee submitted an application before the Appellate tribunal for reference of the questions of law arising out of order dated 13/05/1958 passed by the Appellate tribunal and on that application the Appellate tribunal, by order dated F 13/02/1959, referred the following question to the High court for consideration under S. 66 (1 of the Income Tax Act: "Whether, on the facts and in the circumstances of this case, the profits earned outside the taxable territories and brought into the taxable territories during the chargeable accounting period ending on 31/03/1947 were assessable under the Business Profits Tax Act. ";