HARRIES, C.J. - (1.) THIS is a reference made by the Tribunal, Calcutta Bench, under s. 66 of the Indian IT Act at the instance of the assessees. The question which has been formulated for the opinion of the Court is as follows :- "Is it open to the Rampooria Cotton Mills Ltd., to exercise the option referred to in the second proviso to s. 6(1) of the EPT Act ?"
(2.) THE assessees are a limited company which acquired a cotton mill from M/s Hazarimal Hiralal in the year 1942. This mill was in existence before 31st March, 1936, and until the date of transfer to the assessees had been worked by M/s Hazarimal Hiralal. M/s Hazarimal Hiralal who had operated the mill between the period September, 1939, and the year 1942 determined their standard profits on the basis of a standard period. The present assessees continued the same method between 1942 and the commencement of the chargeable accounting period, 1st July, 1944. During that period the standard profits were computed on the basis of the standard year's profits. The assessees however then claimed that they were entitled under the second proviso of s. 6(1) of the EPT Act to adopt standard profits on the basis of the statutory percentage permitted on the average amount of capital employed. Reliance was placed on the terms of the second proviso to s. 6(1) of the Act. The assessees contended that as they took over the present mill in 1942 their business should be considered as having commenced on or after 31st March, 1936. The Tribunal however held that the business which they carried on, namely, the business of operating the cotton mill, was commenced before 31st March, 1936, and accordingly the assessees were not entitled to exercise the option given to assessees by the second proviso to sub-s. (1) of s. 6 of the Act. Being dissatisfied with that view the assessees asked the Tribunal to state a case which the latter has done raising the question which I have set out.
(3.) SEC. 6(1) so far as it is material is as follows :- "For the purposes of this Act, the standard profits of a business in relation to any chargeable accounting period shall, subject to the provisions of sub-ss. (3) and (4), be an amount bearing to the profits of the business during the standard period, if in respect of that business a standard period is available, the same proportion as the chargeable accounting period bears to the standard period ; Provided further that in the case of a business which was commenced on or after the 31st day of March, 1936, the standard profits shall, at the option of the person carrying on the business, be an amount calculated by applying the statutory percentage to the average amount of capital employed in the business during such chargeable accounting period." There can be no doubt if the assessees' business can be said to have been commenced after 31st March, 1936, the assessees could at their option claim that the standard profits should be calculated as provided in this second proviso.;