RAY J. - (1.) THE assessee company is resident and ordinarily resident in the taxable territories in India. An assessment under s. 23(3) of the Indian IT Act was made on the assessee company on 22nd Jan., 1954. By a letter dt. 19th Feb., 1954, the assessee company informed the ITO that the assessee received advice that a sum of Rs. 2,79,580 had been received by the assessee company in the United Kingdom during the accounting year ended 31st March, 1953, and that the sum had not been brought into or remitted to the taxable territories. This sum received by the assessee in the United Kingdom represented the refund by the United Kingdom Treasury of payments made by the assessee company to the United Kingdom revenue authorities on account of EPT, in previous years under the English Finance Acts of 1941 and 1942.
(2.) THE assessee company requested the ITO that assessment be made treating the said refund as income arising without the taxable territories and, therefore, claimed that a deduction of Rs. 4,500 under the third proviso to cl. (c) of s. 4(1) of the Indian IT Act and appropriate relief allowable under s. 49D of the said Act might be granted. The ITO made a fresh assessment under s. 23(3) r/w s. 34 of the Indian IT Act but treated the EPT, post-war refund as income accruing or arising in India under s. 11(14) of the Indian Finance Act, 1946, and refused to grant the claim under s. 49D of the Indian IT Act. On these facts the question of law which has arisen is as follows : "Whether, on the facts and circumstances of the case the amount received on account of the United Kingdom EPT, post war refund was an income arising outside the taxable territories and as such the claim under s. 49D is admissible?" The relevant provisions of the Indian Finance Act, 1946, are contained in s. 11, sub-ss. (11) to (14). Sub-s. (11) enacts that any sum repaid in respect of any profits which are also assessable to EPT, under the law enforceable in the United Kingdom shall be treated for the purpose of assessment of income-tax and super-tax, as income of the previous year during which the repayment is made. Sub-s. (14) enacts that where under the provisions of sub-s. (2) of s. 12 of the EPT Act, 1940 (Indian Act) EPT, payable under the law enforceable in the United Kingdom has been deducted in computing for the purposes of income-tax and super-tax the profits and gains of any business, the amount of any repayment under sub-s. (i) of s. 28 of the Finance Act, 1941 (English Act) as amended by s. 37 of the Finance Act, 1942 (English Act) in respect of those profits, shall be deemed to be income for the purposes of the Indian IT Act, 1922, and shall, for the purpose of assessment to income-tax and super-tax, be treated as income of the previous year during which the repayment is made.
(3.) THE Indian EPT Act, 1940, defines in s. 2(9) deficiency of profits to mean profits which fall short of the standard profits or loss added to the amount of the standard profits. Loss is defined in s. 2 (16) of the said Act to mean a loss calculated in the same manner as for the purposes of the Act profits are to be computed. Profits are defined in s. 2(19) Of the said Act to mean profit as determined in accordance with the First Schedule. Standard profits are defined in s. 2(20) of the said Act to mean standard profits as computed in accordance with s. 6 of the said Act of 1940. Taxable territories have been defined in s. 2(21)(a) of the said 1940 Act to have the meaning assigned to that expression by cl. (14A) of s. 2 of the Indian IT Act, 1922. Sec. 4 of the said 1940 Act enacts charge of tax. Sec. II of the said 1940 Act enacts relief in respect of double excess profits taxation and s. 12 of the 1940 Act provides for allowance of excess profits in computing income for income-tax purposes. Sec. II of the said 1940 Act states that the Central Government may by notification make provisions for the granting of relief in cases where both EPT, under the said 1940 Act and EPT, under any law in force in the United Kingdom or in any other part of His Majesty's Dominions have been paid upon any profits of the business if it appears to the Central Government that the laws of the United Kingdom provide for corresponding relief in respect of EPT, charged on profits both in the United Kingdom and in the taxable territories. Sec. 12(2) of the 1940 Act enacts that there shall be deducted the amount of any EPT, payable under any law in force in a country outside the taxable territories on the profits of the business in respect of any chargeable accounting period to the extent to which such profits are liable to EPT, under the said 1940 Act after diminishing such amount by any amount which is allowable by way of relief by repayment, set-off or otherwise under any law in the country where the tax is payable providing for the granting of relief in that country where EPT, has also been charged in the taxable territories.;