BANERJEE, J. - (1.) THIS is a reference under s. 66(1) of the Indian IT Act, 1922. The assessment years involved are 1951-52 to 1955-56.
(2.) BEFORE World War II, the assessee, Coal Shipments (Private) Ltd., was one of the companies, which used to export coal from India to Burma. Amongst other such exporters, there was a company of the name of M/s H. V. Low and Co. Ltd. The war stopped such export. After the cessation of hostilities, in 1946, it became possible to resume export to Burma. The exporters, including the assessee and H. V. Low and Co. Ltd., formed an association known as Coal Exporters and Charterers Association, inter alia, with the object of pooling up excess profits. The formation of the association notwithstanding, the assessee and M/s H. V. Low and Co, Ltd. became potential rivals in coal export to Burma. Thereupon, it is said, there was an understanding or an arrangement between the two on the following lines : (a) M/s H. V. Low and Co. Ltd. will not export coal to Burma during the subsistence of the agreement ; (b) M/s H. V. Low and Co. Ltd. would place coal from their colliery at the ready disposal of the assessee for shipment to Burma and would otherwise assist the latter in the export business ; and (c) the assessee will carry on the actual shipping business and pay to M/s H. V. Low and Co. Ltd. at 5 annas per ton (subsequently raised to Re. 1-5 as. per ton) of Coal shipped to Burma. According to the assessee, the last shipment of coal, under the above arrangement, was made in June, 1954. Thereafter, the arrangement came to an end automatically because the Government of Burma began to took elsewhere for its coal requirements. Further, according to the assessee, it made the following payments to M/s H. V. Low and Co. Ltd. under the aforesaid arrangement, during April 1, 1950, to March 31, 1955, namely, The amounts of payment are not in dispute and these payments have been taxed in the hands of M/s H. V. Low and Co. Ltd.
(3.) THE assessee claimed the above payments as admissible business expenditure in the respective years of payment. THE ITO disallowed the claim on the two-fold ground : (1) that there was no written agreement in proof of the arrangement and, as such, it was not possible to say that the payments were made for the purposes of assessee's business, and (2) that assuming that the payments were made to keep off M/s H. V. Low and Co. Ltd. from the Burma trade, they were payments to secure a monopoly and were not allowable as revenue expenses. THE AAC, on appeal by the assessee, concurred with the ITO and upheld the assessment. On second appeal by the assessee, before the Tribunal, the same two points arose for consideration. The Tribunal noticed some discrepancies in facts as stated on behalf of the assessee and the Revenue. The Tribunal, thereupon, required the assessee to swear an affidavit in support of the facts relied upon by it. Pursuant thereto, Sir Walter Michelmore of the assessee-company, affirmed an affidavit. He was also orally examined before the Tribunal. The Tribunal remanded the case to the ITO to verify the facts as stated in the affidavit and to report back to the Tribunal. This the ITO did, and submitted a report. The Tribunal accepted the report, in the absence of any objection thereto, and proceeded on that basis.;