COMMISSIONER OF INCOME TAX MADHYA PRADESH NAGPUR AND BHANDARA Vs. STRAW PRODUCTS LIMITED

JUDGEMENT

(1.) These appeals by special leave are directed against the judgment of the High Court of Madhya Pradesh in a reference made to it by the Income-tax Appellate Tribunal, under S. 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act. The Tribunal referred the following to the High Court:

(2.) The relevant facts are these. The respondent. M/s. Straw Products Ltd., Bhopal, hereinafter called the assessee, is a public limited company. It was incorporated in the erstwhile State of Bhopal in 1939 and was given the certificate of commencement of business on May 30, 1939. On September 20, 1938, the assessee entered into an agreement with the Government of Bhopal. Under the agreement the assessee obtained certain concessions and facilities The assessee not only got exclusive licence to manufacture card-board articles of all kinds but also got land on lease on favourable terms. It was also exempted from payment of customs and other duties payable to the municipality. Clause 8 of the agreement is relevant for the purpose of these appeals and is in the following terms:

(3.) It is common ground that this Agreement was acted upon and for a period of 10 years the assessee was not called upon to submit any returns of income and no assessment was made on the assessee under the Bhopal Income-tax Act. This period of ten years expired on October 31, 1948. On August 1, 1949, Bhopal merged in India and was formed into a Chief Commissioner's Province.