COMMISSIONER OF EXCESS PROFITS TAX Vs. JIVARAJ TOPUN AND SONS

JUDGEMENT

(1.) Under Section 66(1) of the Income-tax Act read with Section 21 of the Excess Profits Tax Act, at the instance of the Commissioner of Excess Profits Tax, the Income-tax Appellate Tribunal has referred to us the following question :

(2.) Mr. Rama Rao Sahib, the learned counsel for the Excess Profits Tax Commissioner, argues that the scheme of the Excess Profits Tax Act is that it is the business that is treated as assessable to tax and as there is no time limit within which an assessment could be made under the Excess Profits Tax Act, unlike the Income-tax Act, even if the business had ceased as there was a partition between the members of an undivided family, it was open to the authorities to assess the profits of that business under the Act by serving a notice on any member of the family to which the business once belonged. He drew our attention to the several provisions of the Act in support of his contention. Section 4 of the Act, is the charging section and it does not, in terms, refer to a person as being the assessee in respect of the profits of the business. But it would be noticed that the proviso to that section refers to Section 4(3) of the Indian Income-tax Act and the body of the section itself refers to the assessment in respect of any business to which the Act applies to be charged, levied and paid on the amount by which the profits during any chargeable accounting period exceed the standard profits. The word "paid" in the context can only refer to a person and it is an indication that the Act contemplates assessment of tax on a person though on the basis of the profits from the business. This view to some extent, receives support from Section 5 of the Act which states that the Act is to apply to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax under the provisions of Sub-clause (i) or Sub-clause (ii) of Clause (b) of Sub-section (1) of Section 4 of the Indian Income tax Act, 1922 or of Clause (c) of that sub section. No doubt the basis of the assessment is not the receipt of the profits but the acerual, whether it accrued to a resident or nonresident and whether the accrual was within or without British India. But here again it assumes that the assessment is on the person on the basis of accrual taking into consideration residence and non residence and accrual within and without British India, in the same manner as under the Indian Income-tax Act. No doubt Section 8 which provides for successions and amalgamations does not very much help us to decide the point, as it provides only for the manner of computing the standard profits in the cases of successions and amalgamations of businesses. The point, however, is put beyond doubt by Section 14, Subsection (1) of the Act which provides for assessment of the tax after the return is submitted in pursuance of a notice issued under Section 13 of the Act. It requires that the Excess Profits Tax Officer, after completing the assessment should furnish "a copy of such order (that is the assessment order) to the person on whom the assessment has been made". Sub-s (2) of that section imposes the liability to piy on the person carrying on the business in that period. Under Sub-section (3) if the business is carried on jointly during the chargeable accounting period, the assessment should be made upon the persons jointly and in the case of a partnership it should be in the name of partnership. Under Sub-section (4) if a person could be assessed either solely or jointly with other person or persons, in case of his death, the assessment may be made on his legal representative either solely, or jointly with the other person or persons. The provisions of this section, therefore, place the matter beyond doubt that the assessment of the tax is on the person in the same manner as under the Income-tax Act. No doubt, under the Income-tax Act the computation of the tax is on the basis of the income derived by a person from various sources; while under the Excess Profits Tax Act it is on the profits of a business of the person. A similar argument was considered by Viscount Finlay in Moore (H. M. Inspector of Taxes) (1928) 12 Tax Gas. 266 at pages 285 and 286 It was argued there also on behalf of the Crown that the excess profits duty was a tax upon the business itself as distinguished from the person who owns or carries on that business. It was urged in support of that contention in that case that the business was continuous and the profits of that business were taken as the basis for assessing the tax under the Act and therefore it was argued that the assessee under the Act was the business and not the person owning it. This argument was met by Viscount Finlay at page 286 in the following passage:

(3.) There is no reason, therefore, for accepting the extreme contention urged by Mr. Rama Rao Sahib on behalf of the Excess Profits Tax Commissioner that the entity which is taken as the basis for assessment is a business under the Excess Profits Tax Act and not a person owning or carrying on the business.