COMMISSIONER OF INCOME TAX AND EXCESS PROFITS TAX MADRAS Vs. PALANI ANDAVAR MILLS LTD

JUDGEMENT

(1.) These references though, they relate to different assessees arise under the Excess Profits Tax Act, 1940, & the question referred is substantially the same in both. except for the dates.

(2.) In view of the arguments addressed-in these cases we had to alter the question & it was agreed that the following question brings out clearly the real bone of contention between the parties: "Whether the profits for the purpose of Rule 5 of Schedule II should be calculated in the manner prescribed by Schedule I" For the disposal of these two references it would be sufficient to refer to the facts in one of the cases, & the facts are confined to R. C. No. 73' of 1943. The chargeable accounting period in the case of this assesses commenced on 1-9-1939 & ended with 31-12-1939. As the business of the assessee was an old business, the standard year selected is the period from 1-10- 1935 to 31-12-1936. The Central Board of Revenue fixed the standard profits at Rs. 45,000. The proportionate standard profits for the chargeable accounting period of four months will be Rs. 12000. The average capita] in the chargeable accounting period is Rs. 8,78,134. The capital of the standard period was Rs. 4,49,549 according to the excess profits tax officer. As there was increase of the capital in the chargeable accounting period over the capital of tbe standard period by Rs. 4,28,585, the additional profits for the standard period was arrived at by taking the statutory percentage of 8 per cent, on the increase of capital namely, Rs. 4,28,585, which yielded Rs. 34,287. The proportion of this for the four months is Rs. 11,429 and adding this figure to the Rs. 12000 the total of the adjusted standard profits in proportion to the chargeable accounting period is Rs. 23,429.

(3.) The dispute relates to the calculation of the capital in the standard period. According to the assessee the capital during the standard period should be Rs. 4,22,188. The difference between the two figures is due to the fact that In the calculating the depreciation of the fixed assets, the excess profits tax officer applied the rules for depreciation provided under the income-tax Act of 1922 before it was amended in 1939, while the assessee applied the amended Act. The question for consideration is whether the assessee is right or the contention of the Crown should be upheld. The Appellate Tribunal accepted the contention of the assessee. Hence the Reference.