MCGREGOR AND BALFOUR LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference involves a short but intriguing point which afforded an opportunity for arguments of some subtlety.

(2.) THE assessees, McGregor and Balfour Ltd., Calcutta, are a limited company, incorporated in the United Kingdom and having their registered office there. THE control and management is also not wholly situated in India. THEy however trade in this country as well and had to pay excess profits tax under the relevant Acts both in India and in England. In respect of the tax paid in this country, they availed themselves of the provisions of s. 12(1) of the EPT Act and in respect of the tax paid in the United Kingdom they availed themselves of the provisions of s. 12(2) and so deducted appropriate amounts in computing their profits and gains of the relevant years for the purposes of income-tax and super-tax. In the accounting year ended on the 31st Oct., 1946, relative to the asst. yr. 1947-48 they obtained in the United Kingdom a repayment of a sum of Rs. 2,31,009 out of the excess profits tax paid there under the English Act. That repayment was made to them under s. 28(1) of the Finance Act of 1941 (4 and 5 Geo. 6, c. 30). THE ITO included the amount in the taxable profits of the assessees for the accounting year, purporting to do so under the provisions of s. II(14) of the Indian Finance Act, 1946; and upon adding that amount to the assessees'business income in Calcutta which was Rs. 4,03,928 and treating the whole of the total of Rs. 6,34,937 as their Indian income, he found that it exceeded their foreign income which was Rs. 4,29,620. Accordingly, the ITO applied s. 4A(c)(b) of the Indian IT Act and held the assessees to be resident in British India and assessed them on the whole of their world income. THE assessment was upheld successively by the AAC and the Tribunal.

(3.) THE first question challenges the very assessability of the amount of repayment. As a question arising out of the appellate order, the only contention involved in it is that a provision in the Finance Act of 1946 could not apply to the asst. yr. 1947-48 and since there was no corresponding provision in the Finance Act of 1947, there was no provision at all which made the amount liable to the Indian tax. In my opinion, that contention is entirely misconceived. THE Finance Acts, though annual Acts, are not temporary Acts, nor has the Act of 1946 ever been repealed. It is true that, in the main, the annual Finance Acts make provision for the rate at which tax is to be charged or sometimes the manner in which income is to be computed in assessments for the financial year to which the Acts relate, but if such provisions are limited to the particular assessment year, it is not because the Act itself is a temporary Act, limited for all purposes to a single year, but because the particular assessment year is specifically mentioned in the provisions as the year to which they solely relate. THEre may, however, be and often are provisions of a general character which are of permanent operation and which are available for application, whenever circumstances are found to which they are, by their terms, applicable. It is not unoften that the IT Act or some other Act is amended by a Finance Act or that some principle of taxation or computation of income is laid down in a Finance Act, which is intended to form part of the general law of the country. It is clear that s. 11, sub-s. (14), of the Finance Act of 1946 is a provision of that character. THE Act in which it occurs is still on the statute book as an operative enactment and it was continuing to say in 1947- 48, as it is continuing to say even to- day, that all refunds of excess profits tax obtained in England, if they be of the kind mentioned, shall be treated for the purposes of the Indian IT Act in the manner laid down. THE very fact that such refunds could not be obtained only in the accounting year relative to the asst. yr. 1947-48 but might be obtained in other years in future, is sufficient to indicate that s. 11(14) could not have been intended to be limited to the accounting year 1946-47 and, in fact, the language in which it was expressed shows that it was not so limited. I should add in fairness to Mr. Mitra that he himself conceded that there were weighty considerations against the contention he was advancing and he instanced cases where one Finance Act had been amended by another. In my opinion, there is no substance in the contention that s. 11, sub-s. (14), of the Finance Act of 1946 could not apply to the sum of Rs. 2,31,009 refunded in the accounting year ended on the 31st Oct., 1946.