1. The assessee is a firm of guarantee brokers of the Aruna and Saraspur Mills at Ahmedabad. They received brokerage at half per cent on all sales made by the mills. The assessees maintain their accounts on cash basis and they credit in their books of accounts the amounts actually received by them from the mills in respect of their brokerage, and these entries are made when the brokerage is actually paid. For the purposes of income-tax this mode of accounting was accepted by the Department and it is not suggested that this mode of accounting is in any way incorrect or does not enable the Department to truly assess the profits of the assessees. But the contention put forward by the Department and which was accepted by the Tribunal was that whatever might be the position under the Income-tax Act under the Excess Profits Tax Act the assessees cannot maintain their accounts on the cash basis for accounting and they must make their returns for the Excess Profits Tax Act only on the mercantile basis. In other words according to the Tribunal the assessees must enter in their books of account brokerage when it accrued due to the assessees and not when it was received by them. The question is whether this view of the Tribunal is justified by the provisions of the Excess Profits Tax Act.
2. The Tribunal has relied on Section 5 for coming to the conclusion that it did and that section as the marginal note correctly indicates deals with the application of the Act to the particular business mentioned in that section. That section provides that the Act shall apply to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of 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. Now, when we turn to Section 4(1)(b) (i) and (ii) we find that they deal with accrual of income in or without British India and sub-clause (c) also deals with accrual of income in British India of a person not resident of British India. Section 5 of the Excess Profits Tax Act does not refer to the income which is received in British India under Section 4(1)(a). From this fact the Tribunal has drawn the inference that charge of excess profits tax is only to be made on income which arises or accrues to the assessee and not which is 'received' by the assessee. In other words the Tribunal has looked upon Section 5 of the Excess Profits Tax Act as the charging section and not as section which deals with the applicability of the Act. With respect that is a fallacious reasoning which has led the Tribunal to the conclusion that the assessees are not entitled to maintain their accounts on the cash basis. The charging section is not Section 5 but Section 4 and when we turn to the other provisions of the Act it is clear that the right which the assessees have under Section 13 of the Income-tax Act of having their income, profits or gains computed in accordance with the method of accounting regularly employed by them has not been taken away by the Excess Profits Tax Act. In the first place we have Section 21 of the Act which expressly incorporates in the Excess Profits Tax Act the provisions of Section 13 of the Income-tax Act, and therefore whatever rights the assessees have under Section 13 of the Income-tax Act are maintained in the interests of the assessees in the Excess Profits Tax Act. Then when we turn to Schedule I, which is the schedule according to which profits are to be assessed rule 1 itself says that the profits of a business shall be computed on the principles on which the profits of the business are computed for the purposes of income-tax under Section 10 of the Income-tax Act. Now the effect of the decision of the Tribunal is that Section 5 of the Excess Profits Tax Act overrides Section 21 of the Act and rule 1 of Schedule I. But the proper method of construing a Statute which has different provisions is not to come to a conclusion that one part overrides another part of the Statute but to try and see whether different parts of the Statute can be reconciled so as to present one complete picture. But in this case it is not necessary for us to reconcile different parts of the Excess Profits Tax Act at all. If Section 5 of the Excess Profits Tax Act is not the charging section then under Section 21 and under rule 1 of Schedule I it is clear that the principles contained in Section 13 of the Income-tax Act are made applicable to the Excess Profits Tax Act as well. Therefore if the ordinary mode of accounting of the assessees w as cash basis, then there is no reason why they should not be allowed to use the same mode for making their returns for the purpose of the Excess Profits Tax Act, and the Department is bound to assess the assessees to excess profits tax on the cash basis and not on the mercantile basis. The result is that we must answer the question submitted to us in the negative. The Commissioner to pay the costs of the reference.
3. Reference answered in the negative.