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S.A. Subbiah Iyer Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
Decided On
Reported inAIR1930Mad449
AppellantS.A. Subbiah Iyer
RespondentCommissioner of Income-tax
Cases ReferredNafar Chandra Pal v. Shukur Sheikh A.I.R.
- - if in the course of any assessment under this act or any proceeding in connection therewith other than a proceeding under chapter 7 a question has arisen with reference to the interpretation of any of the provision of this act or of, any rule there under, the chief revenue authority may, either on its 'own motion or on reference from any revenue officers subordinate to it, draw up a statement of the case and refer it, with its own opinion thereon, to the high court, and shall so refer any such question on the application of the assesses, unless it is satisfied that the application is frivolous or that a, reference is unnecessary. as it stands, the answer clearly must be in the negative. in the present case the commissioner of income-tax agrees that the assesses has acted perfectly.....beasley, c.j.1. in accordance with order of the high court dated 24th april 1929 three questions have been referred to the high court under section 66 (3), income-tax act by the commissioner of income-tax, madras. those questions are: (1) whether a sale and conveyance by a debtor of the assessee in respect of a money lending business carried on by the assessee out of british india in discharge of the principal and interest of debt due to such business of lands situate in british india amounts to a remittance into british india of profits of the assessee made in that foreign business; (2) whether the presumption as to foreign remittances being from out of the profits is applicable or available in a case where the dealings between the british and the foreign business consist of large sums.....

Beasley, C.J.

1. In accordance with order of the High Court dated 24th April 1929 three questions have been referred to the High Court under Section 66 (3), Income-tax Act by the Commissioner of Income-tax, Madras. Those questions are: (1) whether a sale and conveyance by a debtor of the assessee in respect of a money lending business carried on by the assessee out of British India in discharge of the principal and interest of debt due to such business of lands situate in British India amounts to a remittance into British India of profits of the assessee made in that foreign business; (2) whether the presumption as to foreign remittances being from out of the profits is applicable or available in a case where the dealings between the British and the foreign business consist of large sums of money being more or less regularly repaid by remittances by the foreign business and (3) whether the said presumption is applicable or available in a case where the moneys remitted are in the current dealings account and debited to such account and not to the personal or profits account of the assessee and where interest earned every year by the British Indian business in respect of such dealings is included in the assessment of the British Indian business.

2. Question (1) was not submitted to the Commissioner of Income-tax for reference to the High Court when the assesses under Section 66 (2), Income-tax Act, required the Commissioner to refer the other two questions to the High Court; and the High Court in directing the Commissioner of Income-tax to refer all the three questions reserved to the Commissioner the right to contend that the reference on the first point did not lie at all by reason of the fact of its not haying been submitted to him under Section 66 (2) of the Act. That question was fully argued on the reference. The Commissioner by his order on the petitioner's application dated the 23rd February 1928 stated that his request could not be granted, that Section 66 (1) had no application and that the petitioner could have preferred an application under Section 66 (2) but did not so. Admittedly, the petitioner did not prefer an application under Section 66 (2) but Mr. V.V. Sreenivasa Ayangar contends that the High Court can nevertheless require the Commissioner to refer the question under Section 66 (1) if the question raises an important point of law for decision. He further contends that, even if Section 66 (1) has no application, then under Section 45, Specific Relief Act, the High Court can decide the question. On the former question he relies upon a decision of the Privy Council in Alcock Ashdown and Co, 'Ltd., v. Chief Revenue Authority of Bombay A.I.R. 1923 P.C. 138. In that case it was held that it is the duty of the Chief Revenue Authority under Section 51, Income-tax Act, 1918, to state a case and refer it to the High Court when in the course of an assessment a serious question of law arises. On page 752 (of 47 Bom.) Lord Phillimore stated:

In their Lordship's view, always supposing that there is a serious point of law to be considered, there does lie a duty upon the Chief Revenue Authority to state case for the opinion of the Court, and if he does not appreciate that there is such a serious point, it is in the power of the Court to control him and to order him to state a case.

3. It was argued the Section 51, Income-tax Act of 1918, is similar to Section 66 of the present Act namely, the Income-tax of 1922. Section 51, Income-tax Act of 1918 is as follows:

If in the course of any assessment under this Act or any proceeding in connection therewith other than a proceeding under Chapter 7 a question has arisen with reference to the interpretation of any of the provision of this Act or of, any rule there under, the Chief Revenue authority may, either on its 'own motion or on reference from any revenue officers subordinate to it, draw up a statement of the case and refer it, with its own opinion thereon, to the High Court, and shall so refer any such question on the application of the assesses, unless it is satisfied that the application is frivolous or that a, reference is unnecessary.

4. We do not agree that section is similar to Section 66 of the present Act Under Section 51 ( l) of the Act of 1918 the assessee could apply to the Chief Revenue Authority to refer any such question and he was not limited in that section as to the time in which he had to make his application within one month of the passing of the order under Section 31 or Section 32 and furthermore requires that application to be accompanied by a fee of Rs. 100/-or any such lesser sum as may be prescribed. Mr. Sreenivasa Ayyangar's contention is that the assessee has two remedies open to him, one under Section 66 ( l) and another under 66 (2). We are unable to accept that contention. It is most unlikely that the legislature intended to give an assessee two remedies one within a specified limit of time and another without any such limitation. It cannot seriously be argued that after an order has been made an assessee who has neglected to make an application to the Commissioner to refer a question of law arising out of that order with in; one month of the making of that order can, nevertheless, many months after' wards, ask the Court to require the Commissioner of Income-tax to refer; the same question to the High Court; merely because it is one of importance. Moreover it is clear that Section 66 ( l) is not intended to benefit an assessee but is merely to enable the Commissioner when he feels any difficulty with regard to a question of law to refer the matter himself to the High Court. The assessee therefore, not having made his application to the Commissioner to refer question ( l) to the High Court within one month of the passing of his order, cannot ask the High Court to direct the Commissioner to refer such a question.

5. It was also contended on behalf of the assessee that any point of law arising out of the facts of the case can be taken cognizance of by the High Court and an opinion given' upon it, because Section 66 says that the Commissioner is to draw up a statement; of the case and it is contended that this means the whole case 1. e., the whole assessment. In support of this contention Shiva Prasad Gupta v. Commissioner of Income-tax U.P. : AIR1929All819 was referred to. There it was decided that though ordinarily the Income-tax Commissioner would be the officer who would frame the points of law that arise in the case stated by him and though he would be expected to give his own opinion on those points of law for the benefit of the High Court, Section 66 requires the High Court to decide the questions of law that arise in the case i.e., the High Court is entitled to 'resettle the issues' as it were and to decide those issues. On p. 821 Mukerji, J. states:

The meaning and object, however, of the entire 8. 66 seems to me to be free from obscurity. My impression is that the High Court has to accept the facts as found by the Commissioner of Income-tax and if necessary may call for more facts by asking him to make a fresh statement of them under Sub-section 4, Section 66. But it is for the High Court to find out from the contention of the assessee on the one hand and the contention of the Income-tax authorities on the other, what is the real point of law that arises between the parties and what it has to decide. This reading of Section 66 seems to be clear to me from among other matters the fact that the High Court is nowhere called upon to decide such question as may be framed by the Commissioner of Income-tax.

6. In my view this decision does not mean that the assessee is entitled to argue any question of law which may arise out of the assessment and which he has not asked the Commissioner of Income-tax to refer to the High Court but merely means that the High Court can, if it chooses, alter the questions referred by the Commissioner of Income tax or reject them altogether and decide the real questions of law at issue between the Commissioner and the assesses at the time when application was made to him to refer the question or questions. This question has also been considered by a Pull Bench of this Court in Commr. of Income-tax v. Thiruvengada Mudaliar : AIR1928Mad889 and it was there held that if a point of law is not raised before the Commissioner of Income-tax within the time specified by Section 66 (2) Income-tax Act, it cannot be raised a all and the Commissioner cannot be required to state a case to the High Court raising that question. It was because the correctness of this decision was questioned that this present reference was directed to be heard by a Bench of five Judges. In my view that decision was correct. In A.K.A.C.T.V. Chettiyar Firm v. Commr. of Income-tax A.I.R. 1928 Rang. 281 and in In the matter of Ishar Dar Dharam Chand 2 Income-tax Cases. 12, a decision of the Lahore High Court a similar view was taken.

7. Obviously Section 45, Specific Relief Act, is of no avail to the assessee because by Sub-section (d) of that section it is subject to the proviso that the applicant has no other specific and adequate legal remedy. In this case a remedy is provided by Section 66 (2), Income-tax Act of 1922, but the assessee neglected to avail himself of it. The assessee therefore cannot be permitted to argue the point of law raised in question (1), and it is unnecessary to state any of the facts out of which that point of law emerges.

8. With regard to questions (2) and (3), the answer to question (2) answers question (3). I, however, think that question (2) does not really raise the question we have to decide. As it stands, the answer clearly must be in the negative. The real question is whether the ordinary presumption that money remitted from a foreign business and received in this country is out of profits, is one which can be rebutted and what facts rebut it. Mr. Patanjali Sastri in the course of his argument was driven to take up the attitude that it could not be rebutted although he was bound to admit in the earlier stages of his argument that such a presumption could be. He further contended that if it could be rebutted it was purely a question of fact whether it had been rebutted. I think this is a mixed question of fact and law and that obviously such a presumption can be rebutted, the onus of doing so being upon the assessee.

9. The, facts are that the petitioner is resident of Tinnevelly carrying a money lending business in Tinnevelly and various other places outside British India of which Quilon in the Travancore State is one. The petitioner was assessed for the year 1926-27 on an income of Rs. 68,395 the year of account being the year ending 16th August 1925. The details of the assessment were as follows:

Rs,Income from property. 200Income from other sources(remittances from petitioner'sforeign business) ... ... 69,473__________Total 69,673Less Loss in petitioner'sTinnevelly business ... 1,278__________Total 68,395The amount of remittances of foreignprofits was calculated by the Income-taxOfficer as follows:Rs.Drawings from petitioner'sTinneveliy shop (there wereno profits in this shop andthere were large remittancesfrom the foreign branches tothis shop) , ... ... 21,469Amount drawn fromQuilon for purchases of landsin Tenkasi Taluk ... 43,810Amount drawn form Quilonbranch by debit to assessee'sdrawings account for purchaseof lands ... ... 4,000Amount received from Quilonin the shape of articles 194__________Total 69,473

10. The Income-tax Officer found that the profits of the petitioner's foreign business for the year amounted to Rs. 1,99,185 and held that the sum of Rs. 69,473 should be regarded as a remittance out of profits and accordingly included it in the petitioner's assessment. From this assessment the petitioner appealed to the Assistant Commissioner and it was found that during the year of account the petitioner had drawn Rs. 89,847 from his foreign businesses in excess of the amount sent by him to those businesses. The petitioner's course of business was to supply foreign business with money from Tinnevelly. This money he himself borrowed from other persons. The money sent by the petitioner to his foreign businesses was sent by means of hundis and money remitted from those foreign businesses to Tinnevelly was also sent by means of hundis. There was a continuous flow of money during the year in both directions. The Tinnevelly business made no profits in the year of account. The Assistant Commissioner held that as the money received from the foreign businesses was in excess of that sent by the petitioner to those foreign businesses, the excess should be regarded as a remittance of foreign profits. He enhanced the assessment by Rs. 68,378 by taking the excess figure of Rs. 89,847 and deducting from it a sum of Rs. 21,469 which had been applied in part by the petitioner towards the discharge of borrowings by him in his Tinnevelly business. The petitioner then preferred an appeal to the Commissioner of Income-tax against the Assistant Commissioner's order of enhancement and succeeded in reducing the assessment. The petitioner applied to him to refer the following question namely:

whether or not Rs. 67,209 can be taxed as a remittance of foreign profits under Section 4 (2) Income-tax Act in the facts and circumstances of this case.

11. The Commissioner of Income-tax declined to refer that question being of the opinion that it was not one of law. He was, however, directed to refer the question to the High Court and it has come up in the shape of questions (2) and (3).

12. If an assessee's foreign business remits money to him in a country in which his profits from his business in that country are assessed to income-tax, the presumption is that the remittance is a remittance from out of the profits of the foreign business. The Scottish Provident Institution v. John Allan [1903] A.C. 129 followed In re: A.V.P.M.R.M. Murugappa Chettiar A.I.R. 1926 Mad. 767. In the latter case it was decided that money remitted to the headquarters of a firm in British India from a branch situated on a foreign country is presumed to be profits and not capital and is assessable to income-tax as profits unless the assessee proves the contrary. The Commissioner of Income-tax argues that the assessee has mixed up his accounts of capital account in Quilon, a current account and a profit account; in his books there is no separate fund kept in respect of these items. It is admitted by him that these remittances from the current account in Quilon are shown in that account to be remittances from capital and are similarly shown in the Tinnevelly books to be received in the shape of capital. It is argued that nevertheless the remittances were not from capital at all but were from profits because it is shown that there were profits earned by the foreign business to an amount more than enough to repay the loans received, from Tinnevellv and that no businessman would be likely to remit capital when he has profits out of which he can repay the loans and in this contention he is supported by the observations made in Allan's case [1903] A.C. 129. In the report of that case in 4Tax Cases on p. 419, Lord Mclaren stated:

But, where a capitalist company, as in the present case, hits invested large sums for a period of 15 years in a colony, and has an agent employed not only to receive interest but also to receive the capital of the investment when paid up and to reinvest it, even if unappropriated remittances are made to this country, I think every one would agree they must be dealt with according to the ordinary course of business and these remittances must be presumed to be paid in the first place out of interest so far as they are income, and in the second place out of principal or capital. I think that rule results from the fact that no prudent man of business will encroach upon his capital for investment when he had income uninvested lying it his disposal.

13. The Commissioner's contention goes to the length of saying that a businessman is not to be allowed to conduct his own business as he chooses. In the present case the Commissioner of Income-tax agrees that the assesses has acted perfectly honestly, that is to say to intended to remit capital and not profits from Quilon to Tinnevelly and kept genuine accounts and made true entries in those accounts but contends that nevertheless as profits were earned in the assessee's foreign business those remittances must be held to be from those profits and not to be capital. It seems to me clear that as the Commissioner of Income-tax admits that the assessee acted honestly in making the entries in the account books and had a bona fide intention of' remitting capital and not profits his argument that the sums remitted are liable to 'be taxed must at once fail, and I am far from saying that the assessee did what a prudent man of business would not do. He had borrowed money in Tinnevelly for the purpose of lending it out to his foreign Business and to make a profit on it and what he had borrowed bad to be repaid. I see nothing unbusiness like in his choosing to repay those loans out of capital rather than wait until he winds up his foreign business as the Commissioner of Income-tax suggests he should do.

14. Another argument addressed to us was that the remittances from the foreign business must be remittances of profits and not capital by reason of the fact that part of the sums remitted was used by the assessee for repaying the loans taken in Tinnevelly for the conduct of the Tinnevelly business and part for the personal expenses of the petitioner. With regard to the former reason, I think that the fact that the funds were utilised for repayment of the loans taken at Tinnevelly supports the assessee's case rather than weakens it and with regard to the latter reason the use to which an assessee chooses to put his money on receipt of it cannot alter the character in which it was received. If this money was received in British India as capital the fact that the assessee chose to use some of it for his own personal expenses did not change its nature.

15. For those reasons the answer to questions (2) and (3) is that in the circumstances of this case the presumption as to foreign remittances being out of profits has been rebutted by the assessee.

16. Rupees 300 costs of this reference are directed to be paid by the Commissioner of Income-tax to the assessee. Rs. 100 deposited is to be returned to the assessee.

Ramesam, J.

17. I concur with the order just pronounced by my Lord. On questions 2 and 3, I only wish to add that Allan's case [1903] A.C. 129 itself shows that the presumption laid down therein is a rebuttable presumption. To say that, even where the party indicates some evidence of his wish to withdraw the capital, leaving the profits in the foreign country he must be deemed to have withdrawn the profits and left the capital is to make the presumption irrebuttable. On the contention for the Income-tax Commissioner (at one stage of the argument) the capital can only be brought up last i.e., only when the trader wishes to wind up his business in the foreign country. This is to dictate to him in what order he should withdraw his funds and it is difficult to see why it should be so.

18. It must be remembered that this method of treating his funds is available to the party only, once in respect of particular item of capital. Only when another item of advance is made can he claim again to withdraw capital. If once it is conceded that the trader may call back his capital it is for him to choose in what particular year he does so and to indicate his choice by accounts (which there is no reason to suspect) or otherwise. Once the choice is made, the presumption is rebutted.

Pandalai, J.

19. I agree with my Lord for the reasons stated by him that it is not open to the assessee to raise before us question (1) which relates to Rs. 43,810.

20. Questions (2) and (3) relate to Rs. 67,209 the amount which the Income-tax Commissioner attributed to foreign profits received in British India in the year of account and they both present different aspects of the same matter whether the Commissioner was justified on the account books and other materials furnished by the assessee and the nature of his business, in thinking; that there was any presumption that the sum in question was profits and if there was any presumption in the matter whether he ought not to have held that it was rebutted. Whether the sum was in fact profits or capital is ultimately one of fact. But if in determining that fact, the Commissioner has acted on a presumption which either did not arise or which in the admitted facts must be held to have been rebutted then the conclusion is vitiated by an error of law and this Court will correct it. The ground of the Commissioner's decision is stated as follows in para 5 of his order dated 3rd September 1927:

It is arguable that the appellants discharged doubts due to creditors in British India that he had no funds in British India to draw upon and he must therefore have drawn upon his foreign business. As there were profits in the foreign business more than sufficient to cover the discharge of these liabilities it must be presumed that these profits were drawn upon.... If the appellant incurred liabilities in the course of his British Indian business and met them by drawing on his funds abroad there is certainly a presumption that any profits that may have been available abroad were drawn on for this purpose.

21. The Commissioner accordingly made a calculation on a comparison of the volumes of the Tinnevelly business with that of the foreign business and computed Rs. 77,209 to be amount repaid on account of the purely British Indian liabilities and so held that sum to represent the foreign profits received at Tinnevelly.

22. The question before the Commissioner was whether the balance according to the current, account as it is called of remittances passing during the year between the Tinnevelly head office and the foreign branches of the assessee's business represent or must be presumed to be profits. When regard is had to the nature of the assessee's business which may be broadly described as carrying on a money lending business in Travancore and Cochin with money borrowed at Tinnevelly it is seen that the account is in no way intended to show the profits of the business at all but on the contrary it represents on one side the working capital sent by Tinnevelly to the foreign shop and on the other, the amounts returned from the latter to Tinnevelly for repayment to the depositors from whom the assessee had borrowed. There is a separate profit and loss account in the books of the foreign shops. There is no question that the books are not honestly and properly kept or that they were intended to conceal the facts. It was also admitted that if the opening balance in the account were taken into consideration there was no excess remittance to Tinnevelly at all the excess of Rs. 89,847 being the result if only the remittances during the year of account were taken. As to this the Commissioner in para 4 says ';

I think the appellant is right on this point also. The argument underlying what has been known as the 'theory of excess remittances' is that in so far as money brought into British India is found to be in excess of the sum required to replace money previously sent abroad, it should be presumed that the money sent in is a remittance of profit if profit was available for remittance. In this case, there seems to be no doubt that the balance shown as due by the foreign shops at the beginning of the year represent money supplied at some time or other from Tinnevelly. The 'net remittance' of Rs. 89,819 in the year of account was not sufficient to replace the sums supplied but not replaced in the previous years. A mere comparison of the amounts of remittance each way is not therefore by itself a sufficient ground for holding that money was sent in otherwise than in replacement of money previously sent out.

23. Having thus, I think rightly, held 'that a mere comparison, of remittances each way is not sufficient to say that money was sent in otherwise than in replacement of money previously sent out the Commissioner went on to hold, I think, wrongly that so much of the remittances to Tinnevelly as were utilized to pay off Tinnevelly debts must be presumed to be foreign profits received in British India.

24. It is difficult to see how the character of a remittance into British India, whether it is capital or profits is to be judged by the use to which it is put after its receipt in British India. If a man received 'his foreign profits in British India they will be equally liable to tax whether he pays debts, or gambles with them. But if what he received was not profits but his foreign capital he cannot be taxed here because he pays off there with the debts he had incurred to carry on his business, local or foreign. The nature of the remittance must depend on what it was in origin. If the moneys remitted were not or cannot be presumed to he profits when remitted the fact that debts wore paid off with them cannot make them such.

25. Before us the main contention was not that the repayment of Tinnevelly debts shows that the money with which it was done was from foreign profits brought into British India because it was recognized that it only showed that the assessee was paying off borrowed capital sent to foreign business and returned therefrom. But the main contention was that according to the rule in the Scottish Provident Institution v. Allan [1903] A.C. 129 followed in In re. Murugappa Chettiar A.I.R. 1926 Mad. 767 when there are profits available in a foreign country and remittances are made from that country into British India the inference must be drawn that such remittances are from profits and this in spite of whatever the assessee may do and of the fact that according to the books of the assessee accepted as properly and honestly kept such remittances are shown to be and are honestly regarded by the assessee himself to be return of capital previously sent from British India to the foreign country for the business there.

26. The decisions cited do not support the contention to the length to which it goes. In the Scottish Provident Institution case [1903] A.C. 129 about 1,500,000 had been sent to Australia for investment and after making the remittance in question there was still more than 1,800.000 in investment there. Apparently in order to escape the British tax, the Australian branch office of the company had according to instructions accompanied each of the disputed remittances with a letter to say that it was towards particular advances, most of them made several years previously. On these facts the Lord President of the Court of Exchequer (Scotland) concluded his judgment: in the lower Court with the observation that under the circumstances indefinite; remittances to this country must be presumed to consist of interest not of capital so long as the amount of capital remitted to Australia for investment still remains invested there. (4 Tax cases 419). Lord Maclaren similarly said that the sound principle is that the source of the fund remitted in the absence of evidence to the contrary, must be determined according to the ordinary course of business in dealing with uninvested funds (p. 420). In the House of Lords, the Lord Chancellor referred to the instructions and letters above referred to as mere nicknaming the sum received and said that the right of the Crown could not be defeated thereby. 1903 A.C. 135. Lord Davey referred to the fact that the company had in all remitted 1frac12; millions to Australia and had at the end of the year in question 2frac 12; millions there and that in every sense that is profit. As to the attempt to make out that what was remitted back were sums which had been sent out several years previously, his Lordship said it was mere book-keeping and not actual facts. The mere calling it capital for the purpose of the Inland Revenue Department will not make into capital that which is essentially and in truth profit (p. 137) Lord Shand and Lord Robertson also referred to the fact that the sum still in Australia was more than the sum sent there (pp. 136 and 138). The decision in In re: Murugappa Chettiar A.I.R. 1926 Mad. 767 does not carry the matter further than to show that where the Commissioner has not misdirected himself as to the nature and scope of the presumption, the Court will not interfere with his inference on the question of fact whether the remittance was profits or capital.

27. In this case the Commissioner in my opinion misdirected himself in raising the presumption where the admitted facts did not leave any scope for it, or to put it in another way where he ought to have held that the admitted facts rebutted it. In the first place, the presumption is certainly rebuttable and can only be used in the absence of proof to the contrary. Whether the proof is Sufficient is certainly a matter for the Commissioner only. But in the present case there is no dispute as to the facts to, the course of business and assessee's books which are admitted to be honestly kept in the usual course of that business and the only question is what is the proper legal inference from those admitted 'facts and this is a question of law: Nafar Chandra Pal v. Shukur Sheikh A.I.R. 1918 P.C. 92 (of 46 Cal.)

28. The Commissioner recognized that there was no ground in the amounts of remittances to and from Tinnevelly for holding that more money was sent to Tinnevelly than was necessary to replace capital previously sent out. He recognized that the foreign business was financed by borrowing at Tinnevelly, and that these loans were repaid by remittances from foreign businesses. There was nothing to show as there was in the Scottish' Provident Institution case that the investments still left in the foreign country were more or less than the unreturned capital plus the foreign profits earned more than three years prior to the year of account which are not liable to tax. The important fact on which the presumption was based in that case was therefore lacking in this and I am not sure that in using the presumption in that case care should not be taken to see that the circumstances are similar.

29. In any case, I cannot accede to the contention that even when it is shown that the assessee who has borrowed in British India and carried on a business with such borrowed capital and in foreign parts wants to return his borrowed capital and for that purpose remits that capital to British India and has deliberately and honestly maintained his books in the usual course to show what he has done, there is still a presumption that the source from whence he repays his debt is his foreign profits and not the borrowed capital. So long as it is open to a man to keep his foreign profits abroad, it is not for the Commissioner or anyone else to compel him to do what he is not bound to do by law. After all a man can remit any particular amount of capital from foreign parts into British India only once and further remittances unless there were fresh capital sent out which could be returned must be from profits. The order in which a man must dispose of his capital and profits is for himself to determine and where as in this case, he has determined that order and there is nothing to suspect his bona fides or to whose (sic) that his books are intended to conceal his real purpose, we cannot by resort to a presumption hold that he has done what he had not done and what he cannot be compelled to do.

30. I agree that the answer to the second and third questions must be as proposed by my Lord.

Eddy, J.

31. I agree with the judgment of my Lord and desire to add only a word or two with regard to the construction of Section 66, Income-tax Act. The contention that under this section an assessee has alternative remedies is in my opinion untenable. It is quite plain from Sub-section (2) of that section that an assessee who desires a question of law to be referred to the High Court must make his request to the Commissioner to refer it within one month of an order affecting him. Expressio unius est exclusio alterius. None the less it was contended before us that when he had allowed that time to go by he might avail himself of the provisions of the first subsection of that section. The first subsection of that section, in my opinion, confers no rights on the assessee at all. It is a provision, as I think, to enable the Commissioner to seek the assistance of the High Court when a question of law arises. Moreover the provision, as I think, contains its own time limit. Observe the words:

If, in the course of any assessment under this Act on any proceeding in connexion there with.

32. If one reads these words in conjunction with the rest of the subsection, it is clear, I think, that this provision is to enable the Commissioner to refer a question of law to this Court before he or any Income-tax authority subordinate to him as the case may be comes in the first instance to a final determination with regard to any assessment.

Cornish, J.

33.After the judgments which have been delivered it is hardly necessary to add anything more. But I will say a few words on the point raised in the argument whether the Court could entertain a question of law not referred to the Court by the Commissioner of Income-tax and which he had not refused to refer at the request of the assessee. The scheme of Section 66 appears to be this: Sub-section (i) enables the Commissioner to obtain suo motu a determination by the High Court of a question of law. Sub-section (2) enables an assessee who has exhausted his right of appeal under Section 82 to get a determination of a question of law by requiring the Commissioner to state a case and refer the question of law to the High Court; and Sub-section (3) empowers the High Court to require the Commissioner to state a case if the High Court is satisfied, on the assessee's application, that the Commissioner should have referred the question of law which the assessee required him to refer. But clearly the time limit imposed by Sub-section (2) is intended to qualify the assessee's right to require the Commissioner to refer a question of law; and it seems to me equally clear from the language of Sub-section (3) that the question of law which the Commissioner has refused to refer is the only question of law which the High Court can require him to refer on the assessee's application. The Commissioner cannot be called upon under Sub-section (3) to state a case in respect of a question of law which the assessee has not required him to refer to the High Court under Sub-section (2). If, therefore, the assessee fails to require the Commissioner to refer a particular question of law within the prescribed period of time he cannot after the expiry of that period apply to the High Court to call upon the Commissioner to refer it. Any other construction would, in my judgment, render the one month limit imposed by Sub-section (2) meaningless. I agree with the proposed answers to the questions.

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