(Judgment of the Court was delivered by the Honourable the Chief Justice).
The assessee carried on a money-lending business at Kualalumpur in the Federated Malay States at all times material to this reference. In the course of the money-lending business immovable properties had been acquired and one of the questions was whether the assessee was liable to excess profits tax in respect of that income. He also owned rubber estates in the Federate Malay States and the further question was raised whether he was liable to excess profits tax in respect of that income. The Excess Profits Tax authorities and the Income-tax Appellate Tribunal, Calcutta Bench, held that he was assessable to excess profits tax in respect of both these sources of income. At the request of the assessee the Tribunal has referred to this Court the following question :-
'Whether in the circumstances of the case, it is correct to include in the profits of the assessees business, the income from the house properties and rubber gardens in Malaya under Section 2 (5) and 2 (19) of the Excess Profits Tax Act read with the first schedule to the said Act.'
In the course of his address to the Court Mr. Rajah Ayyar on behalf of the assessee suggested that the house property in Kualalumpur was not acquired in the course of the money-lending business but represented investments in real estate which his father had entered into. This assertion is obviously one which we cannot take into consideration. Before the Excess Profits Tax Officer the case proceeded on the basis that the houses had been acquired in the money-lending business. Before the Appellate Assistant Commissioner it was apparently said that this was not in accordance with the facts and he was asked to review the case on the basis that the houses merely represented investments. The Appellate Assistant Commissioner rightly said that it was far too late in the day to raise such a contention and the assessment proceeded on the same basis as it had proceeded on before the Excess Profits Tax Officer. As far as we can gather, this question was not raised before the Appellate Tribunal. In any event it cannot be raised here.
In A. S. Pl. Vr. Ramaswami Chettiar v. The Commissioner of Income-tax, Madras, a Special Bench of this Court held that rents derived from properties taken over in discharge of loans made in the course of a foreign money-lending business and treated as assets of the business could be assessed as part of the profit of that business when remitted to British India. Therefore the income derived from the houses now held by the assessee represented profits made by him in his business and consequently he is liable to excess profits tax by reason of the provisions of Sections 2 (5) and 2 (19) read with rule 4 (2) of Schedule I of the Act.
Mr. Rajah Ayyar suggested that the decision of this Court in S. N. A. S. A. Annamalai Chettiar v. The Commissioner of Income-tax, Madras, had in effect overruled A. S. Pl. Vr. Ramaswami Chettiar v. The commissioner of Income-tax, Madras. This is, however, not the case. In S. N. A. S. A. Annamalai Chettiar v. The commissioner of Income-tax, Madras, the Court was merely concerned with the question whether an assessee was to be assessed to income-tax in respect of the income from house property abroad as representing the profits of a business under Section 10 or merely as income from house property under Section 9. It was held that in view of the amendment of the Income-tax Act in 1939 the assessment should be made under Section 9. The question there was quite a different one from that with which the Court is now concerned.
The Income-tax Tribunal was also right in confirming the assessment of the assessee to excess profits tax in respect of the income derived from his rubber estates. This income represented income from business. In R. M. S. T. Ponnuswami Pillai v. The Commissioner of Income-tax, Madras, a Special Bench of this Court held that the income from a tea estate carried on in Ceylon represented profits and gains of a business within the meaning of Section 4 (2) of the Income-tax Act. There can be no difference in principle between a tea estate and a rubber estate. In both cases the raw product has to go through some process of manufacture before being placed on the market.
Consequently the answer which we give to the reference is that it is correct to include in the profits of the assessees business the income from his house properties and rubber gardens in Malaya under Section 2 (5) and 2 (19) of the Excess Profits Tax Act read with the first schedule to the said Act.
The assessee must pay the costs of this reference, Rs. 250.
Reference answered accordingly.