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Commissioner of Income-tax Vs. Shaw Wallace and Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 240 of 1976
Judge
Reported in[1983]143ITR207(Cal)
ActsIncome Tax Act, 1961 - Section 5(1)
AppellantCommissioner of Income-tax
RespondentShaw Wallace and Co. Ltd.
Appellant AdvocateA.C. Moitra and ;S.K. Chakrabarty, Advs.
Respondent AdvocateD. Pal, ;Manisha Sil and ;J. Shah, Advs.
Excerpt:
- .....as ' the net dividends'). another claim of the assessee was that the amount due from chingrihata bone mills (p.) ltd. amounting to rs. 2,53,484 and interest thereon amounting to rs. 49,132, which was written off, should be allowed as a deduction in computing the business income. the ito, however, did not accept either of these two claims.3. the asseessee-company was aggrieved with the assessment order and, therefore, went up in appeal before the aac. the aac together with other reliefs accepted the claim of the assesseee-company on both of these points.4. the department was aggrieved with the order of the aac on these two issues and, therefore, came up in appeal before the appellate tribunal. the appellate tribunal following with its own order for the immediately preceding assessment.....
Judgment:

Suhas Chandra Sen, J.

1. In this case, we are concerned with the assessment year 1964-65, for which the relevant accounting year is the calendar year 1963.

2. The facts of this case are as follows :

For this assessment year the assessee-company amongst other claims contended before the ITO that the dividend from foreign companies should be assessed not on the gross amount of the dividends (hereinafter referred to as ' the gross dividend ') but on the gross amount of the dividends less tax deducted therefrom in the foreign countries (hereinafter referred to as ' the net dividends'). Another claim of the assessee was that the amount due from Chingrihata Bone Mills (P.) Ltd. amounting to Rs. 2,53,484 and interest thereon amounting to Rs. 49,132, which was written off, should be allowed as a deduction in computing the business income. The ITO, however, did not accept either of these two claims.

3. The asseessee-company was aggrieved with the assessment order and, therefore, went up in appeal before the AAC. The AAC together with other reliefs accepted the claim of the assesseee-company on both of these points.

4. The Department was aggrieved with the order of the AAC on these two issues and, therefore, came up in appeal before the Appellate Tribunal. The Appellate Tribunal following with its own order for the immediately preceding assessment year, i.e., assessment year 1963-64 (ITA No. 4890/CaI/1069-70) held that only the net dividends from foreign companies should be assessed to tax.

5. On the other issues, namely, whether the amount of Rs. 2,53,484 due from Chingrihata Bone Mills (P.) Ltd. and interest thereon amounting to Rs. 49,132 which were written off could be allowed as a deduction in working out the business income, the Appellate Tribunal considered the arguments of the departmental representative and the assessee's counsel and held that these amounts could not be allowed as deduction in computing the business income. The result was that the Appellate Tribunal confirmed the action of the AAC in holding that only the net dividends from foreign companies were liable to be included in the total income and reversed the action of the AAC in allowing the deduction of amounts due from Chingrihata Bone Mills (P.) Ltd. and interest thereon.

6. At the instance of the Revenue, the Tribunal has referred the following question of law to this court:

'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that only the net foreign dividends could be included in the assessee's total income under the pro-visons of the I.T. Act, 1961 ?'

7. The Tribunal has also, at the instance of the assessee, referred the following two questions of law :

'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the amount of Rs. 2,53,484 due from M/s. Chingrihata Bone Mills (P.) Ltd. and written off during the previous year was not an admissible deduction in working but the assessee's income from business under the I.T. Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that interest of Rs. 49,132 on the amount due from M/s. Chingrihata Bone Mills (P.) Ltd., which was written off during the previous year, was not an allowable deduction in working out the income from business under the I.T. Act, 1961 '

8. So far as the first question raised by the Revenue is concerned, the point has been gone into and decided by this court in the case of CIT y. Shaw Wallace & Co. Ltd. : [1981]132ITR466(Cal) . Following that decision the question is answered in the affirmative and in favour of the assessee.

9. So far as the questions raised by the assessee are concerned, it has been contended before us, that the assessee-company did not have any financial involvement in Chingrihata Bone Mills (P.) Ltd. What the company did was to advance money to it and the company treated this an advance towards the purchase price and, therefore, this advance was really in course of its trading operations. The company required supplies of bone from Chingrihata Bone Mills (P.) Ltd. and the price was to be adjusted against the advance that was given by the company. But Chingrihata Bone Mills (P.) Ltd. ran into financial difficulties and. the purchase price', therefore; not adjusted against the advance made to Chingrihata Bone Mills (P.) Ltd. It has been argued that the Tribunal really failed to appreciate the facts of this case. Reference has been made to the findings of fact made by the Tribunal and it has been contended that this aspect of the matter has been overlooked by the Tribunal and the facts found by the Tribunal are not binding on this court arid the conclusions from the facts that have been drawn are really mixed findings of fact and law and the court is entitled to reappraise the evidence and come to a different conclusion.

10. On behalf of the Revenue, it has been contended that the loan was given not in course of trading operation nor is it incidental to the trading operation of the company. It has also been argued that the finding of the Tribunal in this regard is a finding of fact and reference has been made to several decisions in support of this contention. Reliance has been placed upon the decision in the case of A.V. Thomas and Co. Ltd. v. CIT : [1963]48ITR67(SC) , and also in the case of Amarchand Sobhachand v. CIT : [1971]82ITR591(SC) . It was argued that the finding of the Tribunal that the amounts were not lent in course of the assessee's money-lending business was a finding of fact arid it was not binding oh the court. It was further contended on the strength of the decision in the case of CIT v. Williamson Magor and Co. Ltd. : [1979]117ITR858(Cal) , that the finding of fact by the Tribunal cannot be assailed in court. Reference has also been - made to the copy of accounts of Chingrihata Bone Mills (P.) Ltd. as shown in the assessee's account books and it has been strongly emphasised that the 'amount was kept in suspense account and was adjusted against Dhapa Works account. Dr. Pal, in reply, has contended that the finding of facts in certain circumstances can be examined by court as has been pointed out by the Supreme Court in the case of G. Venkataswami Naidu & Co. v. CIT 0065/1958 : [1959]35ITR594(SC) . Dr. Pal has argued that he was not challenging the findings of the Tribunal that this amount could not be allowed as a bad debt but he was really challenging the finding that this was not in the course of the trading activity of the company. The company was purchasing regularly from Chingrihata Bone Mills (P.) Ltd. In order to ensure regular supply it was necessary to help Chingrihata Bone Mills (P.) Ltd. and it did not adjust the loan amount given to Chingrihata Bone Mills (P.) Ltd. only to help it financially and in that process the assessee-company was keeping its supply from Chingrihata Bone Mills (P.) Ltd. ensured.

11. We are of the opinion that this aspect of the question was not really argued before the Tribunal and the Tribunal had no occasion to examine the facts relevant for this purpose. The assessee's contention is that it did not adjust the loan account against the purchase because of the financial difficulties of Chingrihata Bone Mills (P.) Ltd. and because the assessee was interested in the course of its business in getting regular supply from Chingrihata Bone Mills (P.) Ltd., was an argument which was not, advanced before the Tribunal. In that view of the matter, in our opinion, in the interest of justice, we should remand the case to the Tribunal for going into this question and decide this point according to law, and for this purpose both the assessee and the Revenue will be entitled to adduce evidence before the Tribunal and the Tribunal will be entitled to consider the matter afresh.

12. So far as the first question raised by the assessee is concerned, we are remitting the matter to the Tribunal for a decision in accordance with law after hearing the parties.

13. So far as the second question raised by the assessee is concerned, we are remitting this question also to the Tribunal for a decision in accordance with law after hearing the parties as directed in this order.

14. In the facts and circumstances of the case, the parties will pay and bear their own costs.

Sabyasachi Mukharji, J.

I agree.


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