1956 Supreme(SC) 39

SUPREME COURT OF INDIA
4th May 1956
S.R. DAS., C.J.I., BHAGWATI AND VENKATARAMA AYYAR, JJ.
Bipin Lal Kuthiala ... Appellant
Versus
Commissioner of Income-tax, Punjab ... Respondent.
Civil Appeal No.253 of 1954
Advocates appeared
For Appellant: Mr. N. C. Chatterji, Sr. Advocate, (Mr. Naunit Lal, Advocate, with him)
For Respondent: Mr. C. K. Daphtary, Solicitor-General of India, (Mr. G. N. Joshi and Mr. R.H. Dhebar for Mr. P. G. Gokhale, Advocates, with him)

Headnote:Section 4 (1) (b) (iii)-Receipt in India-Presumption as to foreign remittances-Sale of timber in Native State-Part of purchase price received in British India on instructions of assesse. Presumption is that remittances are out of profits-Onus on assessee to rebut presumption.

       The assessee, a resident of Simla and forest-contractor had taken on lease forests in the erstwhile Indian State of Jubbal for exploitation. The lease was taken in 1942-43 but the work of felling of trees and extraction of timber continued up to 1945-46. No profit or loss account had been prepared for each of the aforesaid four years separately but a consolidated balance-sheet and profit and loss account had been drawn up for all the four years. In the appellants income-tax returns, the income from the forest business was calculated and shown by applying the rate of ten percent, on the sales made in the relevant years.

       In the relevant accounting year 1942-43 the assessee sold in Jubbal a quantity of timber in one lot to a single party for Rs. 1.91 lakhs. The profit made by assessee from such sale was finally determined by the Income tax Appellate Tribunal at Rs. 18,758. As, however, no part of the sale proceeds was received during the relevant accounting period, the income from the forest business, less the statutory exemption of Rs. 4,500 was taken into consideration only for the purpose of fixing the rate. In course of asssessment for the assessment year 1944-45, it transpired that out of the purchase price of Rs. 1,91,000 for timber sold in the accounting year 1942-43, the sum of Rs. 1,57,000 was realised from the purchaser in the accounting year 1943-44 in the following manner :-

       (a) Rs. 1,25,000 received in cash by the Jubbal State.

       (b) Rs. 29,000 received in cash by the appellant in British Indis.

       (c) Rs. 3,000 paid in cash in British India to a cotractor named Sita Ram, who was a creditor of the appellant.

       The Income-tax Officer took the view that the sums of Rs. 29,000 and Rs. 3,000, aggregating to Rs. 32,000, received in the relevant accounting year 1943-44 included the entire profit that had accrued or arisen to the appellant on the sale of timber in 1942-43 for Rs. 1.911akhs and such profit was assessable to tax under S. 4 (1) (b) (iii) as income, profits and gains accrued or arisen to the appellant without British India before the beginning of the previous year, that is to say, in the accounting year 1942-43 and brought into or received in British India during the relevant accounting year 1943-44 and assessed accordingly. On appeal by the appellant the Appellate Assistant Commissioner upheld the decision of the Income Tax Officer, and the same view was taken by the Income-tax Appellate Tribunal. The Appellate Tribunal, in agreement with the Income-tax authorities held that the two payments in British India had been made by the purchaser according to the instructions of the appellant and were consequently tantamount to constructive remittances of those amounts from Jubbal State to British India and not the profits in the absence of any evidence adduced by the appellant to the contrary, must be regarded as remittances of profits.

       Thereupon the assessee applied to the Appellate Tribunal under S. 66(1) and subsequently to the High Court under S. 66 (2) for reference but both the applications were dismissed. The assessee thereupon obtained special leave and appealed to the Supreme Court. It was contended that profit is the excess receipt on the aggregate amount spent in the business and, therefore no profit can be said to have been received unless and until the entire outlay is recouped. At the date of the receipt of the two sums in British India the entire outlay had not been recovered and, therefore, no profit had been received by the appellant and consequently no profit could be remitted to British India.

       Held: (1) The argument cannot be accepted. There can be no getting away from the fact that profit accrues or arises on the sale, which in this case, took place in 1942-43. Whatever profit there was it certainly accrued or arose in that year. This profit on the sale of timber in 1942-43 has since been ascertained at Rs. 18,758. This finding is final and the appellant cannot go behind it. There being this profit, as Eventually ascertained, the presumption, according to the cases referred to in the judgment under appeal, will be that the remittances of money from foreign business to British India must be of profits, unless the contrary were shown by the appellant.

       (2) The appellant cannot question that there was, in fact, profit which was less than the amount remitted. It was open to him to adduce evidence to show that he was winding up his business and reducing the establishment or was not in need of so much monies to be invested as capital in his business and, therefore, was remitting his capital which became unnecessary for the Jubbal business. This he failed to do. In the circumstances the appellant did not discharge the onus that was on him and the Income-tax Appellate Tribunal was quite correct in coming to the conclusion that the sum of Rs. 32,000 included the profits made on the sale of timber for Rs. 1,91,000 in the accounting year 1942-43.

       (3) In view of the surrounding circumstances the Appellate Tribunal and the Income-tax authorities were fully justified in concluding that the purchaser made the two payments in British India under the instructions of the appellant and that certainly amounts to a constructive remittance of those amounts by the appellant himself from Jubbal to British India. This conclusion naturally attracts the application of the decisions which clearly establish that remittances of money in such circumstances from foreign country to British India must be presumed to be of profits. There is no evidence adduced by the appellant to rebut this presumption.1