SABYASACHI MUKHARJI, J.

( 1 ) IN this reference under Section 256 (2) of tbe I. T. Act, 1961, as directed by this court, the Tribunal has referred the following three questions for the assessment year 1967-68 :"1. Whether, on the facts and in the circumstances of the case, the findings of the Tribunal as to the nature, object and purpose of the fund of the assessee held in the U. K. in Pound Sterling were based on no evidence and/or were perverse ? 2. Vhether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the profit arose in respect of the amount of 1,796 which was not remitted in India ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 1,68,157 had been eorrectly taxed as part of the assessec's trading profits?"

( 2 ) IN order to appreciate these questions, it will be necessary to refer to certain facts as mentioned in the statement of case. But we will refer to certain summary of facts, because there is some suggestion by learned advocate for the assessee that the statement of case does not correctly summarise all the essential ingredients of the findings or of the facts admitted- It appears that during the year 1950, the assessee-company had received a sum of Rs. 97,01,124 from the Govt. of the U. K. by way of ex gratia grant, for the rehabilitation of its war-damaged industry in Burma. This amount was credited, according to the statement of case, to its capital reserve account. Learned advocate for the assepsee stresses the point that it was held as fixed assets. This reserve, subject to certain subsequent adjustments, had been permanently reflected in the company's investments in U. K. Govt. securities, B. O. C. (1954) shares and U. K. Municipal Corportion deposits. Subsequently, the company's investments in 2,01,886 shares of B. O. C. (1954) were disposed of indifferent years and the whole amount thereof was paid by the Government of Burma through B. O. C. in the U. K. The realisation was always treated for tax purposes as on capital account. The dividends received from B. O. C. shares as well as the profit from Burma operations were always repatriated to India and the Reserve Bank had never allowed to repatriate them to the U. K. According to the assessee, it had plans to invest these moneys in various capital projects in the U. K. as part of its expansion scheme and, therefore, these were kept, inter alia, in U. K. Govt. securities, Municipal Corporation deposits, etc. , after obtaining the Reserve Bank of India's approval from time to time, pending finalisation of the negotiations. The company wrote on December 26, 1963, to the Ministry of Finance, Govt. of India, for retention of certain amounts in the U. K. In view of a certain controversy, though an extract of that letter has been set out in the statement of case, it is desirable to set out the said letter in extenso which appears at page 10 of the Paper Book being annex. "a" to the statement of case. The said letter, as stated hereinbefore, was dated December 26, 1963, and was addressed to the Secretary, Department of Economic Affairs, Ministry of Finance, Govt. of India, New Delhi. It stated as follows:"balance HELD IN THE U. K. : We refer to the correspondence and discussions between us resting with our letter of 29th May, 1963, reference GM/7 (IDIL ). Your decision on the main subject under discussion was communicated to us by the Reserve Bank, and the amount of 2,02,000 sought to be utilised by us was duly remitted to India and reported to the Reserve Bank. We have still to receive the Government's decision in regard to the two outstanding matters detailed in our letter under reference and in this connection we have now reported the receipt of the sum of 260,141,13'! 1 in the U. K. in full and final settlement of the proceeds of shares in the Burma Oil Company (1954) Ltd. and fixed assets of the Indo-Burma Petroleum Company Ltd. which were transferr

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