Case: Meenakshi Mills, Madurai Vs. The Commissioner Of Income-Tax,Madras

and not of income not accrued or arisen.This is conceded by the appellant. But it is argued that different considerations arise in the case of companies registered under the Indian Companies Act, because there are provisions in the Act as to how the profits are to be disposed of, such as distribution of dividends or adding to the reserve and until that was done, there was no accrual of income or of profits under the statute.This is to confuse accrual of income with the disposal of it. Income which has accrued to an assessee might remain undisposed of by him, but the liability to tax attaches to it under the provisions of the Indian Income-tax Act as soon as it accrues. It is no concern of the revenue how and when profits are disposed of by the assesses, and for this purpose it makes no difference whether the assessee is an individual or a company, both of them being equally liable to tax on income and profits when they have arisen or accrued. The provisions of the Companies Act as to the disposal, of profits are designed to protect the interests of the shareholders and have no effect on the right which the State has under the provisions of the Act to impose a tax on income when it arises or accrues.It should also be mentioned that though the decision in 1954 S C R 258: (AIR 1953 S C 527) (Z9) relates to a firm and not a company, the decisions in 1924 A C 508 (Z6) and 1914 AC 1001 (Z7) which were held to be inapplicable to the imposition of a charge under the Indian Income-tax Act related to companies, and the argument and the decision proceeded on the footing that the principles applicable were the same both to firms and companies. The decision in 1954 S C R 258: (AIR 1953 S C 527) (Z9) must accordingly be held to conclude this question against the appellant.36. It must be said of this contention that it was raised before the Tribunal and negatived. Being a question of law, the appellant had a right to have it referred to the court under section 66 (1). But the question as framed by the appellant in its application under section 66 (1) did not specifically raise this point; nor does it appear to have been argued in the High Court. As the matter is now concluded by the authority, it will be an idle formality to direct the tribunal to refer the question for the decision of the court. The powers of this Court in appeal under Article 136 are not intended to be exercised for such a purpose. That disposes of the main and substantial questions that have been agitated in these proceedings.37. There is one other matter in respect of which the appellant sought reference to the court in its application under section 66 (1). The facts relating to this matter are that during the periods of assessment with which the appeals are concerned, the appellant opened branches in the State of Travancore, Cochin, Pudukkottah and Mysore, and sold yarn to its constituents in those States through these branches. The point in dispute is whether the profits made by the appellant on those sales are chargeable to tax. The contention of the appellant before the Tribunal was that the matter was governed by section 14(2)(c), and that the profits could be taxed only if they were remitted to British India. That was not disputed by the Department, but they contended that as the appellant sold in the States goods manufactured by it in British India, the governing provisions were sections 42(1) and 42(3), and that under these provisions, the appellant was liable to be taxed on such portions of the profits as were apportionable to the manufacture of the goods in British India. That was accepted by the Tribunal, and the profits were apportioned in the ratio of 85:15. In its application under section 66 (1), the appellant raised the contention that sections 42 (1) and 42 (3) applied only to non-residents, and that it was only section 14 (2) (c) that would apply to residents and applied to have that question referred to the decision of the court. But the Tribunal held that the decision of this Court inCommissioner of Income-tax v. Ahmedbhai Umarbhai and Co.,1950 S C R 335: (AIR 1950 S C 134) (Z10) had settled that sections 42 (1) and 42 (3) applied both to residents as well as non-residents and consequently declined to refer the question.38. The correctness of this decision does not appear to have been contested before the High Court, the only point dealt with in the judgement of the learned judges being as to the correctness of the ratio in which the apportionment was made. Even in this Court, it was only this question that was pressed on the strength of the decision inCommissioner of Income-tax and Excess Profits Tax and B. and O. v. S. Sen,1949-17 ITR 355 : (AIR 1952 Orissa 89) (Z 11). Section 14 was mentioned in the course of the argument, but no contention was advanced that sections 42 (1) and 42 (3) applied only to non-residents, and the decision in 1950 S C R 335: (AIR 1950 S C 134) (Z10), was not even so much as referred to in the course of the argument, and the appellant did not even ask for this question being referred. That apart, in view of the decision in 1950 S C R 335: (AIR 1950 S C 134) (Z10), no purpose would be served by directing a reference of this question, and the Tribunal was right in observing that "it is not even of academic interest to refer the said question to the High Court". On the question whether the fixation of ratio was correct, we are of opinion that it is a pure question of fact, and is not open to reference under section 66 (1).

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]25. Applying these principles, admittedly there is no question here of construction of any statutory provision or document of title. The issues which arise for determination whether the sales entered in the books of the appellant in the names of the intermediaries were genuine and if not, to whom the goods were sold and for what price are all questions of fact. Their determination does not involve the application of legal principles to facts established in the evidence. The findings of the Tribunal are amply supported by evidence and are eminently reasonable. It should, therefore, follow that there is no question which could be referred to the Court under S.66 (1).It must be said of this contention that it was raised before the Tribunal and negatived. Being a question of law, the appellant had a right to have it referred to the court under section 66 (1). But the question as framed by the appellant in its application under section 66 (1) did not specifically raise this point; nor does it appear to have been argued in the High Court. As the matter is now concluded by the authority, it will be an idle formality to direct the tribunal to refer the question for the decision of the court. The powers of this Court in appeal under Article 136 are not intended to be exercised for such a purpose. That disposes of the main and substantial questions that have been agitated in these proceedings.37. There is one other matter in respect of which the appellant sought reference to the court in its application under section 66 (1). The facts relating to this matter are that during the periods of assessment with which the appeals are concerned, the appellant opened branches in the State of Travancore, Cochin, Pudukkottah and Mysore, and sold yarn to its constituents in those States through these branches. The point in dispute is whether the profits made by the appellant on those sales are chargeable to tax. The contention of the appellant before the Tribunal was that the matter was governed by section 14(2)(c), and that the profits could be taxed only if they were remitted to British India. That was not disputed by the Department, but they contended that as the appellant sold in the States goods manufactured by it in British India, the governing provisions were sections 42(1) and 42(3), and that under these provisions, the appellant was liable to be taxed on such portions of the profits as were apportionable to the manufacture of the goods in British India. That was accepted by the Tribunal, and the profits were apportioned in the ratio of 85:15. In its application under section 66 (1), the appellant raised the contention that sections 42 (1) and 42 (3) applied only to non-residents, and that it was only section 14 (2) (c) that would apply to residents and applied to have that question referred to the decision of the court. But the Tribunal held that the decision of this Court inCommissioner of Income-tax v. Ahmedbhai Umarbhai and Co.,1950 S C R 335: (AIR 1950 S C 134) (Z10) had settled that sections 42 (1) and 42 (3) applied both to residents as well as non-residents and consequently declined to refer the question.The correctness of this decision does not appear to have been contested before the High Court, the only point dealt with in the judgement of the learned judges being as to the correctness of the ratio in which the apportionment was made. Even in this Court, it was only this question that was pressed on the strength of the decision inCommissioner of Income-tax and Excess Profits Tax and B. and O. v. S. Sen,1949-17 ITR 355  : (AIR 1952 Orissa 89) (Z 11). Section 14 was mentioned in the course of the argument, but no contention was advanced that sections 42 (1) and 42 (3) applied only to non-residents, and the decision in 1950 S C R 335: (AIR 1950 S C 134) (Z10), was not even so much as referred to in the course of the argument, and the appellant did not even ask for this question being referred. That apart, in view of the decision in 1950 S C R 335: (AIR 1950 S C 134) (Z10), no purpose would be served by directing a reference of this question, and the Tribunal was right in observing that "it is not even of academic interest to refer the said question to the High Court". On the question whether the fixation of ratio was correct, we are of opinion that it is a pure question of fact, and is not open to reference under section 66 (1).