Case: Bipin Lal Kuthiala Vs. Commissioner of Income Tax, Punjab

2. The facts are shortly as followsThe appellant, who is a resident of Simla, is a forest contractor and had taken certain forest on lease inin the erstwhile Indian State of Jubhal for exploitation. The work of felling of trees and extraction of timber continued up to 194546. No profit or loss account had been prepared for each of the aforesaid four years separately, but a consolidatedand profit and loss account had been drawn up for all the four years. In the appellantsreturns, the income for the forest business was calculated and shown by applying the rate of ten per cent. net on the sales made in the relevant years.4. In course of the assessment proceedings for the assessment yearit transpired that the appellant, who was resident and ordinarily resident in British India, had in the relevant accounting yearsold in Jubbal a quantity of timber in one lot to a single party named Sukh Dial Jagat Ram, a firm carrying on business in Abdullapore in the district of Ambala for a sum of Rs. 1,91,000(rupees one lakh ninety one thousand). By his assessment order datedax Officer held that on the sale of timber of the value of Rs. 1,91,000 during the relevant accounting periodthe appellant had made a profit of Rs. 20,967. 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. The profits made on sales during the three succeeding accounting periods46 were also determined by theOfficer as indicated in his assessment order.5. On appeal by the appellant, the Appellate Assistant Commissioner allowed certain expenses, which had been disallowed by theOfficer, so that the total income from the forest business was reduced. The profit on the sale of timber during the accounting yearwas accordingly reduced from Rs.20,967 to Rs.19,767 and the profits for the three succeeding accounting years were proportionately reduced. On further appeal to theAppellate Tribunal, the profits were further reduced by the allowance of a further sum of Rs.5,000 so that the profit of the accounting yearwas finally ascertained and determined to be Rs.18,758.6. In course of assessment for the assessment yearit transpired that out of the purchase price of Rs. 1,91,000 for timber sold in the accounting yearthe sum of Rs.1,57,000 was realised from the purchaser in the accounting yearin the following mannerRs. 1,25,000 received in cash in Jubbal State.(b) Rs.29,000 received in cash by the appellant in British India.(c) Rs.3,000 paid in cash in British India to a contractor named Sita Ram, who was a creditor of thex Officer took the view that the sums of Rs.29,000 and Rs 3000, aggregating to Rs. 32,000, received in the relevant accounting yearincluded the entire profit that had accrued or arisen to the appellant on the sale of timber infor Rs. 1,91,000 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 yearand brought into or received in British India during the relevant accounting yearand assessed accordingly.7. On appeal by the appellant the Appellate Assistant Commissioner upheld the decision of theOfficer. On further appeal by the appellant theAppellate Tribunal took the same view and dismissed the appeal. The AppellateTribunal, in agreement with theauthorities, 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 that the profits in the absence of any evidence adduced by the appellant to the contrary, must be regarded as remittances ofBeing aggrieved by the decision of the Appellate Tribunal, the appellant applied to the Appellate Tribunal under S. (66) (1), IndianAct, 1922, praying that the Appellate Tribunal might state a case and refer to the High Court the following question of law:(i) Whether, in the circumstances of the case, there is any material for the finding that instead of direct remittance the assessee has chosen to instruct a debtor in Jubbal State to discharge a part of his debt by making the payment of Rs.32,000 in British India ?(ii) Whether, in the circumstances of the case, the receipt of Rs32,000 has been correctly held to be a constructive remittance from Jubbal State to British India?(iii) Whether , in the circumstances of the case it has been correctly held that the assessee remitted the entire profits of the account yearin the sum of Rs. 32,000?(iv) Is there any evidence to support the finding of the Appellate Tribunal that the sale proceeds of Rs.32,000 received in British India includes entire profits earned or accrued in jubbal State in the account yearWhether, there is any material on the record to justify a conclusion that sum of Rs.32,000 received in British India was "income" and therefore liable to be taxed ?Question No. (v), however was withdrawn by the appellant and the Appellate Tribunal by its order dateddismissed the application in respect of the other questions. The appellant thereupon applied to the High Court of Punjab under S. 66 (2), IndianAct, 1922, praying that theAppellate Tribunal be directed to state the case and refer the following questions of law:(i) Whether, in the circumstances of the case, there is any material for the finding that instead of direct remittance the assessee has chosen to instruct a debtor in Jubbal State to discharge a part of his debt by making the payment of Rs.32,000 in British India ?(ii) Whether, in the circumstances of the case, the receipt ofhas been correctly held to be a constructive remittance from Jubhal State to British India ?(iii) Whether, in the circumstances of the case, it has been correctly held that the assessee remitted the entire profits of the account yearin the sum of Rs.32,000?(iv) Is there any evidence to support the finding of the Appellate Tribunal that the sale proceeds of Rs. 32,000 received in British India includes entire earned or accrued in Jubbal State in the account year?The High Court issued a rule to the respondent to show cause why the application should not be granted. By its order datedthe High Court dismissed the application with costs. Leave to appeal having been refused, the appellant obtained Special Leave to appeal from this Court.

Reasoning: There can be no getting away from the fact that profit accrues or arises on the sale, which in this case took place inWhatever profit there was, it certainly accrued or arose in that year. The profit on the sale of timber inhas 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 thealready stated the two amounts were paid in British India at the direction of the appellant, which means the same thing as if the payment had been made by the purchaser and received by the appellant from his purchaser in Jubbal and then remitted by the appellant through the purchaser as his agent to himself and his creditor in British India. In such a situation the presumption is that the profit was included in the remittances and the decision referred to above can have no application.13. On a consideration of the facts and circumstances of this case, no real or substantial question of law arises from the order of the Appellate Tribunal and the High Court was justified in dismissing the appellants application under S. 66(2), IndianAct, 1922. For reasons stated above this appeal is dismissed with costs.