TMI Blog1970 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... axable territories, being British India, as it then was, from the accumulated profits from the then native State of Junagadh by the Tribunal by its judgment which is common to both the said assessment years. Two questions have been referred, but question No. 2 has not been pressed and, as a matter of fact, was not argued at all. Only question No. 1, therefore, survives for determination. Question No. 1 reads: "Whether the Tribunal erred in law or acted without, evidence in holding that all or any of the various items aggregating to Rs. 4,80,000, (rupees four lakhs eighty thousand) in the assessment year 1948-49 and Rs. 1,70,000 (rupees one lakh seventy thousand) in the assessment year 1946-47, constituted remittances of profits to the taxable territories within the meaning of section 4(1)(b)(iii) of the Indian Income-tax Act." In the two previous years relevant to this reference one R. M. Raja was alive. He died later in February, 1955. He waa assessment as an individual and resident but not ordinarily resident in the taxable territories in the two relevant accounting years. He was carrying on busuness at Junagadh, Veraval and Shahpur all within the State of Junagadh, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responding bank accounts also appear in the account books of Kanji Lava, Junagadh. The business of Raja Oil Mills, Bombay, also had a banking account and a corresponding account was maintained by Kanji Lava, Junagadh, in its books of account. By its judgment the Tribunal found that the assessee was not carrying on only banking business, but was carrying on the business of an oil mill at Veraval as well as in Bombay. The Tribunal also found that there were frequent transfers of funds from the several bank accounts of the assessee not only inter se the banking accounts, but also in the business of Raja Oil Mills. It also found that a perusal of the account of the assessee in the Raja Oil Mills, Bombay, showed that the assessee had utilised the funds standing to his credit in that account for many other purposes, such as, making deposits in the assessee's own banks in Bombay, in paying life insurance premia, income-tax, etc., in purchasing prize bonds and in connection with the payment for goods and bills presumably connected with the assessee's business at Veraval and Shahpur. The Tribunal also found that the assessee did not charge interest to the Raja Oil Mills on the sums standi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(1)(b)(iii). As regards the assessment year 1948-49, the said sum of Rs. 4,80,000 was made up of diverse items consisting of specific remittances from Junagadh to Bombay aggregating to Rs. 4,80,000. The Tribunal found that those remittances were credited initially in one or the other banking account of the assessee in Bombay where they emained for considerable lengths of time and that, out of the same, diverse sums were given to the Raja Oil Mills, Bombay, and were credited in the assessee's account with the Raja Oil Mills. The Tribunal held that in connection with the amounts aggregating to Rs. 4,80,000 the position n was similar in nature to that in connection with the amount of Rs. 1,70,000 and, for the same reasons as given in respect of that sum of Rs. 1,70,000, the Tribunal held that the sum of Rs. 4,80,000 was liable to be taxed under section 4(1)(b)(iii). The Tribunal held that the amounts of Rs. 1,70,000, and Rs. 4,80,000 were liable to be taxed subject to there being sufficient profits available in the State of Junagadh for being remitted to Bombay. The Tribunal directed the Appellate Assistant Commissioner to go into the question as to whether there were sufficient prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banker money is his stock-in-trade, and if a banker remits money in the course of his business, we start with this that what he is remitting is his stock-in-trade and he is remitting it for his business and for the purpose of carrying on his business and there would, therefore, be no presumption that when he remits any amount in the course of his business, he has remitted profits out of his accumulated profits and if the taxing department wants to tax any remittances it would be for the taxing department to establish that the remittances were not a part of his stock-in-trade but out of his accumulated profits. From these principles laid down by that judgment it must follow that in the case of a banker when there is flow of monies both ways, and particularly if the flow either way is fairly equal, it would not be correct for the income-tax department to pick some individual items of remittances made in the normal course of banking business as being out of accumulated profits, because money is banker's stock-in-trade. Of course, there would be exceptions where the taxing department can clearly identify and prove any remittance as being out of accumulated profits and the ratio of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the sons of the assessee, the aggregate of the deposits is Rs. 1,13,180 and the aggregate of the withdrawals is Rs. 1,13,053. The two aggregates are practically equal. In the account in the Bank of India Ltd., Bullion Exchange Branch, Bombay, the aggregate of the deposits is Rs. 17,14,258 and that of the withdrawals is Rs. 17,11,335, the two being fairly equal. The Tribunal has held that this amount was by far the largest banking account of the assessee and it must be noted that each of the two aggregates of deposits and withdrawals exceeded as large a sum as Rs. 17,00,000. Now we will advert to the said sum of Rs. 1,70,000. Rs. 50,000, Rs. 13,000, and Rs. 50,000 were remitted from the State of Junagadh and deposited in the account with the Bank of lndia Ltd. in the joint names on 28th October, 1944, 4th November, 1944, and 15th November, 1944, respectively, and on 12th October, 1945, that is, after almost a year Rs. 95,000 were paid out of that account to the Raja Oil Mills. The Tribunal has pointed out that these amounts remaned idle for months and months. Two sms of Rs. 50,000 and Rs. 25,000 were credited in the account with the Bank of India Ltd., head office, Bombay, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the totals of either side of about Rs. 26,00,000, is very small. In the account with the National Bank of India Ltd., the aggregates of the deposits and the withdrawals are Rs. 96,249 and Rs. 95,044, respectively, and the two are fairly equal. In the assessee's account with the Central Bank of India Ltd., the deposits and withdrawals during the year aggregate to Rs. 98,813 and Rs. 97,540, which are fairly equal. Now, the said aggregate amount of Rs. 4,80,000 credited into the assessee's account with the Raja Oil Mills is made up of certain twelve amounts. These amounts were credited into that account on different dates between 17th June, 1947, and 30th August, 1947, i.e., a period of about two and a half months. These amounts were credited into this account by transfers of various amounts from the assessee's different banking accounts in Bombay. These transfers were made between the 29th September, 1947, and 28th October, 1947, i.e., a period of about one month. These amounts had been lying in the various banking accounts of the assessee in Bombay for periods ranging from two to seven months. It is clear that the twelve amounts composing this aggregate sum of Rs. 4,80,000 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of the remittances, after they were credited in the assessee's banking accounts, remained idle for months. The Tribunal states that money to a banker is his stock-in-trade and from its very nature there would be a quick turnover because the banker's profits depend upon the same and that the absence of a quick turnover by reason of the amounts remaining idle for months would lead to an inference that the remittances were not in the course of the assessee's banking business. What we have stated earlier, viz., that it is the nature of the remittances which has to be ascertained, applies to this aspect also. Just as the use to which funds after they are received in the taxable territories are put, is not directly relevant or important, so also would the fact that the funds remained idle for considerable periods not be of direct relevance or importance. What has to be determined is the character of the remittance, i.e., whether the remittance was in the course of normal banking business. If it was, then in the case of a banker it would be remitting of his stock-in. trade. It is, therefore, of no importance whether after the remittances were received the funds were employed usefull ..... X X X X Extracts X X X X X X X X Extracts X X X X
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