TMI Blog1970 (10) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... the following two questions of law for the opinion of this court : " (i) Whether, on the facts and in the circumstances of the case, the interest of Rs. 68,268 was liable to be assessed under the head 'Other sources' in the assessment year 1957-58 ? (ii) Whether, on the facts and in the circumstances of the case, the assessee continued to be the owner of the property for the purposes of computation of income under section 9 of the Indian Income-tax Act, 1922 ? " We would first take up the second question abovesaid and briefly the relevant facts in this context are that the assessee, in the year 1946, acquired the property known as Nedous Hotel in Lahore for a sum of Rs. 46 lakhs. To arrange the requisite finance, Rs. 30 lakhs were r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the income nor could the assessee be allowed the reduction claimed under section 9. Adverting to the first question we notice that the assessee was carrying on extensive business during the Second World War from 1939 to 1945, and had paid excess profits tax under the relevant Act. The assessments in regard to the excess profits tax were set aside by the appellate orders of the Tribunal and as a result thereof fresh assessments were made. Consequently, the assessee not only received back the excess profits tax paid under section 14A(7) of the Excess Profits Tax Act but under the same provision an amount of interest aggregating to Rs. 68,267 was also paid to the assessee. This amount was received in pursuance of the order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently a portion thereof is refunded with the statutory appendages thereto, such an amount cannot lose its original character of being a business income. It is plausibly argued that originally the amount was business profits in the hands of the assessee and when it comes back by way of refund in the same hands it would continue to retain its original identity. Primarily reliance was placed on Donald Miranda v. Commissioner of Income-tax. Mr. Awasthy has primarily relied on the contentions which were raised for the revenue and accepted by Chief Justice Chagla and Desai J. in Commissioner of Income-tax v. Donald Miranda. However, at this very stage, it may be mentioned that, despite its contended plausibility, the view expressed by the Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the taxpayer at his own volition. They have not the remotest analogy to a voluntary deposit of money with the purpose of earning interest thereon. Despite the use of the word " interest " in the statute it is not possible to equate the rate of compensation provided by law for an excessive tax exaction with interest earned on a voluntary loan, deposit or investment. These payments under sections 14 and 14A of the Excess Profits Tax Act, therefore, were exacted under the compulsive taxing power given under the statute to the State and are refunded under the same power. The issue, therefore, is as to what is the character of the payment originally made and also of the amounts refunded subsequently under section 14A(7). In determinin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is intended to represent a repayment of a sum which was paid by them in respect of the duty charged upon the excess profits of their trading. It comes back, therefore, not having lost its character but being still the repayment of a sum--too much, it is true--but a sum taken out of the profits which were made by the company in the course of its trading, profits which at the time they were made were subject to income-tax and subject to excess profits duty, and that is the character of the repayment that has been made. " The above-said view has received repeated acceptance by the Supreme Court and was noticed with approval in McGregor and Balfour Ltd. v. Commissioner of Income-tax. In Donald Miranda v. Commissioner of Income-tax, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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