TMI Blog1933 (2) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ing agent of the assessees. Pursuant to certain verbal negotiations the assessees in August 1928, paid to Messrs. Shaw, Wallace Co. the sum of ₹ 3,25,000 as compensation for the loss of their office as agents to the assessees. The payment made in 1928 came to be considered by the income-tax authorities when dealing with assessments for the year 1929-30. In that year of assessment, the present assessees-the Anglo-Persian Oil Company (India), Ltd.-put forward the payment as a permissible deduction from their gross profits and their claim was allowed. Messrs. Shaw, Wallace Co., the recipients, were at first assessed upon that sum as part of their profits of the previous year, but the question was taken by them to this High Court, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the income, which had escaped assessment. 2. Now, after this reference had been made, the appeal in the case of Messrs. Shaw, Wallace Co. [Commissioner of Income-tax, Bengal v. Shaw Wallace Co. was decided by the Judicial Committee (14th March 1932) 1932 Comp. Cas. 276. The appeal was dismissed, but the finding-that the money received by Messrs. Shaw, Wallace Co., was not income, profits or gains within the meaning of the Indian Act-was in no way based upon the view that it was a receipt on capital account. Indeed, upon the facts as stated in the case then before their Lordships, they do not appear to me to have thought that view correct in the absence of any assignment of goodwill or other asset. 3. Now the present ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence, did not seek to support the reasoning of the income-tax authorities to the effect that the receipt by Messrs. Shaw, Wallace and Co. was a capital receipt and that therefore the payment by the present assessees was a capital payment. On the contrary he conceded at an early stage of Mr. Pugh's argument that the payment in question was not capital expenditure. We are therefore relieved of the duty to examine the principles of law, by which expenditure is distinguished as on capital account or revenue account. I think it right to say however that the Commissioner and his assistant adopted a wrong method of approach to the present question. The principle, that capital receipt spells capital expenditure or vice versa, is simple, but it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ints, suggesting (a) that the payment was not shown to have been made solely for the purpose of earning profits and (b) that, even if this were shown, it was not made solely for the purpose of earning profits in the year of account. For this purpose he expressed himself as willing to accept the statement of facts contained in the assessees' own petition filed before the Commissioner. In my judgment, no effect can be given to either argument. 6. As regards (a), no doubt, if it appeared from the assessees own case or the facts found that the payment was made by way of distribution of profits or, was wholly gratuitous or for some improper or oblique purpose outside the course of business management, we could not regard the deduction as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 34 is inapplicable to put right an assessment by which a deduction has been improperly allowed. Such a case is, in my opinion, a case of income escaping assessment-not the whole income of the assessee but a part of it escaping assessment-and there is nothing in Section 34, which limits it to cases of non-disclosure by the assessee, or discovery of new matter by the income-tax authorities or inadvertence as distinguished from erroneous deliberations on the part of these authorities. In most cases of under-assessment of profits it could be said that the whole profits were assessed at a certain figure; but where that figure is shown to be less than the true amount of assessable profit, the balance has, in my opinion, escaped assessment wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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