TaxTMI 
TaxTMI 
1968 (8) TMI 9
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....first accounting period of which was from that date to April 7, 1944. A profit of Rs. 30,601 was determined for income-tax purposes for the aforesaid period, the assessment year being 1944-45. Since the profits of Ratlam business were to be computed for the period of March 8, 1943, to April 7, 1944, a proportionate profit for the chargeable accounting period from March 8, 1943, to October 28, 1943, was worked out, the amount coming to Rs. 19,578. The Excess Profits Tax Officer was of the view that the main purpose of starting the new business at Ratlam was to avoid excess profits tax liability. Therefore, under section 10A of the Act he included the income from Ratlam business in the total income of the assessee for the purpose of excess profits tax. The assessee was the sole proprietor of the entire business in the taxable as well as non-taxable territories. Ordinarily he was liable to be assessed to excess profits tax on his total income from all the business under the second proviso to section 2(5) of the Act. The third proviso to section 5 of the Act, however, provided that any income which accrued or arose in an Indian State was exempt from excess profits tax. The conclusion....
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.... II and its preamble ran as follows : " Whereas it is expedient to impose a tax on excess profits arising out of certain businesses in the conditions prevailing during the present hostilities..." The Act extended to the whole of British India (vide section 1(2)). Section 5 provided : " This Act shall apply to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of the provisions of sub-clause (i) or sub-clause (ii) of clause (b) of sub-section (1) of section 4 of the Indian Income-tax Act, 1922, or of clause (c) of that sub-section :...... Provided further that this Act shall not apply to any business the whole of the profits of which accrue or arise in an Indian State ; and where the profits of a part of a business accrue or arise in an Indian State, such part shall, for the purposes of this provision, be deemed to be a separate business the whole of the profits of which accrue or arise in an Indian State, and the other part of the business shall, for all the purposes of this Act, be deemed to be a separate business. " Sub-section (1) of section 10A was in the following terms : " Where the Ex....
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....eld that the profits of the manufacturing part of the assessee's business had accrued and arose at Raichur and were thus covered by the proviso and could not be subjected to excess profits tax. In Sohan Pathak & Sons v. Commissioner of Income-tax the assessee claimed, in the matter of assessment relating to the chargeable accounting period ending October 8, 1943, that there had been a partial partition among the members of the Hindu undivided family. The family as such had ceased to carry on the business after that date though they continued to remain joint in status. After the partial partition the adult members of the family had formed two partnerships admitting the minors to the benefits thereof and carried on the same business which was being carried on by the Hindu undivided family. The Excess Profits Tax Officer was of the opinion that the main purpose of the creation of two partnerships was to avoid or reduce the tax liability of the assessees to excess profits tax and he made adjustment under section 10A by adding to the profits made by the family till the date of the partition the profits made by the two firms during the chargeable accounting period. Having failed before....
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....x in respect of that business no question could arise of avoiding or reducing any liability to excess profits tax under section 10A, would equally apply to the present case and must lead to the same result. " There can be no manner of doubt that in this decision this court approved of the view expressed in the Bombay case which can be most appositely applied to the present case. There the assessee was the selling agent of the Victoria and jubilee Mills. He was also the selling agent of two mills working in the Baroda State. The assessee then floated a private limited company in the name of M. M. Shah Ltd. in Baroda State in which all the shares were held by him and his wife. He resigned his office of selling agents of the two mills in Baroda State and on the same date those two mills appointed M. M. Shah Ltd. to be the selling agents of the mills. The Excess Profits Tax Officer added to the assessee's profits the profit derived from the selling agency business of the Baroda State mills. The finding of the department and of the Tribunal was that the assessee had transferred the selling agency to M. M. Shah Ltd., with the main purpose of avoiding or reducing the liability of his bu....