TMI Blog1968 (8) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... on wholesale basis having its head office at Farrukhabad and a branch at Ahmedabad under the name and style of Chandra Prakash Anand Prakash. During the chargeable accounting period from November 9, 1942, to October 28, 1943, the assessee started a new wholesale cloth business at Ratlam which was in an Indian State. That business was started with effect from March 8, 1943, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d business to it would be quite different. It was observed, inter alia, " the Act, including section 10A applies to the business at Farrukhabad and Ahmedabad and when the amount of profits of the business carried on at these places is adjusted, section 10A is applied to that business and not to the business carried on at Ratlam. " The Act was enacted during the period of World War 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 busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision is that the direct point for consideration was whether, on the facts of that case, the third proviso to section 5 could be invoked by the assessee-firm and it was open to it to claim that the work of manufacture of oil carried on at Raichur should be treated as a separate business within the meaning of the proviso. The decision went in favour of the assessee on that point, it being held 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 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court (Commissioner of Excess Profits Tax v. Moholal Maganlal) Bat we fail to appreciate the distinction in principle between that case and the present, for, to both alike, the Act is made inapplicable by section 5. The reasoning of the learned judges in the Bombay case, namely, that if the Act is inapplicable to a particular business and there would thus be no liability to excess profits tax 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 appoint ..... 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