TMI Blog1990 (10) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... rt was delivered by T. K. THOMMEN J. -These appeals by the assessee arise from the judgment dated May 7, 1965, of the Calcutta High Court. The question relates to the assessment for the years 1945-46, 1946-47 and 1947-48 under the Indian Income-tax Act, 1922 (hereinafter referred to as "the Act"). The assessee was a company resident in British India during the relevant years it had a cotton mill in British India. The cloth manufactured by the mill was sold in British India as well as in the native States. In the assessment for 1944-45, it had been held that, for the sales effected in the native States, one-third of the profit was, in terms of section 42(3) of the Act, deemed to have accrued to the assessee in British India. This profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to tax under section 42(3), and only the excess remittances, if any, could be taken as having come out of the remainder profits exempted from tax under section 42. The assessee pointed out that one-third of the profits having been already charged under section 42(3), by reason of the legal fiction contained in that subsection, any amount brought into British India up to the extent of one-third should be presumed to be that which was attributable to that one-third which had already suffered tax, and the balance remittance, if any, alone should be taxed under section 14(2)(c) of the Act. In other words, according to the assessee, if the remittances made to British India in any accounting year exceeded the amount taxed under section 42(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for 1947-48 assessments have been rightly included in the assessable income of the applicant under section 14(2)(c) of the Indian Income-tax Act as profits brought into British India from Indian States ?" The High Court, by its judgment dated May 7, 1965, rejected the assessee's contention that, where there was a mixed fund composed of taxed and non-taxed items and a neutral payment was made, i.e., without specifying the exact source of the payment, the taxing authorities, in the absence of any evidence to the contrary, had to proceed on the basis that the payment was made out of that part of the mixed fund which had already borne tax. The High Court, however, observed : ". . . in this case, the assessee did not have two funds but only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, however, submits that where there was a mixed fund, as in the present case, consisting partly of taxed and partly of untaxed monies, any remittance made should be deemed to have been paid out of that part of the money which had suffered tax. It is a right of the taxpayer to attribute the payment to the taxed money, so as to obtain the benefit allowed by the law. Lord Wright. M. R., in Paton (as Fenton's Trustee) v. CIR [1936] 21 TC 626 at p. 639 (CA), referring to the right of the taxpayer to attribute payment to taxed monies, stated : "In the ordinary course, a person paying interest does not generally appropriate the payment to income or to any particular piece of income or any specific asset: he has the general body of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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