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Shree Jagdish Mills Ltd. Versus Commissioner of Income-Tax, Bombay North

Income-Tax Reference No. 24 of 1958 - Dated:- 24-10-1958 - S. T. Desai And K. T. Desai, JJ. For the Assessee : N. A. Palkhivala with S. P. Mehta For the Commissioner : G. N. Joshi with R. J. Joshi JUDGMENT S. T. Desai, J. The assessee, Shree Ambica Mills Ltd., Ahmedabad, is the successor in interest of Shree Jagdish Mills Ltd. which, at all material times, ran a textile mill at Baroda which was an Indian State. The assessment year is 1949-50 and the previous year ended on 31st December, 1948. Sh .....

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stage to set out certain provisions of that Ordinance: "2. Excess Profits Tax Act applied to Baroda State: The Excess Profits Tax Act (No. XV of 1940) in force in British India as modified up to date shall apply to the Baroda State with the modifications shown in the Schedule annexed hereto from 1st August, 1943. 3. Rate of Excess Profits Tax: The excess profits tax shall be an amount equal to sixty and two-thirds per cent. by which the profits of the business during the chargeable accounti .....

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Government of India or War Loans floated by the Government or in any other manner approved by the Government provided that at the request of the assessee the Board may, at their discretion, invest a portion of the amount standing in his name in shares of companies or trading concerns floated with the consent of the Government of India or of the Baroda Government. 7. ................................................................................................. 8. Amounts to be repaid for the b .....

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ead of paying the amount in cash to the Accountant-General purchased Government of India Loan Paper and sent it to the Accountant-General. In respect of the chargeable accounting periods 1942, 1943 and 1944, the total demand for excess profits tax made on the assessee was for ₹ 38,86,609. This was paid by the assessee mills from time to time by handing over Government of India securities of the face value of ₹ 38,43,000 and the balance was paid by cheque. All the securities which wer .....

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our of the Accountant-General. The Accountant General, however, made an endorsement on those certificates that the securities belonged to the assessee mills. The war came to an end and ultimately on 7th November, 1947, the Accountant-General directed the refund of ₹ 40,51,351-14-1 whereout ₹ 40,38,670-7-5 represented the value of the securities that were directed to be handed over ₹ 12,681-6-8 was the amount of uninvested balance. Included in this sum of ₹ 40,51,351-14-1 .....

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e assessee was that all along the Government securities remained the property of the assessee and the interest realised by the Accountant-General on these securities was the income of the assessee which could only be taxed under the head of "Interest on Securities". The Tribunal rejected that contention and the assessee has come before us on this reference. Two questions have been raised for our determination: "(1) Whether the sum of ₹ 28,178 is assessable to tax in the hand .....

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than a procedure or machinery for collecting compulsory deposits and the title of the Ordinance had little meaning and less consequence. It was said that the word "tax" was not used in the title as was done in British India when the tax was described as excess profits tax. When we turn to the provisions we find that the expression "tax" has been used in the Ordinance. Now, the only clause on which reliance has been principally placed by the learned counsel is clause 8 and the .....

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to which the securities belonged and which, as represented by the Accountant-General, was entitled to receive interest on the securities. What is relied on by the assessee is evidently what was done for convenience both of the assessee and the Accountant-General and we find it difficult to see how that can change the true nature of the levy, if it was a levy, and there is little scope for the argument that what was paid by the assessee was not excess profits tax. The fact that it was to be repai .....

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