9911796707
TMI Blog1949 (3) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowed money and debts shall be deducted for the purposes of computing the average amount of capital. Therefore, if the bank borrowed any moneys, those moneys could not go to the increase of the average amount of capital used by the bank. But there is an exception contained in rule 5 of schedule I, and that exception is that notwithstanding the provisions of rule 2 of Schedule II the amount of loan or debentures from a bank carrying on a bona fide banking business or effected by means of a public issue of debentures secured on the property of the company, shall not be deducted in arriving at the amount of the capital employed in the business. But this rule 5 starts by the opening words, "if at any time after the close of the standard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 2 only and it could not avail itself of the exception contained in Rule 5 of schedule I. If it had no standard period, if its standard period never commenced, there could be no question of the close of the standard period, and as that rule is only applicable to those assessees who have a standard period and the rule comes into operation after the close of such standard period, in my opinion Rule 5 cannot apply to the case of the assessee and the Tribunal was right in coming to the conclusion that the assessee was not entitled to the benefit set out in that rule. The second question that we have to consider is with regard to the method of completing the average amount of capital as set out in schedule II to the Act. Rule 5 in that Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also right in his contention that the legislature has laid down an artificial method of determining the profits or losses and also determining the increase or decrease in the capital employed in the business. But the legislature has provided one safeguard and that is that it leaves it open to the Income Tax Department to prove the contrary which would demolish the presumption raised by rule 5. I do not accept Sir Jamshedujis contention that the expression "be deemed" applies only to sub-clause (a) of rule 5 and not to sub-clause (b). The presumption raised by the rule is (1) that there is an accrual of profits or losses at an even rate throughout the period, and (2) that these profits or losses as they accrued have increased or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the definition contained in Section 2(19) of the Act. According to him the word "profits" should carry the meaning of actual profits. As I have pointed out earlier, that view is in my opinion erroneous and if that was the view of Mr. Shah, the President, then it is difficult to understand how he agreed with the directions given by Mr. Muzumdar, because the directions given by Mr. Muzumdar, are only reconcilable with the profits being construed as statutory profits defined in the Act. In this case it is not disputed that the profits have accrued at an even rate throughout the accounting period. The only question is whether, having so accrued, they have resulted in a corresponding increase in the capital employed in the business. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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