9911796707
TMI Blog1958 (10) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... fore we do that, we wish to state that the assessment years concerned were 1945-46 and 1946-47. Though there were two separate assessment orders in respect of these years, ultimately when they came up before the Appellate Tribunal they were consolidated into one appeal. The appeal before us likewise concerns both these assessment years. It appears that in or about July, 1943, when considerable difficulty was being felt about cloth, the Deputy Commissioner, Amraoti, evolved a scheme to solve that difficulty. Under that scheme Kisanlal Vyas and a firm called Edulji Framji Dhotiwala, who have in these proceedings been referred to as Dhotiwala, undertook to finance the scheme without charging any interest or profit and were appointed as finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be entirely under the control of the Deputy Commissioner who made himself responsible to the assessees for the sale proceeds receivable from the Tehsildars. The Deputy Commissioner was to decide the price for which the cloth was to be sold to the consumers and also the persons entitled to buy the cloth. Out of the sale proceeds the Deputy Commissioner was to pay to the assessees whatever they had advanced on account of the cloth. The most important provision in this scheme is paragraph 14 which is set out below. " Profits resulting from the scheme shall be utilised for such charitable purposes as may be decided on by the Deputy Commissioner in consultation with the advisory committee appointed to supervise the scheme. " It appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were merely the financiers and also managers under the Deputy Commissioner to carry out the scheme and that the assessees only helped to work the scheme. The Tribunal held that the profits that may have resulted from such working were not therefore theirs, nor represented their income and the assessees could not be assessed to income-tax thereon. In this view of the matter the Tribunal set aside the orders of assessment. Thereafter, on the application of the revenue authorities the Tribunal referred the following question to the High Court under section 66(1) of the Act : " Whether on the facts of this case any income accrued to Messrs. Vyas and Dhotiwala as the result of their associating themselves as financiers in the scheme for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control of the Deputy Commissioner, the assessees could not be said to have carried on business by working the scheme. We are unable to see that the fact of the control of the Deputy Commissioner can prevent the working of the scheme by the assessees from being a business carried on by them. In our view, it only comes to this that the assessees had agreed to do business in a certain manner. The fact that the Deputy Commissioner guaranteed the payment by the Tehsildars of the price due from them to the assessees would indicate that the assessees were treated as the owners of the business. It would indicate that if there had been no such guarantee, the loss due to the failure of the Tehsildar to pay their dues would have to be borne by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y interest or profit. Furthermore, since the assessees actually made the profits, they are liable to pay tax thereon whether they agreed not to make any profits or not. We wish also to point out that it is not the assessees' case that they have been made to pay out the profits for any charity. For these reasons we think that the profits were the profits of the assessees and they are liable to pay tax on them. With regard to the assessees' claim for exemption under section 4(3)(i-a), they are clearly not entitled to any. That claim of the assessees has not been accepted by any of the courts below. Section 4(3)(i-a) applies to income derived from business carried on on behalf of a religious and charitable institution when the income is appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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