TMI Blog1958 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,30,094 received by the appellant during the account year 1942-1943. The appellant is a public limited company incorporated in 1921 under the provisions of the Gwalior Companies Act in what, was then the independent State of Gwalior, and carries on business in the manufacture and sale of textiles. Its registered office is at Gwalior, and it is a non-resident company for the purposes of the Act. Its managing agents are Birla Brothers, Ltd. which is a private limited company registered in British India. The point in dispute in these proceedings is whether sums of money received by the appellant during the account year 1942-1943 and aggregating to Rs. 27,30,094 are liable to be taxed under the Act. The appellant admits that it received those monies during that period, and further that they represent profits made by it on certain forward contracts in Jarilla cotton. But it contends that those contracts were entered into at Gwalior with three brokers, viz., Lashkar Trading Company, Banwarilal Shivkumar and Meghraj Mundra, that the agreements between the parties specifically provide that the goods are to be delivered and prices paid at Gwalior, that, in fact, the sum of Rs. 27,30,094 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the forward contracts in question had really been entered into by the managing agents of the appellant at Bombay, that the profits thereon had accrued at Bombay, and that the three brokers of Gwalior were mere dummies who had been put up to conceal the true character of the transactions. This order was confirmed by the Appellate Assistant Commissioner on appeal on November 14, 1949. The appellant took the matter in further appeal to the Appellate Tribunal which by its order dated July 26, 1950, remanded the case for further investigation of the true part played by the several intermediaries, who formed the links in the chain of contracts beginning with those of the appellant with the three brokers of Gwalior and of the payments ending with those by the brokers to the appellant. Pursuant to this order, the Appellate Assistant Commissioner took fresh evidence, and examined as many as seven witnesses, and on a careful and detailed analysis of their evidence, he held in his report dated August 17, 1951, that the forward contracts in question had been entered into with Jwaladutt Kishanprasad by G. D. Birla and R. D. Birla in person or by phone at Bombay, and that the contract notes wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, if there is no evidence whatsoever to support it or if it is perverse. This question was quite recently considered by this court in Meenakshi Mills v. Commissioner of Income-tax, and the law was thus stated : " The position that emerges on the authorities may thus be summed up: (1) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under section 66(1). (2) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final its decision as to the legal effect of that finding is a question of law which can be reviewed by the court. (3) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (4) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact. " Mr. Kolah contends that the finding of the Tribunal in the present case is erroneous in law in that there is no evidence to support it, and even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the interposition of J. R. Pillani, Gwalior, would be a mere device for concealing that fact. Mr. Kolah was highly critical of this evidence. He contended that it ran counter to all the other evidence in the case, and was thoroughly worthless and even demonstrably false in material particulars. He argued that there were serious infirmities in this evidence, and that there had been little or no consideration thereof by the Tribunal, and that its order was accordingly bad as based on misdirections and non-directions. We shall now consider these contentions. The most important of them relates to the statement of Pillani that at the earlier stages of the dealings, profits were paid to the account of Cotton Agents Ltd., Bombay, and that it was only later on that they were credited to J.R. Pillani, Gwalior. To follow the argument of Mr. Kolah on this point, it is necessary to mention that J.R. Pillani had two businesses in Bombay, one in cotton in the name of Jwaladutt Kishanprasad and another in shares in the name of J. R. Pillani, Bombay. Now, the position revealed in the accounts of Jwaladutt Kishnaprasad with reference to the present contracts will appear from the following abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the previous statement of Pillani that he had no current account was inaccurate, or it may be it was false. But is that very material ? What is relevant to the point under consideration is whether Rs. 9,50,000 which was credited to Cotton Agents Ltd., related to cotton transactions or share business. Now it was proved that the sum of Rs. 2,00,000 paid to Cotton Agents Ltd., on February 4, 1943, and Rs. 2,50,000 paid to it on February 5, 1943, were paid not by J. R. Pillani, Bombay, but by Jwaladutt Kishanprasad, and that clearly shows that they related to cotton contracts and not share transactions. It is to be noted in this connection that while the payments dated February 4, 1943, and February 5, 1943, were directly by Jwaladutt Kishanprasad to Cotton Agents Ltd., the payments of Rs. 5,65,000 on March 1, 1943, and Rs. 4,62,750 on March 3, 1943, were by Jwaladutt Kishanprasad in favour of J. R. Pillani, Bombay, which in its turn passed them on to Cotton Agents Ltd. The story which these entries tell is that the transactions were originally between Jwaladutt Kishanprasad and Cotton Agents Ltd., then from March 1, 1943, they were between Jwaladutt Kishanprasad and Cotton Agents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consider the evidence adduced to prove that the agreements were made in Gwalior. Now, the facts found by the Income-tax authorities are these : The three brokers in whose names the contracts stood were, having regard to their means, not likely to have been thought of for contracts of the magnitude which we have. They had not done business in cotton futures prior to the present contracts nor subsequent thereto. They had no bank accounts and large amounts to the tune of Rs. 30 lakhs are supposed to have been paid to them in cash by J. R. Pillani, Gwalior, and turned over by them in cash to the appellant. They produced no accounts for their dealings and the ankdas produced by them at a late stage were found to have been freshly written up. When Durgaprasad Mandalia, the manager of the appellant, was asked as to what securities he held as cover in respect of the huge transactions he entered into with men of such means, he answered that they were men of character. Sagarmal Dingliwala, the manager of J.R. Pillani, Gwalior, at the relevant period, was asked the same question, and he replied that "this business was of Jiyajeerao Cotton Mills, Ltd." The appellant had, in fact, genuine tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there was no reason for not accepting them as correct. But it is pointed out by the Income-tax authorities that the contracts provide for the business being done in accordance with the rules and bye-laws of the East India Cotton Association, Bombay, that according to bye-law No. 44-A of that Association "every contract made subject to these bye-laws shall take effect as contract wholly made in Bombay", and that further under the rules, the delivery of the goods must take place in Bombay. In view of this, the Income-tax Officer was of the opinion that the contracts in question had been got up for the purpose of supporting the present version of the appellant. Mr. Kolah also contended that the evidence of Birlas would have been material in deciding whether they settled the contracts at Bombay as contended for by the Department and that though the order of remand stated that their evidence should be taken, that had not been done and that was a serious irregularity. The portion of the order of remand relevant for the present purpose is as follows : " The managing director of the assessee company or rather the person responsible for ordering these transactions on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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