TMI Blog1954 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, was right. This appeal will accordingly be allowed, and the second question referred by the Tribunal answered in the negative. The result of this will be that the Income-tax Officer will proceed to enquire into the profits of the appellant company for the years in question in accordance with the requirements of rule 2. - - - - - Dated:- 1-11-1954 - Judge(s) : MEHR CHAND MAHAJAN., S. R. DAS., GHULAM HASAN., N. H. BHAGWATI., T. L. VENKATARAMA AYYAR JUDGMENT The judgment of the Court was delivered by VENKATARAMA AYYAR, J.--This is an appeal from the judgment of the High Court of Calcutta on a reference under section 66(1) of the Income-tax Act. The appellant is a company which came into existence in 1870 as an unregis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is to be made, so as to exclude from it any surplus or deficit included therein which was made in any earlier intervaluation period and any expenditure which may under section 10 of this Act be allowed for in computing the profits and gains of a business, whichever is the greater." Rule 5(ii) defines " gross external incomings " as including profits on the sale or the granting of annuities. These rules came into force in 1939. In 1945 the assessment of the profits of the appellant company for the years 1943-1944, 1944-1945 and 1945-46 was taken up by the Income-tax Officer. Under rule 2, what the Income-tax Officer had to do was to compute the profits of the company under the two heads (a) and (b) in that rule and to adopt whichever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of the company and that the computation should be made under rule 2(a). Then he proceeded to assess the profits under that rule precisely in the manner adopted by him in his order dated 14th July, 1945. He first took the annual adjusted surplus calculated according to the actuarial valuation under rule 2(b) and after making certain adjustments, adopted it as the figure under rule 2(a). These orders were clearly erroneous. The statement that there was no element of life insurance in the policies was rightly held to be erroneous by the Tribunal and has not been sought to be supported. If the annuity business of the company was not life insurance business, then even rule 2(a) would have no application. The Income-tax Officer was likewi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dissatisfied with this order, the respondent applied for reference under section 66(1) of the Income-tax Act, and on that application, the following questions were referred to the decision of the High Court :-- "1. Whether in the facts and circumstances of the case the business of the assessee-company consisted wholly of annuity business or whether it contained some elements of ordinary life insurance business as distinct from annuity business. 2. Whether the Income-tax Officer was justified in making an estimate for calculations under rule 2(a) of the Schedule attached to section 10(7) of the Income-tax Act". The reference was heard by Chakravartti and S. R. Das Gupta, JJ. They held that the first question did not arise on the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 2 in the Schedule to the Income-tax Act. His contention is that the Income-tax Officer had failed to make the computation in accordance with rule 2(a), and that the Tribunal was right in remanding the matter for a correct computation of the profits in accordance with that rule. This contention must, in our opinion, succeed. Under rule 2, the Income-tax Officer bar, to determine under clause (a) what the gross external incomings of the previous year were, and deduct out of them the managing expenses for that year. He has also to find out in terms of clause (b) the annual average surplus on the basis of actuarial valuation in the manner prescribed therein. He has then to adopt whichever is higher as the assessable profits of the year. Now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appened before the Income-tax Officer, for the last word on questions of fact is with it, and that is binding on the Courts. Neither in the statement of the case by the Tribunal, nor in its order of remand is there any finding that the requisite materials had been withheld by the appellant. The only statement hearing on this question in the order of the Tribunal is as follows : "... the Departmental Representative admitted before us that the calculations purported to have been made under rule 2(a) were not in accordance with the requirements of rule 2(a), but it was explained that as the information necessary for determining income under rule 2(a) was not available, an estimate was made and the income determined under rule 2(b) was adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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