Commissioner of Income Tax vs SM. AR. VR. Annamalai Chettiar

Alfred Henry Lionel Leach, C.J.—The assessee is a Nattukottai Chettiar who deals in stocks and shares at Devakottah and carries on a money-lending business in Penang. Between the 26th April, 1937 and the 20th November, 1937, the assessee remitted to British India the sum of Rs. 13,900 which represented profits which he had made in his money-lending business at Penang. These remittances have been included by the Income Tax authorities in the profits made by the assessee during the year of account '' 1937--1938. The assessee says that in the last quarter of the year of account he suffered heavy losses in Penang and that these losses were greater than the profits which he had made in the earlier year. On this basis he contends that the Income Tax authorities cannot in law treat the remittances as being remittances of profits. The Income Tax Officer refused, to accept this contention, but on appeal the assessee persuaded the Assistant Commissioner to accept it. The Commissioner of Income Tax agreed with the Income Tax Officer and consequently restored his order of assessment. At the request of the assessee the Income Tax Commissioner has referred, u/s 66 (2), the following question to this Court for decision:

Whether in the circumstances of this case the Commissioner was justified in coming to the conclusion that the remittances between 26th April, 1937 and 20th November, 1937, came out of the profits of the next preceding year which were available when the remittances were actually made, although subsequently in the same accounting period, that is, between January and April, 1938, the petitioner incurred losses which were sufficient to wipe out those profits.

We consider that the Commissioner is right in the view which he takes. The remittances in fact came out of profits. This is not disputed. The fact that losses were incurred subsequently in the year would not change the character of the remittances. We are not dealing with a case where there has been a remittance in anticipation of profits. We are dealing with a case in which profits had actually been earned and more than sufficient in amount to cover the remittances. Therefore we cannot accept the assessee''s contention that his subsequent losses must be deemed to have changed the character of his remittances.

The reference will be answered in favour of the Commissioner and he is entitled to his costs Rs. 250.