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Judgment
SIKRI J. - These appeals, by certificate granted u/s 66A(2) of the Indian income tax Act, 1922, hereinafter referred to as the Act, read with section 261 of the Indian income tax Act, 1961, are the directed against the judgment of the Rajasthan High Court in a consolidated reference made to it by the Appellate Tribunal. These appeals relate to the assessment years 1945-46 and 1946-47. The question referred to the instance of the appellant was "whether the profit on the amount received by the assessee's bankers in British India as price of goods sold by the assessee on railway receipts in the names of the consignees or as price of goods delivered ex-godown Bhilwara was liable to tax under the Indian income tax Act."
The High Court answered the question as follows :
"Our answer to the question No. 2 is that the profits on the amounts received by the assessee's bankers in British India as price of the goods sold by the assessee on railway receipts in the names of the consignees or as price of the goods delivered ex-godown Bhilwara was liable to tax under the Indian income tax Act on accrual basis and not mere receipt basis and that in determined the tax the profits should be apportioned as 75% for the manufacturing process and 25% for the selling process."
Mr. Viswanatha Sastri, the learned counsel for the appellant, contended that on the facts of this case the assessee was liable to tax not on accrual basis but on receipt basis. When asked how does the revenue suffer by the amounts involved in these assessment years being taxed on accrual basis rather than on receipt basis, the learned counsel frankly and properly conceded that it did not make any difference. Since the point whether the receipts in these assessment years are taxable on accrual basis or on receipt basis is academic, Mr. Sastri very properly did not pursue the matter further. We must, however, make it clear that we should not be taken to have expressed any opinion on the soundness of the reasons of the High Court for arriving at the answer reproduced above.
Mr. Sastri next contended that the High Court should not have stated in the answer that "in determining the tax the profits should be apportioned as 75% for the manufacturing process and 25% for the selling process." We agree with submission made by the learned counsel. However widely the question referred to the High Court is interpreted, it does not involve any question as to the amount of profits which arose on the amounts received by the assessee's bankers. The appellate order of the Appellate Tribunal does not contain any discussion on the point as to the correct manner of apportioning profits between the manufacturing process and the selling process. Apparently, the High Court felt that as they had substituted the accrual basis for the receipt basis, they also must determine the question of apportionment of profits. But there is ample power in the Appellate Tribunal when the reference goes back to the Tribunal to apportion the profits, if the matter has not been determined before. In the result, we accept the appeals and modify the answer given by the High Court by deleting the following words :
"And that in determining the tax, the profits should be apportioned as 75% for the manufacturing process and 25% for the selling process."
In view of the circumstances of the case, there will be no order as to costs.
Appeal allowed. Answer modified.