COMMISSIONER OF INCOME TAX, MADRAS vs SM. AR. VR. ANNAMALAI CHETTIAR.

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 April 26, 1937 and November 20, 1937 the assessee remitted to British Indian the sum of Rs. 13,990 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 1937-38. 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 26-4-1937

and 20-11-1937 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, i.e., 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 assessees 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.

Reference answered accordingly.