Jivaraj Topun and Sons vs Commissioner of Excess Profits Tax, Madras

Rajagopalan, J.—The question referred to this Court u/s 66 (2) of the Income Tax Act was ""whether on the facts and in the circumstances

of the case, the determination of the loss of the last chargeable accounting period (5th November, 1945, to 31st March, 1946) at Rs. 4,622 on the

proportionate time basis is in accordance with law

This question arose out of proceedings to assess the excess profits tax the assessee was liable to pay for the chargeable accounting period 5th

November, 1945, to 31st March, 1946, on which date the liability to excess profits tax came to an end. The according period of the assessee for

purposes of Income Tax was the Samvat year, 5th November, 1945, to 24th October, 1946, of which the chargeable according period for excess

profit tax was a portion. The assessee claimed that the profit and loss statement he had prepared for the period 5th November, 1945, to 31st

March, 1946, proved that he had sustained a loss of Rs. 25,307-2-11 during that period and that he should be granted deficiency relief on that

basis. The assessing authority, however, apportioned the loss on the time basis under the third proviso to rule 1 in Schedule I of the Excess Profit

Tax Act, and after ascertaining the loss for the while accounting year as Rs. 11,049 he fixed Rs. 4,622 as the amount of loss during the chargeable

accounting period, on the basis of which the assessee should be granted relief. That was confirmed by the Tribunal.

The assessees contention before us was that he always had to prepare a profit and loss statement for the period ending with 31st March every

year for information of the officers who assessed him to sales tax under the Madras General Tax Act. That contention in that specific form does not

appear to have been placed even before the Tribunal in any written representation submitted by the assessee. Nor has it been made clear to us that

every year the assessee prepared a profit and loss statement for the period from the commencement of the Samvat year and ending with 31st

March and that he prepared the profit and loss statement for the chargeable accounting period in question in the usual course of his business and

under the normal method of book-keeping he adopted. All that could be claimed by the assessee was that it was possible to ascertain with

accuracy the loss he had sustained during the chargeable accounting period 5th November, 1945, to 31st March, 1946, and that he had

ascertained it. Whether that is a special circumstance which will take his case out of the normal rule of apportionment on the time basis, for which

the third proviso provides, is the question.

The question in our opinion must be answered in the negative. The assessees claim falls within the scope of the rule laid down in the unreported

decision of this Court, Visvanatham v. Commissioner of Excess Profits Tax, Madras (Case Referred No. 15 of 1951).

Learned counsel for the assessee referred to Jenkins Productions Ltd. v. Commissioners of Inland Revenue. The scope of the principle laid

down in that decision was considered at length by Satyanarayana Rao, J., in Visvanatham v. Commissioner of Excess of Profit Tax Madras (Case

Referred No. 15 of 1951) and he pointed out ""this case cannot be treated as laying down any absolute rule that in which it is possible to ascertain

the profits from the account maintained by the assessee that circumstance by itself should be treated as a special circumstance to warrant a

departure from the normal rule."" We are in respectful agreement with the principle laid down there.

Learned counsel for the assessee also referred to the decision in Keshavalal and Co., In re, and to the decision of the Bombay High Court in

Nahalchand Laloochand v. Commissioner of Excess Profits Tax, Bombay City. We are unable to see anything in either of these decisions to

support the assessees claim that the fact that he had ascertained the loss for a portion of his accounting year is a special circumstance within the

scope of the third proviso. As pointed out by the learned Judges of the Bombay High Court in Nahalchand Laloochand v. Commissioner of

Excess Profit Tax, Bombay City, the profits of a business as a whole are not ascertainable till the end of the accounting period of the assessee.

We answer the question referred to this Court in the affirmative and against the assessee. As the assessee has failed he will pay the costs of this

reference. Counsels fee Rs. 250.

Reference answered in the affirmative.