Law:

Section:

Rule 1 of Schedule I of Excess Profit Tax Act, 1940 - Computation of profits - Whether if accounting period does not correspond or is not conterminous with chargeable accounting period or with standard period in order to arrive at profits for such periods, proportion has to be worked out in manner indicated in third proviso to rule 1 of Schedule 1 - Held, yes - Whether it is not open under rule I of Schedule I to Excess Profit Tax Officer to split up period with a view to ascertain profits from accounts of assessee even if it be found to be a convenient method instead of working out proportion - Held, yes FACTS The assessee-firm was carrying on a business in yarn and in money-lending. Their previous year for the 1947-48 assessment was the Samvat year, corresponding to 4th November, 1945, to 20thOctober, 1946. For the purposes of excess profits tax, he adopted the Samvat years as the year of account and the chargeable accounting period came to an end on 31-3-1946, on which date excess profits tax cease to operate. During the accounting year the assessee incurred a loss of Rs. 16881 by reason of bad debts and they were written off in accounts before 31-3-1946. The Excess Profits Tax Officer computed the profits for the chargeable accounting period applying the provisions of proviso 3 to rule 1, Schedule I i.e. by adopting the method of apportioning the profits for the chargeable accounting period ending with 31st March, 1946, after ascertaining the profits for the accounting year commencing from 4th November, 1945, and ending with 24th October, 1946. The assessee contended that the accrual of loss before 31st March, 1946, of this magnitude was itself a special circumstance warranting the Excess Profits Tax Officer to alter not only the method of apportionment but even the mode of ascertaining the profits for the chargeable accounting period. This contention was rejected by the revenue authorities and by the Appellate Tribunal. On reference: HELD From a perusal of provisions of rule 1 of Schedule I it would be seen that the unit for computation of the profits under the Act is the accounting period which is a period of 12 months, and, in this case, it was not…

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