Law: Income Tax Act, 1922

Section: 33

Income tax Act (XI of 1922), S. 33 Capital Computation¬"Borrowed money" Amount due to supplier of goods purchased by assessee Whether Capital Appellate Tribunal Proceedings-¬Nature of Remand Observation in order of remand Whether binding on Tribunal. The word "capital" used in, the Excess Profits Tax Act connotes whatever is put into the business by the owners thereof either in the form of cash or in the form of property, whether the cash is given out of the assets already owned by the owners or as a result of borrowings or incurring of debts. The property also may either be given in the beginning as a contribution by the owner of the business or may subsequently be acquired by purchase. The price due in respect of goods purchased on credit from the supplier of goods, which form the stock in trade, cannot be said to be capital contributed to the business by the owners or capital employed in the business. Held, that amount due from the assessee, which was a dealer in cloth, to the supplier towards the price of goods supplied on credit was only a debt and was not a loan which could be treated as "borrowed money" for the purpose of rule 2 A of Schedule II of the Excess Profits Tax Act in computing the average amount of capital of the assessee. There was neither an act of lending nor acceptance whenever the assessee became indebted to the suppliers for the price of goods supplied to the assessee. In an income tax proceeding, the provisions of the Evidence Act do not apply. A well known mercantile custom can always be relied upon by the Income tax Officer or the Appellate Tribunal. Where by an order of remand the Appellate Tribunal does not dispose of the appeal before it finally and the appeal remains pending before it any observations made by the Tribunal in the order of remand do not bind it at the time when the Tribunal gives its final decision. Shree Ram Mills Ltd. v. Commissioner of Excess Profits Tax (1953) 23 IT R 120 ref. STATEMENT OF CASE In compliance with the order of the High Court at Allahabad under section 66 (2) of the Income tax Act read with section 21 of the Excess Profits Tax Act, we hereby draw up a statement of the case and refer it to the High…

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