Law:

Section:

Rule 5 of Schedule I to the Excess Profits Tax Act, 1940 - Capital - Computation of - Whether where assessee bank, commenced its business after 31-3-1936 and exercised option under proviso to section 6 and did not have any standard period, assessee was governed by rule 2 in computation of capital and could not avail benefit of exception under rule 5 - Held, yes FACTS The assessee bank commenced business after 31-3-1936, and it availed itself of the option given by proviso, to section 6 and assessee did not have any standard period as indicated in sub-clause (2) of section 6. The department held that the assessee was not entitled to benefit under rule 5 to Schedule I On appeal, the Tribunal upheld the decision of the revenue. On reference: HELD The assessee bank having exercised its option under the proviso to section 6, did not and in fact could not, adopt any of the four periods as the standard period. Therefore, for the purposes of the Act it had no standard period whatsoever. If that be so, it was clear that in the computation of the average amount of capital it would be governed by Rule 2 only and it could not avail itself of the exception contained in Rule 5 of Schedule I. If it had no standard period, if its standard period never commenced, there could be no question of the close of the standard period, and as that rule is only applicable to those assessees who have a standard period and the rule comes into operation after the close of such standard period, Rule 5 cannot apply to the case of the assessee and the Tribunal was right in coming to the conclusion that the assessee was not entitled to the benefit set out in that rule. Rule 5 of Schedule II to the Excess Profits Tax Act, 1940 - Capital - Computation of - Whether expression 'profits or losses' in Rule 5 means 'statutory profits' - Held, yes - Whether it should be proved by Department that in fact profits or loss did not accrue at an even rate throughout period, or it may be shown that although profits or losses accrued evenly throughout period, in fact they did not result in an increase or decrease in capital employed in business - Held, yes FACTS The assessee bank commenced business after the…

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