Law: Excess Profits Tax Act, (XV of 1940)

Section: 5

Law: Excess Profits Tax Act, (XV of 1940)

Section: 5

Section 5 of the Excess Profits Tax Act, 1940 - Excess profit tax - Accural of - Assessment year 1944-45 - Whether "profits during chargeable accounting period" are those profits respecting which right to receive has accrued or arisen during that period and if right to receive those profits has accrued or arisen subsequently, then even though they accrued or arose by reason of work during chargeable accounting period, they are not liable to be treated as profit of that chargeable accounting period - Held, yes FACTS The assessee, partnership firm carried on the business of supplying goods under contract with the military department during the last world war. The assessee entered into contracts for the supply of fowl and eggs to the military authorities during the period commencing 1-4-1943, and ending 31-3-1944 for a fixed commission. Inasmuch as the assessee was entitled to a commission at Rs. 600 per mensem only, the excess profit tax officer assessed its profits under the contract for the assessment year 1944-45 at Rs. 7,200. Subsequently, the contractual rates were enhanced by the military authority once in July, 1946, and again in May, 1947. As a result of that, it received an amount totalling Rs. 1,42,989 in addition to what had already been received upon the rates specified in the contracts. The excess profit tax officer initiated proceedings and against the assessee under section 15 assessed the enhanced rate received by the assessee, as the profits of the chargeable accounting period ending 31-3-1944, in the excess profits tax assessment for assessment year 1944-45. On appeal, the AAC held that the profits had not accrued during the chargeable accounting period ending 31-3-1944, as the assessee did not enjoy any right during that period to receive the payments in question, and therefore, said amounts could not be considered in that chargeable accounting period, accordingly he set aside the assessment. On further appeal, the Tribunal held that the amounts received by the assessee arose directly out of the performance of the contract during the chargeable accounting period ending 31-3-1944, and was, therefore, a trading receipt, and further that as the…

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