Law:

Section:

Section 256 of the Income-tax Act, 1961 [Corresponding to section 66(1) of the Indian Income-tax Act, 1922] - High Court - Reference to - Assessment years 1945-46 and 1946-47 - High Court held that profit on amount received in India by assessee's bankers for sale of good would be taxable on accrual basis and not receipt basis, and in determining tax, profit should be apportioned as 75 per cent for manufacturing process and 25 per cent for selling process - Whether since question referred to High Court did not involve any discussion as to amount of profits which arose on amounts received by assessee's bankers and order of Tribunal did not contain any discussion on point as to correct manner of apportioning profits between manufacturing and selling profits, that portion of order of High Court was to be deleted - Held, yes FACTS The High Court in its impugned order held that the profits on the amounts received by the assessee's bankers in British India as price of the goods sold by the assessee on railway receipts in the names of the consigness or as price of the goods delivered ex-godown was liable to tax under the Indian Income-tax Act on accrual basis and not mere receipt basis and that in determining the tax the profits should be apportioned as 7 per cent for the manufacturing process and 25 per cent for the selling process. On appeal to the Supreme Court : HELD The question referred to the High Court did not involve any question as to the amount of profits which arose on the amounts received by the assessee's bankers. The appellate order of the Appellate Tribunal did not contain any discussion on the point as to the correct manner of apportioning profits between the manufacturing process and the selling process. Apparently, the High Court felt that as they had substituted the accrual basis for the receipt basis, they also must determine the question of apportionment of profits. But there was ample power in the Appellate Tribunal when the reference goes back to the Tribunal to apportion the profits, if the matter had not been determined before. In the result, the appeal was to be accepted and part of order of High Court which dealt with apportionment of profit…

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