DONALD MIRANDA versus THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY II

Citation: [1962] 1 S.C.R. 133 · Decided: 01-03-1961 · Supreme Court of India · Bench: J.L. KAPUR · Disposal: Appeal(s) allowed

Judgment (excerpt)

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1 S.C.R. SUPREME COURT REPORTS 
133 
DONALD MIRANDA 
v. 
THE COMMISSIONER OF INCOME.TAX, 
BOMBAY CITY ·II 
(and connected appeals) 
(J. L. KAPUR, M. HrnAYATULLAH and 
J. c. SHAH, JJ.) 
Income Tax-Refund of excess profits tax-Liability to income-
tax-Discontinuance of business-Profits for accounting year 
exempt from tax-Excess Profits Tax Act r940 (r5 of r940), 
s. I2(I)-Indian Finance Act, r946 (7 oj r946), s. II(II)-Indian 
Income.tax Act, r922 (II of r922), ss. IO, I2. 
The appellants were partners in a registered firm which was 
dissolved on March 24, r945. 
A private limited company 
succeeded to the business of the firm from March 25, r945. For the 
accounting period April l, r944, to March 24, r945, the firm was 
assessed to excess profits tax under the Excess Profits Tax Act, 
r940. It had deposited certain sums of money as required under 
s. IO of the Indian Finance Act, 1942, read with s. 2 of the 
Excess Profits Tax Ordinance, 1943, and in accordance with 
those provisions became entitled to repayment of a portion of 
the excess profits tax. The appellant's claim before the Income-
tax Officer under s. 25(4) of the Indian Income-tax Act, 1922, 
that no tax was payable on the profits of the firm for the period 
between April l, 1944, to March 24, 1945, was allowed, but 
their plea that the amount of refund of the excess profits tax 
was business profit and therefore similarly exempt from tax, was 
rejected. The High Court, on a reference, took the view that 
the amount refunded \Vas income from other sources taxable 
under s. 12 of the Indian Income.tax Act, 1922, and that, there-
fore, the appellants were not entitled to the benefit of s. 25(4) of 
that Act. 
Held, that in view of s. l2(I) of the Excess Profits Tax Act, 
1940, ands. rr(rr) of the Indian Finance Act, 1946, the amount 
refunded was income from business for the purposes of the 
Indian Income-tax Act, r922, and did not lose its character 
which it had before the deposit. It fell under s. IO of the 
Indian Income-tax Act and was, therefore, exempt under s. 25(4) 
of that Act. 
Mc Gregor and Balfour Ltd. v. Commissioner of Income-tax, 
Bengal, [1959] 36 I.TR. 65 and A. & W. Nesbitt Ltd. v. Mitchell, 
[1926] II T.C. 2rr, relied on. 
CrvIL APPELLATE 
JURISDICTION : 
Civil Appeals 
Nos. 173 to 175of1960. 
March I. 
134 
SUPREME COURT REPORTS 
[1962] 
Donald Miranda 
Appeals from the judgment and orders dated March 
11, 1958, of the Bombay High Court in I. T. R. No. 
36 of 1957. 
v. 
Commissioner of 
Income-tax 
A. V. Viswanatha Sastri, S. M. Dubash and G. 
Gopalakrishnan, for the appellants. 
K. N. Rajagopal Sastri and D. Gupta, for respon. 
dents. 
1961. March 1. The Judgment of the Court was 
delivered by 
Kapur J. 
KAPUR, J.-These are three appeals pursuant to a 
certificate under s. 66A(2) of the Indian Income-tax 
Act, 1922 (hereinafter called the 'Act'), against the 
judgment and orders of the High Court of Bombay in 
Income-tax Reference No. 36of1957. 
The appeals though directed against the same order 
· are three in number because each partner of the firm 
has brought a separate appeal. The firm was carrying 
on the business of wine merchants at Bombay and 
came into existence prior to April 1, 1939. The firm 
had been assessed to income-tax under the provisions 
of the Income-tax Act of 1918. 
The firm which was 
registered under the provisions of the Income-tax Act 
of 1922 (hereinafter termed the Act) was dissolved on 
March 24, 1945, and from the day following that i.e. 
March 25, 1945, a private limited company i.e. S. S. 
Miranda and Co. Ltd. succeeded to the business of the 
firm. 
A claim made under s. 25(4) of the Act to the 
effect that no tax was payable on the profits of the 
registered firm for the period between April 1, 1944, 
to March 24, 1945, was allowed. In respect of the 
chargeable accounting period April 1, 1944, to March 
24, 1945, the registered firm was taxed to excess pro-
fits tax under the Excess Profits Tax Act, 1940. It 
also deposited as required certain sums of money 
under s. 10 of the Finance Act, 1942, read with s. 2 of 
the Excess Profits Tax Ordinance, 1943. In accordance 
with those provisions the firm became entitled to 
repayment of a portion of the excess profits tax 
amounting to a sum of Rs. 2,35,704. The shares of 
the three partners who are respective appellants in 
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1 S.C.R. SUPREME COURT REPORTS 
135 
the three appeals were James Miranda Rs. 58,926, 
196' 
Donald Miranda Rs

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