SUTLEJ COTTON MILLS LTD. versus COMMISSIONER OF INCOME TAX, WEST BENGAL III, CALCUTTA

Citation: [1990] SUPP. 2 S.C.R. 293 · Decided: 23-10-1990 · Supreme Court of India · Bench: T.K. THOMMEN · Disposal: Dismissed

Judgment (excerpt)

SUTLEJ COTION MILLS LTD. 
v. 
COMMISSIONER OF INCOME TAX, WEST BENGAL HI, 
CALCU.TIA 
OCTOBER 23, 1990 
[T.K. THOMMEN AND S.C. AGRAWAL, JJ.] 
Income Tax Act, 1922: Sections 14(2)(c) and 42(3)-Assessee-
Resident in British India-Remittances from native Scates-Whether 
liable ,to be assessed-In addition to assessment of profics from native 
States as deemed income from British India-Principle of attribution-
Applicability of. 
The appellant, a company resident in British India, bad a cotton 
mill. The cloth manufactured in the mill was sold in British India as 
well as native States. For the assesmient years I94S-46, I946-47 and 
I947-48, the company was assessed under Section 14(2)(c) of the Income 
Tax Act, 1922, in respect of certain sums remitted to British hidia from 
native States, in addition to the assessment under Section 42(3), deem-
ing I/3rd of the profit from the sales effected in native States, as having 
accrued from the manufacturing part of business in British India. 
The assessee's contention that I/3rd of income having been asses-
sed undet Section 42(3), as income deemed to have accrued in British 
India, no further assessment should be made under Section I4(2)(c) was 
rejected by the Income Tax Officer, the Appellate Assistaot Commis-
sioner and the Income Tax Appellate Tribunal. The Tribunal also 
rejected the assessee's additional contention that .if the remittances 
made to British India in any year exceeded the amount taxed under 
Section 42(3), then it was only so much of the excess which could be 
taxed under Section I4(2)(c). However, it reduced the additions made 
by the Income Tax Officer and eftlrmed by the appellate authority, by 
I/3rd of such remittances. Ou a reference made under Section 66(I), 
the High Coilrt confirmed the Tribunal's decision. 
In the appeal before this Court, on behalf of the appellant-
assessee it was contended that where there was a mixed fund, as in the 
instant case, consisting partly of taxed and partly of untaxed monies, 
any remittance made should be deemed to have been pai~ out of that 
293 
A 
B 
D 
E 
F 
G 
H 
A 
B 
c 
294 
SUPREME COURT REPORTS 
[1990) Supp. 2 S.C.R. 
part of the money which bad suffered tax and that it was the right of the 
tax payer to attribute the payment to the taxed money so as to obtain the 
benefit allowed by the law. 
Dismissing the appeals, this Court, 
HELD: 1.1 H there were two funds at the disposal of the 
assessee-one upon which tax had been already levied and another 
which was liable to be brought to tax-a presumption, in the absence of 
evidence to the contrary might arise that the remittance made .by the 
assessee in the course of its business was made out of the fund that was 
already taxed and not out of the fund that remained to be taxed. [297F). 
Meyyappa Chettiarv. The Commissioner of Income-Tax, [1933) 1 
ITR 37, 45, referred to. 
1··: 
D 
l.2. The tax payer is given the right of attribution in the way most 
favourable to himself. In the absence of evidence to the contrary, it is 
presumed that payments are made out of income. This abstract princi· 
pie of attribution is applicable in certain circumstances. Whether it is 
applicable in a particular case dependS upon the facts of that case and 
the provisions of the statute. It can be adopted only to the extent that it 
E 
is consistent with the law and facts. [298E-F) 
F 
Paton (As l'enton's Trustee) vi Commissioners of Inland 
Revenue, 21 Tax Cases 626 and The Cape Brandy Syndicate v. The 
Commissioners of Inland Revenue, I2 Tax Cases 359, 366, referred to. 
In the instant case, on the facts found the assessee did not have 
two funds, but only one fund composed of taxed and non-taxed 
amounts. As one third of this iimount had already been taxed under 
section 42(3) of the Act, I/3rd of the remittances to British India in a 
particular year was held to he exempted from levy. The Tribunal hav-
G 
ing excluded I/3rd of the remittances to British India from taxation 
during a particular year, the High Court was justified in refusing to 
grant any fUrther relief to the assessee. [297G; 299B) 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 
H 
1467-69 of 1976. 
SUTLEJ COTION MILLS' v. C .l.T. [THOMMEN, J.] 
295 
Appeals by Certificate from the Judgment and Order dated 
7 .5. 1965 of the Calcutta High Court in Income Tax Reference No. 28 
of 1954. 
B. Sen, N.B. Singh, Sanjay J. Khaitan, Darshan Singh, B.N. 
Dhar and Ms. Suman Khaitan for the Appellant. 
· S.C. Manchand

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