LexTHE COMMISSIONER OF INCOME-TAX NEW DELHI versus M/S. CHUNI LAL MOONGA RAM
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
2 S.C.R.
SUPREME COURT REPORTS
823
'l'HE COl\IMltl~fONEH OF INCOME-TAX
NEW DELHI
·v.
l\1/s. CHUNI LAL MOONGA HAM
(~. K. DAs, l\L HU>AYATULLAH and J.C. :-lHAH, JJ.)
E'.r,ce88 /'1'1.!fif.., 1'a .. r--lnco1ne-.A .. .,~esseecarryinr1 on. business
in fr1,xab1c lcrri'.!01·11- -Lu8SC'i t'.ncurred tn transactionsin nun-
fftxaf)Tr frl'ifor!J -Jj
af[,;1oalife
in coniputing income-b'xcess
l'n!(ils Tax .!cl, 19 IO (1.5 nf 1940), s. 5.
1Juri11g the a.sSC!:is111cut yedr 1946-·17, the asse!:isee \Vas
carryin.~ OH speculath·e \Jusiness in bullion at Delhi. It en-
tered into transaction:-; in the nature of forward transactions with
parties al Bhatinda (in the Patiala State outside the taxable
territories uf llriti'!t India) in which it suffered losses.
The
assessee clain1c<l tlc<luctiou of these losses in the computation
of its inco1ne.
11 cld, that the losses incurred in llhatinda could not be
taken into acc.:uunt in co1nputing the incotne of the assessee in
British Indi;t.
Uu<ler the third proviso to s. 5 of the Excess
Profits Tax Act, 1940, that part of the business of the assessee
in which the losses occurred at Bhatinda was to be deemed to
be a separate business, and consequently the losses incurred in
non-taxable territorv could not be taken into consideration for
purposes of Excess Profits Tax. The language of the third pro-
viso to s. 5 \Vas one of exclusion and made the Act inappli-
cable to profits etc. of the part of the business which arose in
non-taxalile territories.
(
1u1nniission1-r uf lnconie-tax v. Kara1nchand Premchand
Ltd., (1%0) 40 LT. R. 106, relied on.
CrnL APPELLATE J·URISDICTION : Civil Appeals
Nos. 3!J ami 40 of l!HiO.
AppealH froln the judgment and order dated
January 23, 1H57, of the Punjab High Court in
Civil Reference No. 13 of 1955.
H. N. Sanyal,
Additional Solicitor-General of
India, K. N. Rajagopala. Sastri and D. Gupta, for
the appellant.
Naunit Lal, for the respondent.
1961 --
May, 5.
1961
The Commissio.
ner of Income-
tax, New Delhi.
v.
JI /s. Chuni Lal
MoongaRam
Das.J.
824
SUt'l{EME COURT REPORTS
[1962]
1961. May 5. The Judgment of the Court was
delivered by
DAS, J.
These two appeals han'
liee11
brought to this Court on a l'ertifiC"nk of fitness
granted by the High Court of Punjali mHler s. G6A(:?)
of the Indian Incomc:-t:tx Act, l!J2:?.
The relevant facts arc thes'" Messrs Chunilal
l\Ioonga Ram, a firm of Delhi, carriPcl on a specula-
tive business in bullion, mostly in gold and silver,
in Chamlni Chuwk at Delhi. .Fur th<' assl·ssment
year l!H6-47 it was charged to income-tax on its
income from the business in the relevant accounting
period. Similarly, it was clmrgPd to exeess profits
tax for the chargeable aC'Counting period ending on
February 6, l946. Ono of the ap1wals, Civil Appeal
No .. :m of 1960, arises out of the assessment of
income-tax and the other appeal, Civil A ppcal No. 40
of 1960. arises out of th!' assessmPnt of excess
profits tax. During th!' relevant aceounti11g periods
the firm entered into certai11 transactio11s c•allcd
"hedge" transactions in the bullion nwrkl't at
Bhatinda (then a part of the Patiala Statl', thn.t is,
outside the taxable territories of British India). It
claimed that it had i11curred losses to non-residents
there in the Sl!IllS of Rs. 6,366/- and Rs. 16,615/- in
the said transactions and claimed that these losses
should he taken into consideration in dot crmining
its income .. • It appears from the assc·s;;mrn1t order
of the lrn·ome-tax Offict•r, Ddhi, t!akd January 27,
1V49 that the firm purclias()(\ e<•rtain "snlil's" (liars
of gold and silver) from a llhatimla party on the
telephone, which purchasPs were later confirm<'Cl by
a letter or wire.
Similarly, the bars were also sold
by the firm through a Bhatinda party_ on the tele-
phone. Apparently, no delivery was intewied to be
taken or was taken of the bars bought or sold ; nor
did the firm have any branch or agent at Bhatinda.
The transactions were in the nature of forward
transactions carried out by means of telephone
2 S.C.R. SUPREME COURT REPORTS
825
messages, letters or telegrams with parties at
Bhatinda. This was the nature of the transactions
which resulted in the losses for which the firm
claimed deduction.
The Income-tax authorities
disallowed the claim on the ground that if the
Bhatinda transactions had resulted in profits, such
profits would have been exempt from tax in terms
of s.14(2)(c) as Excerpt shown. Read the full judgment & AI analysis in Lexace.