Double Taxation Claim not Allowed as Income Actually Belonged to Assessee

R.B. Shreeram Durgaprasad Private Limited Vs CIT (Bombay High Court)

The Bombay High Court considered two questions referred by the Income Tax Appellate Tribunal (ITAT): whether a sum of ₹1.71 crore had already been included in the income of an export firm for assessment years 1950–51 to 1958–59, and whether the Tribunal was justified in sustaining the addition of the same amount as income of the assessee company arising from under-invoiced export transactions.

The assessee company, which was under liquidation, did not dispute that the amount of ₹1.71 crore had already been included in the income of the export firm and assessed for the relevant years. The company argued that taxing the same amount in its hands would amount to impermissible double taxation. The export firm, however, was not a party to the proceedings before the Court. The High Court noted that the ITAT had relied upon findings recorded in the export firm’s case and that the inclusion of the amount in the export firm’s income was not disputed. Accordingly, the Court answered the first question in the affirmative.

The facts revealed that both the assessee company and the export firm belonged to the same group and were engaged in the export of manganese ore. During search and seizure operations conducted in 1963, authorities seized books of account and documents. Investigations led to findings that both entities had engaged in under-invoicing of exports. The authorities concluded that manganese ore had been exported at rates higher than those disclosed in the books, resulting in unaccounted profits. These profits were allegedly brought back into India through unauthorized channels and introduced into books of account as hundi loans or other non-genuine loans. Assessments were reopened and completed under Section 144 after the assessees failed to adequately cooperate.