| Case ID |
0e67cc4e-af18-4a5f-b86a-6cc15ab68fef |
| Body |
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| Case Number |
D-2741 of 2016 |
| Decision Date |
Jan 01, 1950 |
| Hearing Date |
Jan 01, 1950 |
| Decision |
The Bombay High Court ruled that the Scindia Steam Navigation Co. Ltd. was not entitled to include the expenditure for constructing a shipbuilding yard as capital for the purpose of computing average capital under the Excess Profits Tax Act. The court emphasized that mere preparations or expenditures towards a business do not equate to actually carrying on that business. The tribunal's findings established that the business of plying ships for hire was distinct from the proposed shipbuilding business, which had not commenced during the chargeable accounting period. As such, the court concluded that the shipbuilding business was not operational during the relevant period, and the company could not benefit from the provisions of Schedule II regarding capital computation. |
| Summary |
This case revolves around the interpretation of the Excess Profits Tax Act, 1940, particularly concerning the capital computation for businesses. The Scindia Steam Navigation Co. Ltd. claimed that it should include certain expenditures as capital for tax purposes. However, the court found that these expenditures related to a shipbuilding business that had not commenced operations during the relevant period. The ruling clarified key aspects of what constitutes 'carrying on a business' under tax law, distinguishing between preparations for a business and actual business operations. The decision underscored the importance of having a business that is capable of yielding profits to qualify for capital inclusion in tax computations. This case is significant for tax law practitioners and businesses involved in capital-intensive industries, as it delineates the boundaries of capital claims under the Excess Profits Tax Act, 1940, and highlights the necessity for actual business operations to qualify for tax benefits. |
| Court |
Bombay High Court
|
| Entities Involved |
Scindia Steam Navigation Co. Ltd.,
Commissioner of Excess Profits Tax
|
| Judges |
Chagla, C.J.,
Tendolkar, J.
|
| Lawyers |
Sir Jamshedji Kanga,
C.K. Daphtary,
R.J. Kolah,
M.C. Setalvad,
G.N. Joshi
|
| Petitioners |
Scindia Steam Navigation Co. Ltd.
|
| Respondents |
Commissioner of Excess Profits Tax
|
| Citations |
1950 SLD 111,
(1950) 18 ITR 705
|
| Other Citations |
IRC v. Byron Ltd. Appeal and House of Lords [1946] 14 ITR Suppl. 1 (HL)
|
| Laws Involved |
Excess Profits Tax Act, 1940
|
| Sections |
Schedule II,
2(3),
1(1)(a),
2(5)
|