9911796707
TMI Blog1951 (9) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference between what he paid in cash less interest received and the rebate for income-tax deductible or deducted from payments of interest and the price he got on the sale of the same Government Bonds later. On such calculation the profits he made on purchase and sale of Government Bonds was Rs. 58,450. The Income-tax Officer determined a loss of Rs. 77,150 in the purchase and sale of Government Promissory Notes, treated the interest of Rs. 1,06,414 on Government Bonds and the credit for income-tax of Rs. 30,523-4-0 as unrelated to the business of purchase and sale of Government Securities, and declined to allow earned income relief in respect of interest on securities received by the applicant. 3. With regard to the applicant in R. A. No. 297 of 1948-49 (D. C. Kothari), he was assessed on a total income of Rs. 79,334 arrived at after deducting the loss of Rs. 46,327 in business. The interest derived on Government Securities in the year of account was Rs. 1,06,159 out of which Rs. 34,482-8-0 was deduction of income-tax and surcharge for which credit was given in the assessment. The assessee's profit on the purchase and sale of Government Promissory Notes was the differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was part of the ordinary business of the assessee and was not by way of an investment of surplus monies and the Government Promissory Notes form their stock-in-trade and the profits arising in the purchase and sale was inclusive of interest and formed only business profits, and, therefore, the assessees were entitled to earned income relief in respect of interest. The Tribunal held that interest on securities was a definite and specific source of income distinct from business and that there was no warrant for the contention that interest on securities should be treated as business income. The alternative contention that was urged before the Tribunal was that the net income from securities deducting the alleged loss out of interest realised should have been taken under the head " other sources ". But no authority was cited in support of this contention. The Tribunal noticed that Section 12 of the Income-tax Act dealt only with such sources of income as did not fall under any of the other and specific heads mentioned in Section 6 of the Act and that, therefore, the income from securities could not be brought under the head " other sources ". The alternative contention was also reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest on securities is assessable under Section 8 and could not be treated as part of the business income. This view of the department has been challenged before us solely on the ground that income treated as interest on securities should also be included in the business income, because it formed part of their business operations. The answer given on behalf of the revenue authorities by Mr. Rama Rao Sahib, learned counsel, was that, as the income which represents interest on securities falls under a head which is specifically provided for by Section 8, it is not open to the assessees to contend that it should be treated as part of their business income, as it is made separately chargeable under Section 8. It is necessary in this connection to understand the underlying scheme of the provisions of the Act relating to the charging of income to tax and the mode of computation of income. It is an undoubted fact that income-tax is one single tax on the aggregate total income of an assessee. It is, however, classified under various heads and made chargeable under such heads. Section 3 of the Act is the charging section. Section 4 defines the limits to which the net may be spread by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Schedule D. It may be mentioned that the scheme of taxation under the English Act was : Schedule A provided for the taxation of income derived from property and land ; Schedule B for income derived from the occupation of land ; Schedule C for income derived from Government Securities ; Schedule E for income derived from employment in public service and Schedule D provided for taxation of income not dealt with specifically in any of the schedules. Lord Atkin in the course of his speech at page 457 dealing with the scheme of these schedules observed : (1) (1930) A. C. 432. " Believing, as I do, that the specific Schedules A, B, C and E, and the rules thereunder, contain definite Codes applying exclusively to their respective defined subject-matters I find no ground for assessing the taxpayer under Schedule D for any property or gains which are the subject-matter of the other specific schedules. In the present case the income from the offices should be and has been assessed under Schedule A on the annual value as prescribed by statute. It therefore is not the subject-matter of assessment under D. I should add that if there had been an option to assess under A or D I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the Code provided by the Income Tax Acts. The reason why the Salisbury House case ((1930) A. C. 432) has been referred to is not because of an analogy in the facts, but because of the important demonstration in that case of the general principle underlying the Income Tax Act, 1918. Lord Dunedin there makes it plain that income tax as it is imposed under this Act is one tax to be recovered in a particular manner in respect of each particular property and in accordance with the particular circumstances ; and Lord Atkin, dealing with the matter in a manner which is a little closer to this case, says : ' In my opinion it makes no difference that the income so derived forms part of the annual profits of a trading concern. For the purpose of assessing such profits for the purpose of Schedule D the income so derived is not to be brought into account ', and later, ' Similarly I am of opinion that income derived by a trading company from investments of its funds, whether temporary or permanent, in Government Securities must be taxed under Schedule C, and cannot for the purposes of assessment under Schedule D be brought into account. ' Then again he says : ' I find no ground for asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax at the source, and there is no option left to the assessee now to claim that that interest should be treated as part of the income of his business. It is no doubt possible that these securities may be part of the trade assets of an assessee. But that circumstance does not make the interest in respect of such securities which is specifically chargeable under Section 8, as part of the profits of the business of the assessee. A person may have more than one activity or operation with reference to one set of property, as for example, in this very case, where he gets his interest on the securities for which no exertion on his part is required ; he may at the same time deal in such securities and make profit. The two activities or operations are entirely distinct. The profits made by him by his dealings in securities may legitimately be brought under Section 10 of the Act ; but that is no justification for holding that interest on the securities also forms part of the profits of the business, within the meaning of Section 10 of the Act. Section 12 cannot be invoked unless the previous heads of income are exhausted. As we held that the interest on securities is chargeable under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
