TMI Blog1927 (2) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... have to deal is 1923-24 and the assessee in his statement of total income during the previous year declared the amount of profits or gains or income during the previous year as having accrued to him from two sources numbered respectively 4 and 9 in the form provided by Rule No. 19 of the Rules made by the Board of Inland Revenue under Section 59 of the Act. In respect of property as shown in detail in Schedule A, he declared the income to have been ₹ 3,116. Two items of property are included in this : (a) certain house property at 191, Harrison Road, which was let out to tenants and for which in 1923-24 the assessee actually received as rent ₹ 3,900 : and (b) the dwelling-house in Durpa Narain Tagore Street, the annual letting value being put down as ₹ 1,724. These two items when certain deductions have been made account for the figure ₹ 3,116. The source No. 9 in the form was declared to have yielded in 1923-24 an income of ₹ 8,306. This was ground-rent received by the assessee for certain bustee lands at 14 Mechuabazar Street, let out to tenants. 3. The claim made by the assessee was that the house property at Harrison Road and the bustee land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the years. 7. Learned Counsel for the Board of Inland revenue is anxious to have a determination from us upon the question whether the principle of Brown's case [1921] A.C. 222 applies in India under the present Act and he is prepared to admit with reference to this particular assessment upon this particular assessee whatever facts are necessary to raise this highly important question. I will assume accordingly to take the clearest case that whereas in the previous year, i.e., 1923-24, the assessee received an income from ground-rent of the bustee lands, he has in the year of assessment derived no income whatever from that source. 8. For the purpose of understanding the law upon this question under the English Acts prior to the Finance Act 1926, it makes no difference whether we examine the Act of 1842 (5 and 6 Vict. Chap. 35) or the Act of 1918 (8 and 9 Geo. V, Chap. 4). Upon a true construction of either Act the tax for each Income Tax year was charged upon the income of that year. The assessee had to make his return and the assessment upon him had to be made at a time when a large portion of that year had still to run. To ascertain the amount of future receipts many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... English Acts in the general scheme and in the principle of putting the tax upon the income derived during the year of assessment, intentionally departed from that principle and determined in each year to levy the tax not upon the income of the year of assessment, i.e., the current year, whereof a part is un-expired at the time of assessment, but on the income of the previous year and that under the Indian Act of 1922 the income of the previous year appears not as a standard by which the next year's income is to be computed, nor as a measure nor as an element is one average, but as being itself the subject-matter of the tax. However familiar one may be as lawyer or as patient with the English principles, one cannot profess in either capacity that there is anything absurd, impossible or unjust in levying Income Tax upon the actual receipts of a completed year in the year which follows. One can see readily enough that there may be grave difficulties in changing from the one system to the other, difficulties too in combining taxation of a simply retrospective nature in respect of the profits of the preceding year with a system of deduction as the source in the year of assessment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 18 the collector, if satisfied that such return is correct and complete, was directed to assess: the sum payable by the assessee for the year in which the return is made on the basis of such return. 14. By Section 19 when the collector had ascertained the total income actually received by or accrued to the assessee in the previous year, be was to compute the Income Tax which would have been payable if it had been levied in such previous year with reference to the amount of the income so ascertained and the law then in force; and the difference between the sum so computed and the aggregate of the sums already paid by or on behalf of the assessee in respect of Income Tax for such previous year was to be paid by or refunded to the assessee. This system of adjustment involved a running account between the Government and the tax-payer, a provisional assessment being first made on the income of the preceding year and the assessment being adjusted and corrected when the income in the year of assessment had been ascertained. There, can, therefore, be no doubt that the tax was laid upon the income of the year of assessment and the principle affirmed in Brown's case [1921] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the income of the previous year. Section 18 which deals with deductions as the source on salaries and interest on securities provides by its fifth clause that credit is to be given to person from whose income the deduction was made for that deduction in the assessment, if any, made for the following year. Section 22 which imposes the duty of making a return prescribes that it is to be a return of the total income during the previous year. There is nothing in this section which suggests that it is any part of the duty of the Income Tax officer to make enquiry into the receipts or probable receipts of the assessee during the current year. Section 25 deals with the case where any business, profession or vocation is discontinued. It differentiates strongly between such businesses according as they were commenced before or after the commencement of the Act. As regards the latter the first clause empowers the Income Tax officer to accelerate the ordinary course of things and to make an assessment on the profits of the period between the end of the previous year and the date of discontinuance without waiting until the following year. In such a case the assessee may at once be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d throughout, the sections are to be applied to the state of facts in the previous year or in the case of an exceptional assessment under Section 25(1) a completed portion of the year of assessment. They afford no reasonable ground for a contention that the particular sources numbered (iii) and (iv) must persist throughout two years in order to be chargeable. It is here that it is important to remember that the Income Tax is one tax as Section 3 shows it to be. 18. There are doubtless some difficulties in this view with reference to the tax on salaries which is payable by deduction at the source. If the Finance Act of any year imposes a tax upon the income of the previous year, then in these cases the tax seems to be deducted before it is authorised or imposed. Section 18 says it is to be leviable in advance by deduction at the time of payment. The draftsman does not seem to be in sight of the difficulty. Leviable in advance of what? In advance of its imposition? The tax is to be deducted apparently at the rate laid down by the current Finance Act. In respect of the income of this year the Finance Act of next year may impose quite different rates or (theoretically) no Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd he may have special claim to some consideration at the hands of the Inland Revenue authorities. 22. The second question is stated as follows: Is an amount of interest due on a mortgage debt but not actually paid an allowable item of expenditure under head 'house property income' under Section 9 of the Act. 23. In my opinion this question should be answered in the affirmative, i.e., in favour of the assessee. Apart from the consideration that a taxing statute should be construed, if possible, by confirming oneself to the ordinary meaning of the words used and that there is special objection to any construction which puts a burden upon the subject when the intention of the legislature to impose it is not clear, I think that Sections 9 and 10 of the Act of 1922 must be construed on the footing that when the legislature means paid it says paid. In Section 10 there is a special definition of the word for the purposes of that section. In Section 9 certain allowances are authorized by way of deduction from the bona fide annual value of the property - itself a hypothetical figure. The first two allowances have reference to repairs and do not depend upon proof of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gives rise to the contention that if in the current year the assessee has no income, no tax is payable. The view put forward on behalf of the Grown makes it immaterial whether the assessee has any income in the current year. If the Crown's view prevails, the assessee, though he must pay the tax in the current year, for which he is assessed, pays in respect of his income for the previous year and the state of his income for the current year is negligible. 29. But for such resemblances as are to be found between the Indian Income Tax Acts of 1918 and 1922 and between the former of these and the Income Tax Act, 1918 (8 9 George V, Chap. 39), and were the assessee's Advocate limited to the Act of 1922, most of the materials upon which his argument has been founded would not be available to him. 30. There is no difference between the definition of previous year in the two Indian statutes. The difference between the few Acts lies in the reference in the material sections of the Acts to the period so defined or, to state it otherwise, in the purpose for which the words previous year are introduced into such sections. 31. By Section 14 of the Act of 1918 it is provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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