1934 (3) TMI 32 - HC - Income Tax

Summary

Issues:
1. Taxability of unrealized decree amount for Income Tax assessment
2. Interpretation of the system of keeping accounts by the assessee

Analysis:
1. The High Court considered the reference by the Income Tax Commissioner regarding the taxability of an unrealized decree amount of Rs. 23,269 against certain individuals. The key question was whether this unrealized amount should be considered taxable income for Income Tax purposes, even though it had not been received by the assessee. The assessment was based on the books of the assessee, which showed the amount as a decretal amount credited and debited in the ledger. The Department argued that the assessment should be made based on the books under Section 13 of the Income Tax Act. However, the Court disagreed with the Department's interpretation, citing various rulings that supported the view that income should be considered what is actually received by the assessee. The Court found that the ordinary meaning of "income" is what comes in, i.e., what is actually received, and since the Act did not define income to include unrealized amounts, the unrealized decree was held not to be taxable income for Income Tax purposes.

2. The second issue revolved around the interpretation of the system of keeping accounts by the assessee. The Department contended that the system of keeping accounts should be interpreted in a way that would require the assessee to pay Income Tax on the unrealized decree amount. However, the Court held that the books were maintained by the assessee solely for the purpose of ascertaining the financial state of the family in a particular year. The Court found that the books were not intended to be used for tax assessment purposes in the manner suggested by the Department. As a result, the Court ruled in favor of the assessee, stating that the books were kept for internal financial management and not for tax assessment, thereby directing the reference to be returned to the Commissioner and awarding costs to the assessee against the Department.