|
Advanced Search Options
Case Laws
Showing 41 to 60 of 616 Records
-
1960 (12) TMI 13
Whether it was open to the taxing officer to reopen the assessment for 1945-46 ? and
Whether the commission received by the appellants was liable to be apportioned under rule 9 of Schedule I of the Excess Profits Tax Act ?
Held that:- High Court was right in holding that the assessment made by the Excess Profits Tax Officer by apportionment of the commission income between the chargeable accounting periods was correct. Appeal dismissed.
-
1960 (12) TMI 12
Issues:
Assessment of profits from the purchase and sale of shares as business profits, Material to support the finding of the Appellate Tribunal that the assessee was a dealer in shares and securities, Taxability of profits and transactions of sale and purchase of shares and securities as profits of business.
Analysis:
The judgment pertains to an appeal against the High Court's decision answering questions under section 66(2) of the Indian Income-tax Act against the appellant. The appellant, son of the late Maharajadhiraja of Darbhanga, invested surplus cash in shares and securities, leading to profits in various accounting years. The High Court divided the transactions into three periods and assessed the profits made by the appellant from the purchase and sale of shares. The Income-tax authorities held the profits liable to income-tax as business profits, and the Appellate Tribunal upheld the assessments for certain years.
The appellant argued that his activities were not a business but investments of surplus monies, resulting in capital receipts. He relied on precedents to support his stance. The High Court, considering the material before the Tribunal, found the appellant to be a dealer in shares and securities, making the profits assessable to income-tax. The appellant's argument that the profits were capital accretions and not assessable was dismissed based on the nature of the transactions and evidence presented.
The judgment emphasized the substantial nature of the transactions, the maintenance of books, and the magnitude of shares purchased and sold as factors supporting the Tribunal's conclusion that the appellant was dealing in shares as a business. The second question raised by the appellant was deemed unsubstantial, with the Tribunal's findings based on the appellant's activities and holdings. The High Court upheld its decision against the appellant, dismissing the appeals with costs.
In conclusion, the judgment affirms the taxability of profits from the purchase and sale of shares as business profits, supported by the appellant's activities and the nature of transactions. The appellant's arguments regarding capital receipts were rejected, and the High Court's decision was upheld, leading to the dismissal of the appeals.
-
1960 (12) TMI 11
Whether in the computation of taxable income for purposes of income-tax and excess profits tax, commission allowed to Mahadevan at 12 1/2% should be allowed after deducting the excess profits tax paid?
Held that:- There was thus ample evidence in support of the conclusion of the Excess Profits Tax Officer which was confirmed by the Tribunal. The High Court was not justified in seeking to reappreciate the evidence on which the conclusion of the Excess Profits Tax Officer, which was confirmed by the Tribunal was based. Their jurisdiction being advisory, the High Court had to answer the questions submitted for opinion on the facts found ; if the High Court held the view that the taxing authorities had misdirected themselves in law or had made a wrong inference in law or had failed to apply the correct tests or had misconceived the evidence, it was open to them to invite the attention of the taxing authorities to the error committed by them ; but the High Court could not set aside the decision of the taxing authorities on a reappreciation of the evidence. We may also point out that even if the High Court concluded that the total disallowance of the deduction claimed was not justified, the High Court could not substitute its own view as to what was reasonable and necessary. The High Court had, if it disagreed with the taxing authorities, still to answer the questions submitted and leave to the consideration of the Excess Profits Tax Officer what in the circumstances was reasonable and necessary.
The answer to the question whether the disallowance by the excess profits tax authorities of the commission paid to branch managers was justified under rule 12, Schedule I of the Excess Profits Tax Act should have been answered in the affirmative. Appeal allowed.
-
1960 (12) TMI 10
Whether at the relevant time the assessee company could be deemed to be a company in which the public were substantially interested?
Held that:- The appeal is allowed and the case is remitted to the High Court for deciding the question in the light of the observations in our decision in the Raghuvanshi Mills' case [1960 (12) TMI 7 - SUPREME Court].
-
1960 (12) TMI 9
Whether the share income of the assessees from the unregistered firm (which is separately taxed), namely, ₹ 26,110 can be set off against their share loss from registered firms, namely, ₹ 13,167 ?
Held that:- Though the decision of the High Court on the main issue and on one aspect of the question posed for its opinion was correct, it was in error in deciding that the losses of the registered firms could not be carried forward because they had been absorbed by the profits of the unregistered firm. Subject to that modification, the appeal will be dismissed
-
1960 (12) TMI 8
Whether, on the facts and in the circumstances of the case, the payment of dividend income to the assessee's wife, Ena Mitter, under the covenant in the deed of assignment dated January 19, 1953, was merely a case of application of the assessee's income ?
Held that:- The true position is that if a person longer his alienated or assigned the source of his income so that it is no longer his, he may not be taxed upon the income arising after the assignment of the source, apart from special statutory provisions like section 16(1)(c) or 16(3) which artificially deem it to be the assignor's income. But if the assessee merely applies the income so that it passes through him and goes on to an ultimate purpose, even though he may have entered into a legal obligation to apply it in that way, it remains his income. This is exactly what has happened in the present case. High court correctly answered the third question against the assessee. Appeal dismissed.
-
1960 (12) TMI 7
Whether the company could be said to be one to which section 23A(1) of the Act was applicable, regard being had to the third proviso and the Explanation under it?
Held that:- the judgment and order of the High Court cannot be upheld. Directors cannot, by reason of being directors, be said not to be members of the public. To that extent, the judgment is erroneous. There is a finding by the Tribunal in the supplementary statement of the case that the shares held by Bipinchandra, Harishchandra and Krishnakumar were under the control of their father, Maganlal Parbhudas. Their holding was 3,000 and with Maganlal's holding of 1,344 shares, makes up a total of 4,344 shares. Though the question as framed by the High Court appears to have been correctly answered in the negative, it does not dispose of the matter. The question to be determined still is whether more than 75 per cent. of the shares are not beneficially held by the public. We accordingly set aside the judgment and order of the High Court and direct the High Court to decide the question originally framed by it, viz.
"Whether on the facts and circumstances of the case the provisions of section 23A of the Indian Income-tax Act (XI of 1922) are applicable to the petitioners ? - Appeal allowed. Case remanded.
-
1960 (12) TMI 6
Whether the amount paid by the consumers for new connections is capital receipt and not liable to tax, because the amount is paid by the consumers towards expenditure to be incurred by the assessee in laying new service lines--an asset of a lasting character ?
Held that:- The receipts though related to the business of the assessee as distributors of electricity were not incidental to nor in the course of the carrying on of the assessee's business ; they were receipts for bringing into existence capital of lasting value. Contributions were not made merely for services rendered and to be rendered, but for installation of capital equipment under an agreement for a joint venture. The total receipts being capital receipts, the fact that in the installation of capital, only a certain amount was immediately expended, the balance remaining in hand, could not be regarded as profit in the nature of a trading receipt.The High Court was in error in holding that the excess of the receipts over the amount expended for installation of service lines by the assessee was a trading receipt. Appeal allowed.
-
1960 (12) TMI 5
Whether on the facts and in the circumstances of the case the amount of ₹ 3,20,162 is an allowable deduction ?
Held that:- condition has not been fulfilled and the loss which the appellant has incurred is not in its own business but the liability arose because of the business of another person and that is not a permissible deduction within section 10(1) of the Act. It is not a loss which has to be deducted in respect of the business of the respondent from the profits and gains of the respondent's business. High Court was in error in answering the question in favour of the respondent. We, therefore, allow this appeal, set aside the judgment and order of the High Court and answer the question against the respondent
-
1960 (12) TMI 4
Whether the notice under section 34 was without jurisdiction?
Held that:- The notice under section 34 was not issued after the expiry of the period prescribed in that behalf. The notice was issued by the Income-tax Officer because he had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all material facts necessary for the assessment for the year 1950-51, income had escaped assessment. Such a notice fell manifestly within section 34(1)(a) and could be issued within eight years from the end of the year of assessment. The impugned notice under section 34 for reassessment of the income of the appellants for the year 1950-51 was, in our judgment, properly issued and the High Court was right in dismissing the petition for a writ to quash the notice. Appeal dismissed.
-
1960 (12) TMI 3
Whether the acquisition of the managing agency of the Dawn Mills Co. Ltd. was in the nature of a 'business' carried on by the assessee-ccompany ?
Whether the loss suffered by the assessee-company of ₹ 1,78,438 on purchase and sale of 400 shares of the Dawn Mills Co. Ltd., being incidental to its business of acquiring the managing agency, was a loss of a revenue nature ?
Held that:- The High Court was right in holding that the acquisition of the managing agency was an acquisition of a capital asset and the loss incurred by sale of the 400 shares was of a capital nature. The High Court was also right in dismissing the notice of motion for an order directing the Tribunal to refer the question suggested by the appellants. If the acquisition of the shares was not acquisition of a stock-in-trade, but of a capital asset, the appellants, by valuing the shares at cost or market price whichever was lower, could not bring the difference between the purchase price and the valuation made by them into their trading account. Appeal dismissed.
-
1960 (12) TMI 2
Whether the instrument of partnership dated March 27, 1946, created a valid partnership ?
Whether the fact that on January 1, 1946, there was no firm in existence would be fatal to the application for registration of the firm under section 26A of the Indian Income-tax Act or whether the firm could be registered with effect from March 26, 1946, if it is held that the firm was genuine ?
Held that:- Section 30 of the Indian Partnership Act clearly lays down that a minor cannot become a partner, though with the consent of the adult partners he may be admitted to the benefits of partnership. Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the income-tax authorities register the partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is not open to the income-tax authorities to register a document which is different from the one actually executed and asked to be registered. In our opinion, the Madras view cannot be accepted. Appeal allowed.
-
1960 (12) TMI 1
Issues:
1. Liability of the petitioner to pay oil seeds cess under the Indian Oil Seeds Committee Act.
2. Interpretation of the term "owner" under Section 10(1) of the Act.
3. Assessment period for making an assessment under the Act.
4. Power conferred on the Collector for making assessments under Rule 33.
Analysis:
1. The petitioner, a sole proprietor of a mill, was issued a notice of summary demand to pay oil seeds cess under the Indian Oil Seeds Committee Act. The petitioner contested the demand, leading to the filing of a writ petition to quash the demand notice and the District Judge's order. The court examined the petitioner's liability based on the Act's provisions and rejected the contention that the petitioner, as a lessee during a specific period, was exempt from the cess obligation.
2. The court analyzed the Act's provisions, specifically Section 10(1), which requires the mill owner to furnish returns to the Collector. The petitioner argued that as a lessee during a certain period, he should not be considered the "owner" responsible for the cess. The court interpreted the term "owner" in a manner that held the owner primarily accountable for the cess, emphasizing that a lessee does not fall under the definition of "owner" for the purpose of cess liability.
3. The issue of the assessment period for making an assessment under the Act was also addressed. The court examined Section 11 of the Act, which empowers the Collector to assess the duty payable based on returns submitted. The court rejected the argument that assessments could only be made for a period not exceeding one month. Citing precedents, the court held that there is no explicit limitation on the assessment period, allowing for assessments beyond a single month.
4. The court considered the power conferred on the Collector for making assessments under Rule 33. The petitioner contended that Rule 33 lacked specific guidelines for assessment, suggesting unregulated power. However, the court dismissed this argument, noting that the Collector's orders are subject to revision by the District Judge, ensuring oversight and correction of any errors in assessments. The court concluded that the power to make assessments was not uncanalized and upheld the dismissal of the writ petition.
In conclusion, the court dismissed the writ petition, finding no grounds for issuing a writ of certiorari and upheld the Collector's assessment. The petitioner was ordered to pay costs, including advocate fees, to the respondents.
-
1960 (11) TMI 140
ISSUES PRESENTED and CONSIDEREDThe primary issues considered in this judgment include: - Whether charges of corrupt practices under the Representation of the People Act are quasi-criminal in nature and require proof beyond reasonable doubt.
- Whether the Election Tribunal was justified in refusing permission to amend particulars under Section 90(5) of the Representation of the People Act.
- The scope of agency in election law, specifically whether a volunteer can be considered an agent of a candidate.
- The burden of proof regarding the belief in the truthfulness of statements made during an election campaign.
- Whether the petitioner needed to prove that the publication of false statements affected the election outcome.
- The scope of "undue influence" in the context of election law, particularly concerning actions by influential figures such as the Prime Minister.
ISSUE-WISE DETAILED ANALYSIS 1. Quasi-Criminal Nature of Corrupt Practices The court considered whether the charges of corrupt practices under the Representation of the People Act are of a quasi-criminal nature, requiring proof beyond reasonable doubt. The Division Bench held that such charges are indeed quasi-criminal, necessitating clear and precise allegations. The burden of proof lies with the petitioner to establish the charges without reasonable doubt, and at no point does it shift to the returned candidate. The court found no contrary decisions to challenge this view, thus denying leave to appeal on this point. 2. Amendment of Particulars under Section 90(5) The issue was whether the Election Tribunal was justified in refusing to allow amendments to particulars after the expiration of the limitation period. The Division Bench concluded that the Tribunal could not investigate charges of corrupt practices without clear and specific particulars. The Tribunal's discretion was deemed rightly exercised in refusing the amendment, and thus, the petitioner was not entitled to leave to appeal. 3. Scope of Agency in Election Law The court examined whether a volunteer acting without authority could be considered an agent of a candidate. The Division Bench held that the definition of an election agent is broad but does not include volunteers without authority from the candidate or their election agent. The concept of agency requires consent, not just knowledge. The court referenced cases to support this view, emphasizing that agency must involve some form of authority or consent. 4. Burden of Proof on Belief in Truthfulness of Statements The court addressed whether the petitioner bears the burden of proving that a statement was believed to be false by the person making it. The Bench concluded that the petitioner must prove this belief, even if the circulated news was false. The petitioner failed to demonstrate that the editor of "Milap" believed the news to be false, and thus, no corrupt practice was established. 5. Impact of False Statements on Election Outcome The issue was whether the petitioner needed to prove that false statements about a candidate's withdrawal affected the election outcome. The court found that the petitioner failed to show that the publication of false news prejudiced the election prospects of the candidate, as evidenced by the number of votes she received. Therefore, no ground for leave to appeal was established. 6. Undue Influence by Influential Figures The court considered whether actions by Pandit Jawahar Lal Nehru, asking a candidate to withdraw, constituted undue influence. The legal framework under Section 123(2) of the Representation of the People Act defines undue influence as interference with electoral rights. The court analyzed the concept of undue influence, emphasizing that it involves depriving someone of free will. The evidence showed that the candidate withdrew voluntarily after consulting her workers, without coercion or threat. Thus, no undue influence was found. SIGNIFICANT HOLDINGS The court established several key principles: - Charges of corrupt practices under the Representation of the People Act are quasi-criminal and require proof beyond reasonable doubt.
- The Election Tribunal's discretion in refusing amendments to particulars after the limitation period is justified.
- The definition of agency in election law requires authority or consent, not merely voluntary actions.
- The burden of proof lies with the petitioner to demonstrate the belief in the falsehood of statements.
- Undue influence requires evidence of coercion or deprivation of free will, which was not present in this case.
The court dismissed the petition, finding no merit in the arguments for granting leave to appeal to the Supreme Court.
-
1960 (11) TMI 139
Issues Involved:
1. Validity of the Act under Article 31A.
2. Discrimination and deprivation of rights.
3. Payment of compensation.
4. Public purpose.
5. Rights of the petitioner under the Ijara deed.
6. Applicability of the Act to lands with Butta rights.
Detailed Analysis:
1. Validity of the Act under Article 31A:
The petitioner challenged the validity of Bombay Act LXV of 1959, which abolished the Aghat tenure and the Ijaras in the Saurashtra area. The court examined whether the Act fell within the protection of Article 31A of the Constitution. The Act was found to be limited in its operation to the Saurashtra area because Aghat tenure and Ijaras existed only there. The court held that the rights granted under the Ijara were rights in respect of land arising under the grant and constituted an "estate" within the meaning of Article 31A(2). Therefore, the petitioner was barred from contending that the statute was unconstitutional or violated Articles 14 and 31.
2. Discrimination and deprivation of rights:
The petitioner argued that the Act was discriminatory as it affected only his rights and not those of other land occupants. The court found no merit in this argument, stating that the Act applied uniformly to all Ijaras and Aghat tenures in the Saurashtra area. The court also addressed the contention that the Act amounted to deprivation of property without public purpose. It held that the Act aimed to abolish intermediaries and establish direct relationships between the State and the tillers, which constituted a public purpose.
3. Payment of compensation:
The petitioner contended that the Act did not provide adequate compensation. The court noted that the Act provided for compensation for the loss of rights under the Ijara. Section 9 of the Act provided for compensation payable to the Ijardar for public roads, lanes, paths, bridges, ditches, etc., lying in the Ijara lands. The court held that the compensation provided under the Act was not inadequate and that the adequacy of compensation could not be challenged under Article 31A.
4. Public purpose:
The petitioner argued that the Act did not serve a public purpose as it benefited only a limited number of tenants. The court rejected this argument, stating that the Act aimed to abolish intermediaries and prevent the concentration of large landholdings, which was a public purpose. The court cited previous judgments, including the Supreme Court's decision in Thakur Amar Singnji v. State of Rajasthan, to support its conclusion that the abolition of intermediaries served a public purpose.
5. Rights of the petitioner under the Ijara deed:
The petitioner claimed that he had acquired Butta rights in respect of 1300 acres of land and that these lands were no longer Ijara lands. The court found that there was no evidence to support this claim and that the petitioner had not established his purchase of Butta rights. The court also noted that the petitioner had not been conferred occupancy rights under the resolution dated March 1, 1950, and that the lands in question were still considered Ijara lands under the Act.
6. Applicability of the Act to lands with Butta rights:
The petitioner argued that the Act could not apply to lands for which he had acquired Butta rights. The court held that the petitioner had not provided sufficient proof of acquiring Butta rights for the 1300 acres. The court also noted that Section 3 of the Act provided a special forum to decide whether an Ijardar had Butta rights in any Ijara land. Therefore, the court did not address this disputed question in the petition.
Conclusion:
The court dismissed the petition, holding that the Bombay Act LXV of 1959 was valid under Article 31A and served a public purpose by abolishing intermediaries between the State and the tillers. The court found no merit in the petitioner's claims of discrimination, deprivation of rights, and inadequate compensation. Each party was ordered to bear its own costs, with fees taxed at Rs. 350 due to the importance of the questions raised.
-
1960 (11) TMI 138
Issues Involved:
1. Whether the Bombay Public Trusts Act, 1950, applies to a society registered under the Societies Registration Act, 1860.
2. Whether the society is a public charitable trust.
3. Whether the State Legislature was competent to legislate about such a society with objects not confined to one state.
Issue-wise Detailed Analysis:
1. Applicability of the Bombay Public Trusts Act, 1950:
The primary issue was whether the Bombay Public Trusts Act, 1950 (referred to as the Act), applies to a society registered under the Societies Registration Act, 1860, with objects not confined to the State of Bombay (now Maharashtra). The appellant, a society registered under the Societies Registration Act, contended that the provisions of the Act could not apply to it as it was a corporation and the State Legislature had no power to pass legislation governing such a society. This contention was rejected by the Assistant Charity Commissioner, upheld by the Charity Commissioner, and further dismissed by the District Judge of Poona. The judgment held that the society is an unincorporated body and the State Legislature was competent to pass the Act under entry 32 of List II - State List of the Constitution.
2. Whether the Society is a Public Charitable Trust:
Both the learned judges, Mudholkar and Patel, agreed that the society constitutes a public charitable trust. The definition of "public trust" under Section 2(13) of the Act includes a society formed for a religious or charitable purpose and registered under the Societies Registration Act. The judgment affirmed that the society falls within this definition, making it liable to be registered under the Act.
3. Competency of the State Legislature:
The main contention was whether the State Legislature was competent to legislate about a society with objects not confined to one state. The appellant argued that only Parliament could legislate about such societies under entry 44 of the Union List. However, the judgment concluded that once a society is held to be a public charitable trust, the State Legislature can govern it by virtue of entries 10 and 28 in the Concurrent List, which refer to trusts, trustees, and charitable institutions, without reference to their objects being confined to one state or not. The judgment emphasized that there was no conflicting legislation by Parliament on the subject, making the Act valid.
Interpretation of Legislative Entries:
The judgment discussed the principles of interpreting entries in the Seventh Schedule of the Constitution. It highlighted that a liberal construction should be applied to legislative powers, and an attempt must be made to reconcile different legislative powers to avoid conflict. The judgment referred to several authorities and cases to support this approach.
Corporation vs. Unincorporated Society:
The appellant argued that the society, being registered under the Societies Registration Act, was a corporation or quasi-corporation. The judgment, however, concluded that societies registered under the Societies Registration Act are neither corporations nor quasi-corporations but unincorporated societies. It referred to legislative practices and provisions of the Societies Registration Act to support this conclusion.
Conclusion:
The judgment held that the Bombay Public Trusts Act, 1950, applies to the appellant society, and the State Legislature was competent to legislate on the subject. The appeal was dismissed, with no order as to costs. Additionally, it was noted that the society's application for exemption from the Act could be considered by the State Government on merits, unaffected by this judgment.
-
1960 (11) TMI 137
Issues Involved:
1. Validity of the Bihar Preservation and Improvement of Animals (Amendment) Act, 1959.
2. Validity of the Uttar Pradesh Prevention of Cow Slaughter (Amendment) Act, 1958.
3. Validity of the Madhya Pradesh Agricultural Cattle Preservation Act, 1959.
Detailed Analysis:
1. Validity of the Bihar Preservation and Improvement of Animals (Amendment) Act, 1959
Section 3 of the Act:
- Provision: Prohibits the slaughter of cows, calves, bulls, bullocks, or she-buffaloes unless they are over 25 years old or permanently incapable of breeding or being used as drought animals.
- Petitioners' Argument: The age limit of 25 years is arbitrary and unreasonable, infringing their fundamental rights under Article 19(1)(f) and (g) of the Constitution.
- Respondent's Argument: The age limit is justified due to improved animal husbandry and disease control facilities.
- Court's Finding: The age of 25 years is unreasonable. Expert opinions indicate that bulls, bullocks, and she-buffaloes are generally not useful beyond 14-15 years. Thus, the provision imposes an unreasonable restriction on the petitioners' rights.
- Rule 3 of the Rules: The rule requires concurrence between the Veterinary Officer and the Chairman or Chief Officer for issuing a certificate for slaughter, which is impractical and imposes disproportionate restrictions.
- Court's Decision: Section 3 of the Act and Rule 3 are declared void to the extent they impose unreasonable restrictions.
2. Validity of the Uttar Pradesh Prevention of Cow Slaughter (Amendment) Act, 1958
Section 3 of the Act:
- Provision: Prohibits the slaughter of bulls or bullocks unless they are over 20 years old and permanently unfit for breeding or agricultural operations.
- Petitioners' Argument: The age limit of 20 years is excessively high, and the dual requirement of age and unfitness is unreasonable.
- Respondent's Argument: The age limit is based on the belief that bulls and bullocks remain useful up to 20 years.
- Court's Finding: The dual requirement of age and unfitness is unreasonable and imposes excessive restrictions. The provision effectively bans the slaughter of bulls and bullocks, even after they have ceased to be useful.
- Court's Decision: Section 3 is declared void to the extent it imposes unreasonable restrictions.
3. Validity of the Madhya Pradesh Agricultural Cattle Preservation Act, 1959
Section 4 of the Act:
- Provision: Prohibits the slaughter of agricultural cattle unless they are over 20 years old and unfit for work or breeding, or permanently incapacitated.
- Petitioners' Argument: The age limit of 20 years is excessive, and the dual requirement of age and unfitness is unreasonable.
- Respondent's Argument: The age limit is justified due to the specific conditions in Madhya Pradesh.
- Court's Finding: The dual requirement of age and unfitness is unreasonable and imposes excessive restrictions. The provision effectively bans the slaughter of bulls, bullocks, and buffaloes, even after they have ceased to be useful.
- Section 5: Imposes a restriction on the time for slaughter, allowing any person aggrieved by the order to appeal, which can unduly delay the process.
- Court's Decision: Sections 4 and 5 are declared void to the extent they impose unreasonable restrictions.
Other Provisions:
- Section 6: Restricts the transport of agricultural cattle for slaughter, which is ancillary and not objectionable.
- Section 7: Prohibits the sale or purchase of cows and calves for slaughter, which is valid as it effectuates the ban on slaughter.
- Section 8: Prohibits possession of flesh of agricultural cattle slaughtered in contravention of the Act, which is ancillary and valid.
- Sections 10 and 11: Impose penalties for contravention of the Act, which are valid.
- Section 12: Places the burden of proof on the accused, which is valid as it pertains to the knowledge of the person accused.
Conclusion:
The Supreme Court allowed the writ petitions, declaring the impugned provisions in the Bihar, Uttar Pradesh, and Madhya Pradesh Acts void to the extent they impose unreasonable restrictions on the petitioners' fundamental rights. The respondent States are directed not to enforce the Acts or the rules made thereunder in so far as they have been declared void. The petitioners are entitled to their costs.
-
1960 (11) TMI 136
Issues Involved:
1. Deduction of interest paid on borrowed money for investment in tax-free securities.
2. Applicability of Section 10(2)(iii) versus Section 10(2)(xv) of the Income-tax Act.
3. Interpretation of the proviso to Section 8 of the Income-tax Act.
4. Apportionment of interest charges between taxable and tax-free securities.
Issue-wise Detailed Analysis:
1. Deduction of Interest Paid on Borrowed Money for Investment in Tax-Free Securities:
The primary issue was whether the bank could claim the deduction of the entire interest paid on fixed deposits, specifically the amount apportioned by the Department as interest payable on monies borrowed for investment in tax-free Mysore securities. The Department disallowed Rs. 2,80,194 of the total Rs. 25,91,565 interest charges, which was confirmed by the Appellate Assistant Commissioner and the Tribunal.
2. Applicability of Section 10(2)(iii) versus Section 10(2)(xv) of the Income-tax Act:
The assessee bank argued that the interest paid on deposits should fall under Section 10(2)(xv) (general provision for business expenses) rather than Section 10(2)(iii) (specific provision for interest on borrowed capital). The court rejected this contention, stating that deposits received by a bank in the normal course of its business constitute borrowed monies and thus fall under Section 10(2)(iii). Therefore, the application of Section 10(2)(xv) was excluded.
3. Interpretation of the Proviso to Section 8 of the Income-tax Act:
The court examined whether the sum of Rs. 2,80,194 represented interest on monies borrowed for investment in Mysore securities within the scope of the proviso to Section 8. The court concluded that the deposits received and the securities purchased were part of the bank's normal business operations and not borrowed specifically for investment in securities. Therefore, the proviso to Section 8 did not apply.
4. Apportionment of Interest Charges Between Taxable and Tax-Free Securities:
The court noted that prior to the 1956 amendment to Section 8, there was no statutory provision for apportioning interest payments between taxable and tax-free securities. The court emphasized that the deposits and securities were part of the bank's stock-in-trade, and the interest charges were trading expenses deductible under Section 10(2)(iii). The court found no basis for apportioning the interest charges as the Department claimed.
Conclusion:
The court held that the entire interest paid by the bank, including the Rs. 2,80,194, was a permissible deduction under Section 10(2)(iii) of the Income-tax Act. The assessee was entitled to deduct the full amount of interest charges from its taxable income. The court's interpretation was based on the statutory language and supported by relevant case law, including United Commercial Bank Ltd. v. Commissioner of Income-tax and Hughes (Inspector of Taxes) v. Bank of New Zealand.
Costs:
The assessee was entitled to the costs of the reference.
-
1960 (11) TMI 135
Issues Involved:
1. Deduction of bonus paid to employees for the calendar year 1947 in the assessment year 1950-51.
2. Application of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, in computing the written-down value of assets.
Issue-wise Detailed Analysis:
1. Deduction of Bonus Paid to Employees for the Calendar Year 1947 in the Assessment Year 1950-51:
The assessee, a limited company owning a textile mill, paid Rs. 1,08,325-9-3 as bonus to its workers for the calendar year 1947, which was awarded on 13th January 1949. The company debited this amount in its profits and losses account for the year 1948. The primary issue was whether this bonus could be deducted in the assessment year 1950-51.
The Income-Tax Officer disallowed the claim, stating that the assessee maintained its accounts on a mercantile basis, not on a cash basis, and thus the bonus for 1947 could not be deducted in 1950-51. The Appellate Assistant Commissioner and the Tribunal upheld this view, emphasizing that the liability for the bonus became definite only when the Industrial Court's award was made in 1949.
The Court analyzed Section 10(2)(x) of the Income-tax Act, which allows deductions for sums paid as bonus or commission. According to Section 10(5), "paid" means actually paid or incurred according to the method of accounting adopted. The Court noted that the assessee's method of accounting, though not strictly mercantile, was accepted by the taxing authorities for determining true profits.
The Court concluded that the liability for the bonus amount became a definite obligation only when the Industrial Tribunal made its award on 13th January 1949. The liability did not materialize in 1947, nor could it be foreseen. The Court cited several cases, including *Calcutta Co. Ltd. v. I.T. Commr.*, *Senthikumara Nadar and Sons v. Commr. of Inc.-Tax*, and others, to emphasize that deductions are not permissible for contingent liabilities. Therefore, the assessee was entitled to claim the deduction in the assessment year 1950-51.
2. Application of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950:
The second issue concerned the computation of the written-down value of the assessee's assets. The Income-tax Officer computed the value by deducting the depreciation already allowed under the Industrial Tax Rules of the former Holkar State, as per paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950. The assessee contended that this paragraph was ultra vires and that the value should have been computed under Section 10(2)(vi) of the Income-tax Act.
The Court referred to a recent Supreme Court decision in *The Commissioner of Income-tax, Hyderabad v. Dewan Bahadur Ramgopal Mills Ltd.*, which upheld the validity of the Explanation to paragraph 2 of the Order. The Supreme Court observed that it was for the Central Government to determine if any difficulty in applying Section 10(5)(b) to an assessee in a Part B State had arisen and that Parliament had left this matter to the executive. The Court concluded that the power given to the Central Government under Section 12 of the Finance Act, 1950, was broad enough to permit substantial modifications if necessary for removing difficulties.
Thus, the Court held that paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, was valid and applicable to the assessee.
Conclusion:
Both questions referred to the Court were answered in the affirmative. The assessee was entitled to claim the deduction of the bonus amount in the assessment year 1950-51, and the provisions of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, were applicable in computing the written-down value of its assets. The assessee was awarded costs of the reference, with counsel's fee fixed at Rs. 250.
-
1960 (11) TMI 134
Issues Involved:
1. Nature of the payment received by the assessee upon termination of employment.
2. Taxability of the payment under the Indian Income-tax Act.
Issue-wise Detailed Analysis:
1. Nature of the Payment Received by the Assessee upon Termination of Employment:
The assessee was employed as the general manager of Messrs. J.K. Iron and Steel Co. Ltd., Kanpur, with a salary of Rs. 2,000 per month and certain allowances. The employment agreement stipulated a service period of five years, with a provision for termination on twelve months' notice or salary in lieu thereof. The assessee's services were terminated effective August 31, 1947, without any default or misconduct on his part, and without the required twelve months' notice. Instead, the company paid the assessee Rs. 18,096, which was the computed salary for twelve months after deducting income tax at source.
The key question was whether this amount was compensation for loss of employment or part of the remuneration under the contract. The assessee argued that the amount was compensation for surrendering the right to continue in service for five years. However, the court found that the amount of Rs. 25,200 was part of the remuneration the assessee was entitled to under clause 21 of the contract, which allowed for termination with twelve months' notice or salary in lieu thereof. The court concluded that the payment was not compensation for loss of office but part of the remuneration payable under the employment contract.
2. Taxability of the Payment under the Indian Income-tax Act:
The Income-tax Officer initially held that the sum of Rs. 25,200 was a revenue receipt liable to be taxed. The Appellate Assistant Commissioner reversed this, considering it compensation for loss of service and thus a capital receipt not liable to tax. However, the Income-tax Appellate Tribunal reinstated the initial view, holding that the amount was salary in lieu of twelve months' notice and therefore taxable.
The court upheld the Tribunal's view, citing precedents such as Dale v. de Soissons and Henry v. Arthur Foster, where similar payments were considered part of the remuneration and taxable. The court emphasized that the payment was made under the contract terms and not as compensation for loss of employment. The court also referred to Explanation 2 of section 7 of the Indian Income-tax Act, which states that a payment received from an employer is considered a profit in lieu of salary unless made solely as compensation for loss of employment and not as remuneration for past services.
The court distinguished the present case from others like Hunter v. Dewhurst and W.A. Guff v. Commissioner of Income-tax, where payments were made outside the terms of the contract or as ex gratia payments. The court concluded that the sum of Rs. 25,200 was an income receipt and liable to be taxed under the Income-tax Act.
Conclusion:
The court held that the sum of Rs. 25,200 received by the assessee was part of the remuneration under the employment contract and not compensation for loss of employment. Therefore, it was taxable under the Indian Income-tax Act. The question of law was answered against the assessee and in favor of the Income-tax Department, with the assessee ordered to pay the costs of the reference.
........
|
9911796707
