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1971 (6) TMI 10
As the notice is directed against a non-resident incorporated company which is admittedly outside the jurisdiction of the Indian taxing authorities, the complaint of the petitioner that the respondent had no jurisdiction to issue such a notice is well-founded - respondent has no jurisdiction to issue the notice against an incorporated company which is admittedly in Ceylon and whose income as such is beyond the reach of the Indian authorities. In this view of the matter, the process has to be interdicted at its threshold - The rule nisi is made absolute and all these writ petitions are allowed
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1971 (6) TMI 9
Mysore Agricultural Income Tax Act – method of accounting – cash system of accounting or point basis - whether the assessing authority can apply point basis for income from coffee crop - when assessee regularly follows cash system of accounting, ITO cannot adopt point basis for coffee crop alone
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1971 (6) TMI 8
Mysore Agricultural Income Tax Act - issue of a notice under section 36 is a condition precedent to the validity of the assessment on agricultural income which has escaped assessment or has been under-assessed in the assessment year, and if no, such notice is issued or if the notice issued is invalid, the assessment is bad in law. As we have observed earlier, there were no notices issued to the assessee requiring him to furnish the returns under section 36 read with section 18(2) of the Act which is the condition precedent for initiating proceedings under section 36. Therefore, the entire reassessment proceedings ending with the assessments under revision are illegal and without jurisdiction
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1971 (6) TMI 7
The amount of remuneration of directors and the manner of distribution thereof are both provided in the articles of association of the company. Payment of remuneration by virtue of any provision contained in the articles does not undoubtedly oust the jurisdiction of the Income-tax Officer under section 10(4A) and, by itself, in the absence of other relevant materials, may not sufficiently justify an amount paid. In view, however, of the fact that the total amount paid to the directors on account of remuneration and commission in the instant case is not unreasonable or excessive and is justified, the manner of distribution of the said total amount amongst the directors on the basis of the articles which constitute a valid agreement between the members themselves who also happen to be the directors and between them and the company, results in the smooth and efficient working of the company and avoids all kinds of possible hitches amongst them. As the payment of the total amount of remuneration inclusive of commission to the directors is justified in the facts of the instant case, the payment to the Rani of a larger sum in the matter of distribution of the total amount by agreement between the parties cannot be considered to be unjustified, particularly as such payment results in smooth working of the company on the basis of the articles.
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1971 (6) TMI 6
Issues:
1. Inclusion of income in the assessee's total income under section 64(iii) of the Income-tax Act, 1961 for the assessment year 1965-66.
Detailed Analysis:
The case involved a question of law under section 256(1) of the Income-tax Act, 1961, regarding the inclusion of a sum of Rs. 4,934 in the assessee's income for the assessment year 1965-66 under section 64(iii) of the Act. The assessee transferred assets to his wife, who then invested in a cloth business, resulting in income. The Income-tax Officer included this income in the assessee's total income under section 64(iii), which was upheld in first appeal. The Tribunal ruled that even though the transfer was for obtaining consent for adoption, it was without adequate consideration, thus upholding the inclusion of the income in the assessee's total income.
The main contention by the assessee was that the assets were transferred for adequate consideration and that the income did not directly or indirectly arise from the transferred assets. The department argued that the assets were transferred without adequate consideration as the spiritual benefit obtained from the wife's consent for adoption was not measurable in monetary terms. The department distinguished a previous Supreme Court case where income did not directly arise from the transferred assets, unlike in the present case where the wife's income was directly linked to the transferred assets.
The court analyzed the provisions of section 64(iii) of the Act, which require assets to be transferred without adequate consideration for the income to be included in the husband's total income. The court referred to a Supreme Court case to distinguish the present case, where the wife's income was directly linked to the transferred assets. The court also discussed the concept of "adequate consideration" in legal terms, emphasizing that it must be measurable in monetary value. The court cited previous cases to support the view that natural love and affection, or spiritual benefits, do not constitute adequate consideration under tax laws.
Ultimately, the court held that the assets were transferred without adequate consideration, and the income earned by the wife was directly linked to the transferred assets, leading to the inclusion of the income in the assessee's total income under section 64(iii) of the Act. The court answered the question in the affirmative, ruling against the assessee and ordering them to pay the costs of the reference to the Commissioner of Income-tax.
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1971 (6) TMI 5
Issues:
Whether the share income of the minor son from a partnership firm is liable to be included in the assessment of the father under section 64(iv) of the Income-tax Act, 1961.
Analysis:
The case involved a dispute regarding the inclusion of the share income of the assessee's minor son from a partnership firm in the total income of the assessee under section 64(iv) of the Income-tax Act, 1961. The Income-tax Officer had reopened the assessment and included the minor son's share income in the total income of the assessee. This decision was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The Tribunal found that the assets gifted by the father to the minor son were introduced to the advantage of the partnership business, indicating an intention to provide an income-earning business to the minor. The Tribunal concluded that the minor's admission to the partnership was based on the assets gifted by the father.
The legal argument centered on whether the share income of the minor directly or indirectly arose from the assets gifted by the father. The counsel for the assessee contended that the income did not have a direct connection to the gifted assets, citing relevant Supreme Court decisions. The Supreme Court's interpretation of section 64(iv) of the Act was crucial in determining the inclusion of the minor's income in the father's total income. The Supreme Court emphasized the necessity of a proximate connection between the transfer of assets and the income in question to fall within the ambit of the relevant section.
The High Court, in line with the Supreme Court's decision in a similar case, ruled in favor of the assessee. The court agreed with the argument that the minor's share income should not be included in the total income of the assessee as there was no direct or proximate connection between the gifted assets and the income earned by the minor from the partnership firm. The court applied the principles established in the previous Supreme Court judgment under the Income-tax Act, 1922, which was deemed applicable to the current case under the 1961 Act. Consequently, the court held that the share income of the minor son should not be included in the total income of the assessee under section 64(iv) of the Act, and the costs of the reference were to be paid by the Commissioner of Income-tax to the assessee.
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1971 (6) TMI 4
Applications have been made by the official liquidator of the company in liquidation under section 446 of the Companies Act, 1956, read with section 460(4) thereof for necessary directions in respect of certain legal proceedings, which have been initiated by the Income-tax Officer against the applicant.
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1971 (6) TMI 3
Madras Agricultural Income Tax Act - respondent has failed in his duty in not having entertained the revision petition and in not having disposed it of regularly and legally - subject-matter of the revision petition is remitted once again to the file of the Commissioner
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1971 (6) TMI 2
Issues:
1. Interpretation of section 35(5) of the Income-tax Act, 1922.
2. Compliance with directives of the Tribunal for reassessment of a partner in a registered firm.
Analysis:
The judgment by the High Court of MADRAS, delivered by Judge RAMAPRASADA RAO, pertains to a case involving the assessment of income tax for the assessment year 1951-52 of a partner in a firm, initially considered unregistered. The firm contested this assessment and eventually obtained registration status following a High Court decision and a directive from the Appellate Tribunal. The petitioner challenged the subsequent reassessment of their share income as a partner of a registered firm under section 35(5) of the Income-tax Act, 1922.
Regarding the first contention raised by the petitioner's counsel, it was argued that the assessment was invalid as section 35(5) was introduced post the relevant assessment year. However, the court disagreed, emphasizing that the petitioner had actively pursued the firm's registration status, leading to the subsequent reassessment under the applicable law at the time of rectification. The court highlighted the presumption of regularity in official acts and dismissed this argument.
The second contention, not initially presented in the petition, questioned the Income-tax Officer's failure to conduct a fresh assessment on the registered firm following the Tribunal's directive. The court, relying on the presumption of regularity and lack of supporting evidence, rejected this contention, stating that the petitioner cannot raise new challenges after a significant time lapse.
The judgment emphasized that the reassessment was a result of the High Court's order and the Tribunal's directive, aligning with the law in force when the rectification occurred. The court rejected the petitioner's attempt to revert to a pre-1952 status for the firm, emphasizing the legal principle of not being able to benefit from contradictory positions. Ultimately, both contentions were deemed unsuccessful, leading to the dismissal of the writ petition without costs.
In conclusion, the judgment underscores the importance of legal consistency, presumption of regularity in official actions, and the application of the law in force at the time of reassessment. The court's decision reaffirms the validity of the reassessment under section 35(5) and highlights the petitioner's inability to challenge the process retroactively.
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1971 (6) TMI 1
Issues Involved:
1. Whether the accused were the principal officers of the company during the relevant period.
2. Whether the company had distributed dividends and deducted the tax.
3. Whether the accused failed to remit the tax to the credit of the Central Government within the time specified.
4. Applicability of Section 276B of the Income-tax Act, 1961, as amended by the Finance Act, 1969.
5. Protection under Article 20(1) of the Constitution.
Issue-wise Detailed Analysis:
1. Principal Officers of the Company:
The court examined whether the accused were the principal officers of the company during the relevant period. The complainant argued that the first respondent was the managing director until April 15, 1963, making him the principal officer. The appellate judge initially presumed that the managing director was in actual management and hence the principal officer. However, the judgment clarified that the managing director is not explicitly included in the category under Section 2(35) of the Income-tax Act, 1961, which lists "the secretary, treasurer, manager or agent." The managing director cannot be equated with the manager under the Indian Companies Act. Furthermore, the Income-tax Officer did not serve a notice to treat the managing director as the principal officer, as required by Section 2(35)(b). Thus, the court concluded that the first respondent was not the principal officer at the relevant time.
2. Distribution of Dividends and Deduction of Tax:
The court found the evidence regarding the deduction of tax from dividends to be confusing and insufficient. Exhibit P-4, a statement submitted by the company, indicated that no amounts were deducted at source on the dividends and that the amounts were credited in the shareholders' accounts rather than paid in cash or by cheque. The court noted that crediting amounts in accounts is not an approved mode of distributing dividends under Section 205(3) of the Companies Act, 1956, which requires payment in cash or by cheque/warrant. Therefore, the court agreed with the appellate judge that there was a lack of evidence to prove that any tax was deducted from the dividends.
3. Failure to Remit Tax:
The complainant had to show that the deductions were made by the particular officer and that he failed to pay it to the credit of the Central Government. Since the evidence did not establish that any tax was deducted, the obligation to remit the tax did not arise. The court emphasized that the offence attaches personally to the offender and not to the company, and no conviction could be made without proving the deduction by the accused.
4. Applicability of Section 276B:
The lower court found that since Section 276B was introduced only from April 1, 1969, the accused were protected under Article 20(1) of the Constitution, which prohibits retrospective application of penal laws. The court upheld this view, stating that the prosecution failed to prove that the accused committed an offence punishable under the law in force at the time of the commission. Therefore, the appeals regarding the applicability of Section 276B were dismissed.
5. Protection under Article 20(1):
The court acknowledged that the accused were protected by Article 20(1) of the Constitution, which prevents retrospective penalization. The alleged offence, if any, was complete under the 1922 Act, and the prosecution should have been initiated under that Act. The court rejected the argument that the offence continued under the 1961 Act, as the obligation to deduct and pay tax was not established.
Conclusion:
The court dismissed the appeals, confirming the acquittal of the accused. The prosecution failed to prove that the accused were the principal officers, that dividends were distributed and tax deducted, and that there was an obligation to remit the tax. The accused were also protected under Article 20(1) of the Constitution, and the provisions of Section 276B of the Income-tax Act, 1961, were not applicable retrospectively.
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