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Showing 41 to 54 of 54 Records
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1971 (5) TMI 14
Reassessment - revised return discloses higher profits or income than what was disclosed in the earlier return - notice under section 147 cannot be challenged by assessee on the ground that the Income-tax Officer had no jurisdiction to issue the notice
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1971 (5) TMI 13
Issues Involved:
1. Jurisdiction of the Additional Commissioner of Income-tax under section 263 of the Income-tax Act, 1961.
2. Validity of the notice issued by the Additional Commissioner of Income-tax.
3. Whether the Additional Commissioner of Income-tax is a persona designata.
4. Concurrent jurisdiction of the Additional Commissioner and the Commissioner of Income-tax.
Issue-wise Detailed Analysis:
1. Jurisdiction of the Additional Commissioner of Income-tax under section 263 of the Income-tax Act, 1961:
The petitioner contended that the power of revision under section 263 could only be exercised by the Commissioner of Income-tax and not by the Additional Commissioner. However, the amendments made by the Finance Act, 1970, to sections 116 and 117 of the Income-tax Act, 1961, included the Additional Commissioner of Income-tax in the same category as the Commissioner of Income-tax. Additionally, section 130 was amended to state that the term "Commissioner" includes the Additional Commissioner, thereby granting the latter concurrent jurisdiction with the Commissioner for the purposes of sections 263 and 264.
2. Validity of the notice issued by the Additional Commissioner of Income-tax:
The notice dated September 16, 1970, issued by the Additional Commissioner of Income-tax, Delhi-II, was challenged by the petitioner on the grounds of lack of jurisdiction. The court found that the amendments to the Income-tax Act and the notification by the Central Board of Direct Taxes (CBDT) conferred valid concurrent jurisdiction on the Additional Commissioner. Therefore, the notice issued by the Additional Commissioner was deemed valid and within the scope of his authority.
3. Whether the Additional Commissioner of Income-tax is a persona designata:
The petitioner argued that the Commissioner of Income-tax was a persona designata, meaning a specific individual designated by the statute to perform certain functions, and thus the Additional Commissioner could not exercise the powers under section 263. The court referred to the Supreme Court's decision in Ajaib Singh v. Gurbachas Singh, which discussed the concept of persona designata. However, the court distinguished this case by noting that the amendments to the Income-tax Act explicitly placed the Additional Commissioner on an equal footing with the Commissioner, thus negating the persona designata argument.
4. Concurrent jurisdiction of the Additional Commissioner and the Commissioner of Income-tax:
The court examined the amendments made by the Finance Act, 1970, and the subsequent notification by the CBDT, which provided that the Additional Commissioner of Income-tax would have concurrent jurisdiction with the Commissioner of Income-tax. The court concluded that the Additional Commissioner of Income-tax, Delhi-II, had the same powers as the Commissioner of Income-tax, Delhi-II, including the power to revise orders under section 263.
Conclusion:
The court dismissed the petition, holding that the amendments to the Income-tax Act and the notification issued by the CBDT validly conferred concurrent jurisdiction on the Additional Commissioner of Income-tax. The notice issued by the Additional Commissioner under section 263 was deemed valid, and the petitioner's arguments regarding persona designata were rejected. The court found no merit in the petition and dismissed it with costs.
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1971 (5) TMI 12
Registration - Minor who was admitted to the benefits of partnership attaning majority - as per deed minors' attaining majority automatically become full fledged partners - it results in change in constitution of the firm - previously granted registration cannot be continued
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1971 (5) TMI 11
Use of some imported reconditioned machinery - Whether the assessee's industrial undertaking was not formed by the transfer to its business of machinery or plant previously used in any other business within the meaning of section 15C(2)(i) of the Indian Income-tax Act, 1922, for the purposes of tax exemption in accordance with section 15C(1)
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1971 (5) TMI 10
Issues:
- Application under section 256(2) of the Income-tax Act, 1961 for reference of questions of law to the High Court.
- Determination of the applicable Income-tax Act - 1922 or 1961.
- Consideration of the application under sub-sections (2) and (3) of section 66.
- Condonation of delay in filing the reference application.
- Jurisdiction of the Appellate Tribunal to condone delay.
- Power of the High Court under sub-section (3) of section 66 to condone delay.
- Dismissal of the reference application as barred by time.
Analysis:
The assessee filed an appeal before the Income-tax Appellate Tribunal for the assessment year 1961-62, which was dismissed for default. Subsequently, an application was made under section 256(1) of the Income-tax Act, 1961, for reference of certain questions of law to the High Court. The Appellate Tribunal rejected the application as time-barred, leading to the current reference. Section 256(2) allows an assessee to apply for a reference if the Appellate Tribunal refuses to state the case on the ground of no question of law. In this case, the Tribunal rejected the application on the basis of time limitation, making the reference application not maintainable under section 256(2.
The determination of the applicable Income-tax Act was crucial in this case. The Appellate Tribunal observed that the case fell under the provisions of the Indian Income-tax Act, 1922. The decision on which Act applies hinges on whether the return of income was filed before or after April 1, 1962, the date the Act of 1961 came into force. The record did not specify the filing date, but assuming the Act of 1922 applies, it was noted that the reference application could not be treated under sub-section (2) of section 66 due to the time-barred nature of the initial reference application.
Regarding the consideration under sub-sections (2) and (3) of section 66, it was highlighted that the Appellate Tribunal's refusal to condone the delay in filing the reference application was correct as per the jurisdictional limitations. Sub-section (7A) of section 66 was applicable, and the Appellate Tribunal was bound to dismiss the application as barred by time. The High Court lacked the power under sub-section (3) of section 66 to condone the delay, further solidifying the rejection of the application.
In conclusion, the High Court rejected the application, emphasizing that whether viewed under sub-section (2) or (3) of section 66 or under sub-section (2) of section 256, the application could not succeed. Despite no order as to costs, the counsel's fee was assessed at Rs. 100, bringing closure to the legal proceedings.
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1971 (5) TMI 9
Issues:
1. Validity of the notice issued under section 226(3)(i) of the Income-tax Act, 1961.
2. Disbelief of the affidavit filed by the petitioner.
3. Power of the Tax Recovery Officer to take recovery proceedings without a recovery certificate.
Analysis:
1. The High Court analyzed the validity of the notice issued under section 226(3)(i) of the Income-tax Act, 1961. The court emphasized that the notice must specify the amount due by the person and the period within which payment is required. While the court acknowledged the importance of specifying the amount due, it did not categorically state that a notice without this specification is always invalid. The court highlighted the need for caution in exercising the powers under section 226(3) and stressed that the notice should indicate the specific sum due to the assessee. The petitioner's understanding of the notice's intent was also considered in determining its validity.
2. The court addressed the disbelief of the affidavit filed by the petitioner. It noted that the affidavit, filed by the petitioner's accountant instead of a partner, lacked clarity regarding the source of information provided. The court highlighted that the affidavit did not align with the requirements of section 226(3)(vi), which necessitates a statement on oath by the person served with the notice. The court concluded that the affidavit did not meet the statutory requirements for challenging the notice.
3. Lastly, the court examined the power of the Tax Recovery Officer to initiate recovery proceedings without a recovery certificate. The court interpreted the relevant sections of the Income-tax Act, emphasizing the mandatory nature of obtaining a recovery certificate before commencing recovery proceedings. It noted that the absence of a recovery certificate rendered the recovery proceedings taken by the Tax Recovery Officer against the petitioner without jurisdiction. Consequently, the court quashed the recovery proceedings but denied the remaining relief sought by the petitioner. No costs were awarded in the case.
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1971 (5) TMI 8
Issues Involved:
1. Entitlement to deduction under Section 10(2)(vii) of the Indian Income-tax Act, 1922.
2. Definition and interpretation of the term "sale" under Section 10(2)(vii).
3. Legal implications of the transfer of ownership without a registered sale deed.
Detailed Analysis:
1. Entitlement to Deduction under Section 10(2)(vii) of the Indian Income-tax Act, 1922:
The primary issue was whether the assessee-company was entitled to the deduction of a loss amounting to Rs. 3,58,783 under Section 10(2)(vii) of the Act. The assessee-company had transferred its Crown Flour Mills to its subsidiary, Hindustan Cold Stores and Refrigeration Ltd., and claimed the deduction for the loss incurred from this transfer. The Income-tax Officer disallowed this claim on the ground that no registered sale deed had been executed, and thus the business of the Crown Flour Mills was still considered to be that of the assessee-company.
2. Definition and Interpretation of the Term "Sale" under Section 10(2)(vii):
The court had to determine the meaning of "sale" within the context of Section 10(2)(vii). The Tribunal initially interpreted "sale" in its popular and commercial sense, suggesting that the passing of property was not essential for the completion of a sale. However, the court disagreed, stating that the term "sale" must be interpreted in its legal sense as defined by law, specifically under Section 54 of the Transfer of Property Act, 1882. This section stipulates that the transfer of ownership in exchange for a price paid or promised must be made by a registered instrument for tangible immovable property of the value of one hundred rupees and upwards.
3. Legal Implications of the Transfer of Ownership without a Registered Sale Deed:
The court examined whether the execution of an agreement and the transfer of possession constituted a "sale" in the absence of a registered sale deed. The assessee-company argued that the transaction should be considered a sale based on the doctrine of part performance under Section 53-A of the Transfer of Property Act. However, the court noted that this doctrine does not affect the rights of a transferee for consideration who has no notice of the contract of sale or part performance. Therefore, without a registered sale deed, the transaction could not be considered a sale, and the assessee-company had not legally divested itself of the ownership of the Crown Flour Mills.
Conclusion:
The court concluded that the assessee-company had not sold the Crown Flour Mills to the subsidiary company within the meaning of Section 10(2)(vii) of the Act. Consequently, the assessee-company was not entitled to claim the deduction of the loss of Rs. 3,58,783. The answer to the reframed question was in the negative, in favor of the revenue and against the assessee. There was no order as to costs.
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1971 (5) TMI 7
Estate Duty Act, 1953 - estate duty assessment of the estate of deceased - property passing on death - father of the deceased had created a trust by which the properties were vested in trustees absolutely for the worship of idols - validity of trust - Whether the properties comprised in the trusts were correctly included in the estate of the deceased as property passing on his death under section 5
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1971 (5) TMI 6
Issues:
1. Deductibility of expenditure incurred for transferring a deceased person's body.
2. Disallowance of house allowance paid to a director.
Analysis:
1. The first issue revolves around the deductibility of an expenditure of Rs. 6,900 incurred by a private limited company for transferring a deceased former chairman's body. The Income-tax Officer initially disallowed the deduction, deeming it not incidental to the business. However, the Appellate Assistant Commissioner and subsequently the Tribunal allowed the deduction, considering it as a business expense. The High Court analyzed the situation, emphasizing that the deceased had come to Delhi for business purposes, and his return journey to Jodhpur would have been on the company's business as well. The court applied the test of commercial expediency, stating that the expenditure was for the purpose of carrying on the business, thus allowing the deduction. The judgment referenced previous cases to support the broader interpretation of "for the purpose of the business" under the Income-tax Act.
2. The second issue pertains to the disallowance of a portion of the house allowance paid to a director of the company. The director was receiving a salary increase upon relocation to Delhi, along with a furnished residence. The Tribunal disallowed a portion of the house allowance, considering it excessive based on an estimate. The court noted that the Tribunal had previously made a similar decision for a different assessment year. The assessee argued against the reduction, citing a Madras High Court case on director remuneration. However, the court upheld the Tribunal's decision, stating that the Tribunal had applied its mind to the business nature and necessity of the director's remuneration, thus finding the decision reasonable and ruling in favor of the revenue.
In conclusion, the High Court ruled in favor of the assessee regarding the deductibility of the expenditure for transferring the deceased person's body, while ruling in favor of the revenue regarding the disallowance of a portion of the house allowance paid to the director. The judgment provided detailed reasoning based on the interpretation of relevant legal provisions and precedents, ensuring a comprehensive analysis of both issues involved in the case.
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1971 (5) TMI 5
Issues Involved:
1. Jurisdiction of the Income-tax Officer to demand additional surcharge.
2. Validity and communication of the rectification order under section 154 of the Income-tax Act, 1961.
3. Applicability of exemption under section 81 of the Income-tax Act, 1961, to additional surcharge levied under the Finance Act, 1963.
4. Interpretation of "additional surcharge" as distinct or part of "income-tax".
Detailed Analysis:
1. Jurisdiction of the Income-tax Officer to Demand Additional Surcharge:
The petitioner, a co-operative society engaged in banking, challenged the jurisdiction of the Income-tax Officer to demand an additional surcharge amounting to Rs. 8,010.09. The court examined section 4 of the Income-tax Act, 1961, which provides for the charge of income-tax in accordance with the provisions of the Act. The court also considered section 2 of the Finance Act, 1963, which specifies that income-tax is to be increased by surcharges. The court concluded that the additional surcharge is part of the total income-tax and hence falls under the exemption provided by section 81 of the Income-tax Act, 1961. Therefore, the Income-tax Officer lacked jurisdiction to demand the additional surcharge from the petitioner.
2. Validity and Communication of the Rectification Order under Section 154:
The petitioner argued that the Income-tax Officer failed to supply a copy of the rectification order dated January 30, 1967, thereby depriving the petitioner of an effective right of appeal. The court acknowledged this irregularity but noted that the order was brought to the petitioner's notice during the revision hearing before the Commissioner of Income-tax. The court found that the Appellate Assistant Commissioner had dismissed the appeal based on an erroneous assumption that no rectification order had been passed. However, since the rectification order was eventually considered during the revision, the court decided not to interfere with the orders of the income-tax authorities unless the jurisdictional contention had merit.
3. Applicability of Exemption under Section 81 to Additional Surcharge:
The court examined section 81 of the Income-tax Act, 1961, which exempts co-operative societies from paying income-tax on profits and gains from banking activities. The court noted that the petitioner's income from non-banking sources did not exceed Rs. 15,000, making it eligible for the exemption. The court held that the additional surcharge, being part of the total income-tax, is also covered by this exemption. The court emphasized that section 110 of the Income-tax Act provides for the computation of income-tax after deducting the exempted amount, and since the petitioner's total income was exempt, no tax, including additional surcharge, was payable.
4. Interpretation of "Additional Surcharge" as Distinct or Part of "Income-Tax":
The court analyzed the relevant constitutional provisions and the Finance Act, 1963. Article 271 of the Constitution allows Parliament to levy a surcharge on taxes for Union purposes, and such surcharge retains the character of the original tax. The court found that section 2 of the Finance Act, 1963, treats the additional surcharge as part of the total income-tax. The court rejected the revenue's argument that additional surcharge is a separate levy, concluding that it is included in the income-tax and thus subject to the exemptions provided in section 81 of the Income-tax Act, 1961.
Conclusion:
The court allowed the petition, quashing the order of the Income-tax Officer dated January 30, 1969, the appellate order of the Assistant Commissioner dated October 9, 1968, and the revisional order of the Commissioner of Income-tax dated August 13, 1970. The court held that the demand for additional surcharge was erroneous and without authority, as the petitioner was exempt from paying income-tax, including the additional surcharge, under section 81 of the Income-tax Act, 1961. The petition was allowed with costs.
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1971 (5) TMI 4
Issues Involved:
1. Entitlement to set-off of speculation losses brought forward from earlier years against speculation profits of the assessment year under appeal.
Detailed Analysis:
Issue 1: Entitlement to Set-off of Speculation Losses
The primary question referred to the court was whether the assessee, Smt. Saroj Agarwal, was entitled to set off the speculation losses incurred by her deceased husband, Prem Shanker, against her speculation profits for the assessment year 1962-63.
Facts:
- Prem Shanker was a partner in three firms and had unabsorbed speculation losses amounting to Rs. 25,914 from the assessment years 1958-59, 1959-60, and 1960-61.
- After his death on July 24, 1959, his widow, Smt. Saroj Agarwal, joined the firms as a partner and her adopted son, Sudhir Kumar, was admitted to the benefits of the partnership.
- The Income-tax Officer denied the set-off of these losses against her speculation profits for the assessment year 1962-63.
Appellate Assistant Commissioner's Decision:
- The Appellate Assistant Commissioner held that there was no succession or inheritance concerning the membership of the firm.
- Smt. Saroj Agarwal joined the firm through a fresh partnership agreement, not by inheriting the right to join the firm.
- Consequently, the speculation losses of Prem Shanker could not be set off against her profits.
Appellate Tribunal's Decision:
- The Tribunal observed that Smt. Saroj Agarwal was admitted to the partnerships because she was the heir of Prem Shanker.
- The firms were not dissolved after Prem Shanker's death but continued with Smt. Saroj Agarwal as a partner.
- The Tribunal concluded that she succeeded to the deceased's position by inheritance and was entitled to set off the losses.
High Court's Analysis:
- The court examined sections 70 to 80 of Chapter VI of the Income-tax Act, 1961, particularly section 78(2), which allows the carry forward and set-off of losses by a successor if the succession is by inheritance.
- For section 78(2) to apply, the assessee must show that:
1. The person carrying on the business was succeeded in such capacity.
2. The succession was by inheritance.
Legal Precedents:
- The court referred to several cases, including Commissioner of Income-tax v. Mansooklal Zaveri, Commissioner of Income-tax v. N. N. Firm, and Executors of the Estate of T. K. Dubash v. Commissioner of Income-tax, to interpret "succession in such capacity."
- The term implies continuity in the business activity with a change only in ownership.
Partnership Deeds and Conduct:
- The partnership deeds dated January 12, 1951, and July 30, 1957, did not mention that the firms would not dissolve upon a partner's death.
- The court found no implied agreement that the firms would continue without dissolution upon the death of a partner.
- Therefore, the firms were dissolved upon Prem Shanker's death, and Smt. Saroj Agarwal's right to carry on the business arose from new partnership agreements dated August 12, 1959, not by inheritance.
Conclusion:
- The court concluded that Smt. Saroj Agarwal did not inherit the right to carry on the business but acquired it through new contracts.
- Hence, she was not entitled to set off the speculation losses incurred by her husband against her profits for the assessment year 1962-63.
Judgment:
- The question was answered in the negative, against the assessee.
- The Commissioner of Income-tax was entitled to costs assessed at Rs. 200, with counsel's fee also assessed at the same figure.
Summary:
The High Court of Allahabad ruled that Smt. Saroj Agarwal was not entitled to set off the speculation losses incurred by her deceased husband against her speculation profits for the assessment year 1962-63. The court found that the firms were dissolved upon her husband's death, and her right to carry on the business arose from new partnership agreements, not by inheritance. The question was answered in the negative, and the Commissioner of Income-tax was awarded costs.
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1971 (5) TMI 3
Issues Involved:
1. Validity of the order of transfer dated 23rd June, 1964, by the Commissioner of Income-tax, Lucknow.
2. Validity of the assessment orders for the assessment years 1960-61 and 1961-62.
3. Adequacy of the opportunity provided to the petitioner to show cause against the proposed transfer.
4. Recording of reasons for the transfer by the Commissioner of Income-tax.
5. Applicability of section 127 of the Income-tax Act, 1961, versus section 5(7A) of the Income-tax Act, 1922.
Issue-wise Detailed Analysis:
1. Validity of the Order of Transfer:
In both writ petitions, the petitioner challenged the validity of the order of transfer dated 23rd June, 1964, made by the Commissioner of Income-tax, Lucknow. The petitioner argued that the Commissioner had no jurisdiction to transfer the assessment proceedings for the years 1960-61 and 1961-62 under section 127 of the Income-tax Act, 1961, because the returns for these years were filed before 1st April, 1962. The court held that even if section 127 of the 1961 Act did not apply, the transfer could still be justified under section 5(7A) of the 1922 Act, which did not require giving the assessee an opportunity to be heard or recording reasons for the transfer.
2. Validity of the Assessment Orders:
The petitioner contended that the assessment orders made by the Income-tax Officer, Special Investigation Circle, Lucknow, were without jurisdiction and should be quashed. The court found that the assessment proceedings were validly transferred and conducted under the jurisdiction of the Income-tax Officer, Special Investigation Circle, Lucknow, and thus, the assessment orders were not without jurisdiction.
3. Adequacy of the Opportunity Provided to Show Cause:
The petitioner argued that they were not given an effective opportunity to show cause against the proposed transfer because the reasons for the transfer were not communicated to them. The court noted that the Commissioner had issued a notice on 25th May, 1964, and another on 10th June, 1964, requiring the petitioner to show cause. The petitioner requested more time and the reasons for the transfer but failed to appear on the scheduled date. The court held that the opportunity provided was adequate.
4. Recording of Reasons for the Transfer:
The petitioner claimed that the Commissioner did not record reasons for the transfer, making the order defective. The court examined the reasons recorded by the Commissioner, which stated that the cases required proper investigation. The court found that these reasons were sufficient under section 127 of the 1961 Act.
5. Applicability of Section 127 of the Income-tax Act, 1961, Versus Section 5(7A) of the Income-tax Act, 1922:
The petitioner argued that section 127 of the 1961 Act did not apply because the returns were filed before 1st April, 1962, and therefore, the proceedings should be governed by the 1922 Act. The court agreed that section 127 of the 1961 Act might not apply but held that section 5(7A) of the 1922 Act, which allowed the Commissioner to transfer cases without giving an opportunity to be heard or recording reasons, was applicable. Thus, the transfer order was valid under the 1922 Act.
Conclusion:
The court dismissed the writ petitions, holding that the transfer order dated 23rd June, 1964, was valid under section 5(7A) of the 1922 Act, and the assessment orders for the years 1960-61 and 1961-62 were not without jurisdiction. The court found that the petitioner was given adequate opportunity to show cause, and the reasons for the transfer were sufficiently recorded. The petitions were dismissed with costs.
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1971 (5) TMI 2
Issues Involved:
1. Whether the shares allotted to the wife of the deceased as his nominee and/or benamidar were, as from the commencement of the Hindu Succession Act, 1956, held by her as full owner thereof, by virtue of the provisions of section 14 of that Act.
2. Whether, in the circumstances of the case, the shares which stood in the names of the wife and the sons of the deceased were held by them as benami and they really belonged to the deceased.
3. Assuming that the shares in dispute really belonged to the deceased, whether those shares constituted property which passed on the death of the deceased for the purposes of section 5 of the Estate Duty Act.
Detailed Analysis:
Issue 1: Ownership of Shares under Hindu Succession Act, 1956
The court examined whether the shares allotted to the deceased's wife as his nominee or benamidar were held by her as full owner under section 14 of the Hindu Succession Act, 1956. The Assistant Controller and the Central Board of Direct Taxes found that the shares were held benami by the deceased in the name of his wife and sons, and thus, the wife did not become an absolute owner upon the commencement of the Hindu Succession Act. The court agreed with this finding, stating, "Since she had no interest at all, section 14 of the Hindu Succession Act will not apply, because that provision applies to a Hindu female having a limited ownership in a property. Here, the wife had no ownership whatever in the shares." Therefore, the court answered this question in the negative.
Issue 2: Benami Nature of Shares
The court addressed whether the shares standing in the names of the deceased's wife and sons were held benami and actually belonged to the deceased. The Assistant Controller and the Board had found that the deceased financed the purchase of all the shares and that there was no evidence showing that the wife or sons exercised shareholder rights independently or enjoyed the dividends. The court noted, "The law seems to be well-settled that if the source of purchase money is proved, the fact that the transaction stands in the name of another person will raise a presumption that the transaction was benami." The court concluded that the finding regarding benami was a finding of fact and not a question of law, thus it should not have been referred to the court. Therefore, the court answered that the question is one of fact and does not raise any point of law.
Issue 3: Competency to Dispose of Shares under Section 5 of the Estate Duty Act
The court examined whether the shares, assuming they belonged to the deceased, constituted property that passed on his death under section 5 of the Estate Duty Act. The applicant argued that the deceased was not competent to dispose of the shares as they were legally in the names of his wife and sons. The court referred to the Andhra Pradesh High Court's rulings in similar cases and agreed that "on the finding that the shares stood in the name of the wife and the sons, etc., benami for the deceased, it must be held that the deceased had no power to transfer them." Therefore, the shares could not be included in the estate of the deceased. The court answered this question in the negative.
Conclusion:
The court concluded:
1. The shares were not held by the wife as full owner under section 14 of the Hindu Succession Act.
2. The question of whether the shares were held benami is a question of fact and does not raise any point of law.
3. The shares did not constitute property that passed on the death of the deceased under section 5 of the Estate Duty Act.
The answers were returned to the Board with a copy of the judgment.
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1971 (5) TMI 1
Issues:
1. Interpretation of the Finance Act, 1965 regarding voluntary disclosure of income.
2. Determination of net wealth for Wealth-tax assessment considering income-tax liability.
3. Applicability of deductions for income-tax paid under the voluntary disclosure scheme.
Analysis:
The judgment addresses two writ petitions arising from similar facts concerning the interpretation of the Finance Act, 1965, and its implications on Wealth-tax assessment. The Finance Act, 1965, introduced a scheme for voluntary disclosure of secreted income with retrospective effect from March 1, 1965. The scheme provided for a concessional basis for settling income-tax liability on the disclosed amount. The petitioners availed of this scheme by disclosing undisclosed income for various assessment years and paying income-tax accordingly.
The dispute arose when the Wealth-tax Officer initiated proceedings under the Wealth-tax Act, 1957, to reassess the net wealth based on the disclosed income attributed to specific assessment years. The petitioners argued that the income-tax payable on the disclosed income should be considered a debt owed by them on the valuation date and deducted from the disclosed amount to determine the net wealth for Wealth-tax assessment. However, both the Wealth-tax Officer and the Appellate Assistant Commissioner rejected this contention.
The court examined the relevant provisions of the Wealth-tax Act and the Finance Act, 1965, to assess the petitioners' claims. It was established that the income-tax paid under the voluntary disclosure scheme was not a debt owed by the assessee on the valuation date for determining net wealth under the Wealth-tax Act. The court clarified that the tax liability arises only when the income is assessed under the relevant Income-tax Act, not at the time of disclosure under the Finance Act, 1965.
The court concluded that the petitioners' claims for deduction of income-tax paid under the voluntary disclosure scheme in determining the net wealth for Wealth-tax assessment were not sustainable. The court dismissed the writ petitions, upholding that the income-tax paid under the voluntary disclosure scheme did not qualify as a debt owed by the assessee on the valuation date for Wealth-tax assessment purposes.
In summary, the judgment clarifies the distinction between income-tax liability under the Income-tax Act and net wealth assessment under the Wealth-tax Act, emphasizing that the tax liability arises only upon assessment under the relevant Income-tax Act, not at the time of voluntary disclosure under the Finance Act, 1965.
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9911796707
