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Showing 61 to 80 of 87 Records
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1965 (12) TMI 27
Whether, on the facts of the case and having regard to the provisions of paragraph 2 of the Taxation Laws (Merged States) (Removal of Difficultics) Order, 1949, and clause 8 of the Agreement made on 20th September, 1938, between the assessee and the State of Bhopal, the correct basis for computing the written down value of the depreciable assets as at 1st November, 1948, is the one which is adopted by the Income-tax Officer or the one adopted by the Appellate Assistant Commissioner ?
Held that:- Applying the 1962 Order to the facts of this case it is clear that the answer to the question referred must be that the correct basis for computing the written down value of the depreciable assets as on November 1, 1948, is the one which was adopted by the Income-tax Officer. In the result, the appeals are accepted. The judgment of the High Court is set aside and the question answered as indicated above.
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1965 (12) TMI 26
Whether the assessee was entitled to have an adjustment of the advance tax paid by it under section 18A of the Indian Income-tax Act in Lahore for the assessment year 1947-48, against the demand of tax raised by the Income-tax Officer, 3rd Additional Business Circle, New Delhi, for the assessment year 1947-48 ?
Held that:- In our opinion the effect of section 18(3) of the Indian Independence Act was to change the incidents of the advance tax paid. Previously the advance tax was to be adjusted towards a single regular assessment to be made by British India. After the Indian Independence Act the advance tax was liable to be adjusted against two regular assessments, one by India and one by Pakistan. In Pakistan, under section 18A(11), the Pakistan Government was entitled to adjust the advance tax paid by the assessee against its demand. Similarly, the Government of India was entitled to adjust the amount against its demand. It follows that if the assessee has been given credit for the advance tax by the Pakistan Government, he cannot claim that credit should be given to him by the Indian income-tax authorities. The effect of the Indian Independence Act was not to double the advance money the assessee had paid. The amount of money he paid as advance tax remained the same. Having been given credit by the Pakistan Government he could not claim that there was any amount left on which section 18A(11) could operate.
The answer to the questions should be in the negative and against the assessee. Appeal allowed.
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1965 (12) TMI 25
Whether capital appreciation in respect of the lands from which the income derived is agricultural income and which was not taxable in the hands of the company as capital gains would still on distribution be liable to be taxed as dividend under section 12 of the Income-tax Act?
Held that:- Capital gains under section 12B are chargeable in respect of any profits arising from transfer of " capital assets ", and " capital assets " do not include lands from which the income derived is agricultural income. Profits derived by transfer of lands from which the income derived is agricultural income would not, therefore, be chargeable on a combined reading of section 12B with section 2(4A) of the Income-tax Act under the head " Capital gains ". The expression " accumulated profits " does not include capital gains arising within the excepted periods : vide Explanation to section 2(6A). " Accumulated profits " are, therefore, profits which are so regarded in commercial practice, and capital gains as defined in the Income-tax Act. Realization of appreciated value of assets in commercial practice is regarded as realization of capital rise, and not of profits of the business. Unless, therefore, appreciation in the value of capital assets is included in the capital gains, distribution by the liquidator of the rise in the capital value will not be deemed dividend for the purpose of the Income-tax Act. Appeal dismissed.
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1965 (12) TMI 24
Order of the High Court of Judicature at Allahabad quashing the notice issued by the appellant under section 34 of the Indian Income-tax Act, 1922 to the respondent as the karta of a Hindu undivided family for the assessment year 1955-56 questioned
Held that:- The High Court went wrong in holding that the Income-tax Officer had no jurisdiction to initiate proceedings under section 34 of the Act against the respondent as the karta of a Hindu undivided family. Appeal allowed.
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1965 (12) TMI 23
Whether, on the facts and circumstances of the case, the surplus of $1,41,326 realised by the assessee-company by the sale of some of its estates and properties held by it in Malaya was income chargeable to tax under the Indian Income-tax Act ?
Held that:- The purpose or the object for which it is incorporated where the taxpayer is a company may have some bearing, but is not decisive, nor is the circumstance that a single plot of land was acquired and was thereafter sold as a whole or in plots decisive. Profit motive in entering into a transaction is also not decisive. Here, as already pointed out, the primary object of the company was to take over the assets of the P. K. N. firm to carry on the business of planters and to earn profits by sale of rubber. The incidental sale of uneconomic or inconvenient plots of land or houses could not convert what was essentially an investment into a business transaction in real estate. Appeal dismissed.
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1965 (12) TMI 22
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of rupees 84,633 expended by the assessee in obtaining the loan or any part thereof is an allowable expenditure ?
Held that:- The expenditure of ₹ 84,633 was not in the nature of capital expenditure and was laid out or expended wholly and exclusively for the purpose of the assessee's business. The answer to the question referred, therefore, must be in the affirmative. The appeal is allowed, the judgment of the High Court set aside and the question referred answered in the affirmative.
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1965 (12) TMI 21
Issues:
1. Appeal against conviction under Section 120B of the Penal Code and Section 5 of Imports and Exports (Control) Act, 1947.
2. Limitation of leave granted by the Supreme Court to the question of sentence.
3. Application for extending the scope of leave granted.
4. Question of sentence imposed by the High Court exceeding the Magistrate's jurisdiction.
5. Argument regarding the profit made by the appellants influencing the sentence.
6. Decision on reducing the fine imposed on the appellants.
Analysis:
1. The judgment involves an appeal against the conviction of the appellants under Section 120B of the Penal Code and Section 5 of the Imports and Exports (Control) Act, 1947. The appellants were initially acquitted by the Magistrate but later convicted by the High Court.
2. The Supreme Court had granted leave to the appellants limited to the question of sentence. The appellants' counsel wanted to argue that the conviction itself could not be supported, but this point was abandoned during the hearing.
3. The appellants also filed an application to extend the scope of the leave granted, but it was not considered as there was no certificate as required by the Rules. The application had to be made to the Judge who granted special leave.
4. The main issue raised during the appeal was the question of the sentence imposed by the High Court, which exceeded the jurisdiction of the Magistrate. The Supreme Court held that the sentence of a fine imposed by the High Court was not within the Magistrate's power and reduced it to Rs. 2,000/- for each appellant.
5. The respondent argued that the appellants had made significant profits, justifying the heavy fine imposed by the High Court. However, the Supreme Court disagreed, stating that the profit made should not solely determine the sentence. The focus should be on the seriousness of the breach of the law and the need for a deterrent sentence.
6. The Supreme Court ultimately decided to reduce the fine imposed on the appellants to Rs. 2,000/- each, as that was the maximum amount the Magistrate could impose. The appellants had already paid the fine imposed by the High Court, so no further sentence of imprisonment in default of payment was necessary. They were entitled to a refund after the deduction of the reduced fine.
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1965 (12) TMI 20
Issues Involved:
1. Legality of search and seizure under Rule 126L(2) of the Defence of India (Amendment) Rules, 1963.
2. Validity of seizure orders under Section 110(3) of the Customs Act, 1962.
3. Whether the Collector of Customs is a "proper officer" under the Customs Act.
4. Legal possession and physical possession in the context of seizure.
5. Relevance and utility of seized documents under the Customs Act.
6. Legality of authorisation for search under Section 105 of the Customs Act.
7. Interpretation of the term "secreted" in Section 105 of the Customs Act.
8. Requirement of specifying documents in search authorisation under Section 105 of the Customs Act.
Issue-Wise Detailed Analysis:
1. Legality of Search and Seizure under Rule 126L(2) of the Defence of India (Amendment) Rules, 1963
The appellants contended that the order of search and seizure dated August 19, 1963, was illegal as the Excise authorities had no power to seize documents under Rule 126L(2) of the Defence of India (Amendment) Rules, 1963. The Rule only gives authority to seize any gold suspected to be in contravention of the Gold Control Rules, but there is no provision for the search or seizure of any documents. The respondents argued that the power to seize documents was implied under Rule 156, which grants ancillary powers for effective exercise of seizure. However, the court held that Rule 156 does not include the power of seizure of documents, which is an independent power. The court noted that Rule 126L(2) had not been amended to include seizure of documents, unlike Rule 126L(1) which had been amended to include such power.
2. Validity of Seizure Orders under Section 110(3) of the Customs Act, 1962
The court found that while the initial order of search and seizure under Rule 126L(2) was invalid, the documents were validly seized under Section 110(3) of the Customs Act by the Collector of Customs on September 11, 1963. Section 110(3) allows the proper officer to seize any documents or things useful for or relevant to any proceeding under the Customs Act. The court held that there was sufficient material to support the opinion of the Collector that the documents were relevant to the proceedings under the Customs Act.
3. Whether the Collector of Customs is a "Proper Officer" under the Customs Act
The appellants argued that the Collector of Customs was not a "proper officer" within the meaning of the Act and thus had no authority to seize documents. The court rejected this contention, stating that the Collector of Customs, who had assigned the powers of a "proper officer" to a subordinate officer, must himself be deemed to have the powers of a "proper officer" under Section 110(3) of the Customs Act.
4. Legal Possession and Physical Possession in the Context of Seizure
The appellants contended that the documents were not in physical possession of the Superintendent or the Assistant Collector when the seizure orders were passed. The court held that legal possession does not necessarily require physical possession. The documents were in the legal possession of the Superintendent, who had control over them even though they were temporarily sent to Delhi for translation. The court cited Mellish, L.J. in Ancona v. Rogers to support the view that legal possession can be maintained even when the documents are with a bailee for a specific purpose.
5. Relevance and Utility of Seized Documents under the Customs Act
The appellants argued that there was no material to show that the documents seized were relevant or useful to the proceeding under the Customs Act. The court rejected this argument, citing the orders of the Collector and the statements of the Superintendent, which indicated that the documents were relevant to the proceedings under the Customs Act. The court found sufficient material to support the Collector's opinion under Section 110(3) of the Customs Act.
6. Legality of Authorisation for Search under Section 105 of the Customs Act
In Civil Appeal No. 677 of 1965, the appellants contended that the authorisation for search was not legally valid as there was no averment by the Assistant Collector that the documents were "secreted." The court held that the word "secreted" must be understood in the context of the section, meaning documents kept out of the normal place with a view to conceal them or likely to be secreted. The court found that the preliminary conditions required by Section 105 were satisfied.
7. Interpretation of the Term "Secreted" in Section 105 of the Customs Act
The court interpreted the term "secreted" in Section 105 of the Customs Act to mean documents kept not in the normal or usual place with a view to conceal them or likely to be secreted. The court rejected the appellant's argument that the term meant hidden or concealed in a narrow sense.
8. Requirement of Specifying Documents in Search Authorisation under Section 105 of the Customs Act
The appellants contended that the authorisation for search under Section 105 must specify the documents for which the search is to be made. The court rejected this argument, stating that the power of search under Section 105 is of a general character and not limited to specific documents. The court held that it is not possible to predict or know in advance what documents could be found and which of them may be useful or necessary for the proceedings. The court emphasized that the preliminary conditions required by Section 105 must be strictly satisfied before exercising the power of search.
Conclusion
The court dismissed all the appeals, holding that the appellants had made out no case for the grant of a writ. The initial search and seizure under Rule 126L(2) was invalid, but the subsequent seizure under Section 110(3) of the Customs Act was valid. The court upheld the legality of the search authorisations under Section 105 of the Customs Act and rejected the appellants' contentions on all issues.
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1965 (12) TMI 19
Whether all or any of the conditions mentioned in rule 48 of the IT Rules 1922 have been satisfied - It is necessary to conduct an investigation to find out whether a discretion is vested in the ITO or not by determining whether any part of the rule [rule 48(1)], had been satisfied and if it is possible to decide whether there was an error or not only after coming to the conclusion whether r. 48(1) has been satisfied, it appears to me the error is not an error apparent on the face of the record
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1965 (12) TMI 18
Issues Involved:
1. Vires of the Gift-tax Act, 1958.
2. Legislative competence of Parliament to enact the Gift-tax Act.
3. Distinction between tax on lands and buildings and tax on gifts of lands and buildings.
4. Validity of Section 4(c) of the Gift-tax Act regarding bona fide satisfaction of the Gift-tax Officer.
Detailed Analysis:
1. Vires of the Gift-tax Act, 1958:
The primary issue in both writ petitions was the challenge to the vires of the Gift-tax Act, 1958. The petitioners contended that the Act was ultra vires of Parliament.
2. Legislative Competence of Parliament:
The petitioners argued that neither the Central legislature nor the State legislature could pass the impugned law. The contention was based on the interpretation of Article 248 and Entry 97 of List I of the Seventh Schedule of the Constitution. The court held that Article 248 grants Parliament exclusive power to legislate on matters not enumerated in the State or Concurrent Lists. Entry 97 further includes any tax not mentioned in either of those lists. The court found no specific entry relating to tax on gifts, thus bringing it under the ambit of Article 248 and Entry 97. The court concluded that the impugned legislation is fully protected by Article 248 read with Entry 97, and therefore, Parliament had the legislative competence to enact the Gift-tax Act.
3. Distinction Between Tax on Lands and Buildings and Tax on Gifts of Lands and Buildings:
The petitioners argued that the Gift-tax Act, in so far as it includes gifts of land and buildings, fell within the State legislature's domain under Entry 49 of List II. The court rejected this argument, stating that there is a clear difference between a tax on lands and buildings and a tax on gifts of lands and buildings. Entry 49 contemplates a tax on ownership or enjoyment of lands and buildings, not on the transfer of the same. The court cited several precedents to support its view, concluding that the impugned Act was validly passed by Parliament by virtue of Article 248 read with Entry 97.
4. Validity of Section 4(c) of the Gift-tax Act:
The petitioner in Writ Petition No. 566 of 1961 contended that the Gift-tax Officer had not recorded a finding that the impugned transaction was bona fide, which is a condition precedent under Section 4(c) of the Act. The court agreed that the transaction could be treated as a gift only if the Gift-tax Officer was bona fide satisfied that it was such. The court found that there was no such finding in the present case and remanded the case to the appellate authority for rehearing and deciding it in accordance with the provisions of Section 4(c) of the Act.
Judgment:
- Writ Petition No. 1291 of 1959: Dismissed with costs.
- Writ Petition No. 566 of 1961: Allowed. The orders passed by the appellate authority were quashed, and the case was remanded to the appellate authority for rehearing in accordance with law. Costs in this writ petition were to be borne by the parties.
This comprehensive analysis ensures that the legal terminology and significant phrases from the original judgment are preserved while providing a detailed understanding of the issues and the court's reasoning.
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1965 (12) TMI 17
Issues:
1. Determination of the status of the petitioner as Hindu joint family for income-tax and wealth-tax assessment purposes.
Analysis:
The case involved a question referred to the High Court by the Wealth-tax Tribunal regarding the status of the petitioner as a Hindu joint family for taxation purposes. The petitioner had obtained his share from ancestral property after partition, becoming the sole coparcener with his wife. The central issue was whether he should be assessed as an individual or as a Hindu undivided family for income-tax and wealth-tax purposes.
The Tribunal relied on the Privy Council decision in Kalyanji's case and subsequent decisions, concluding that the petitioner should be assessed as an individual. However, the Orissa High Court, in Rukmini Bai Rathor v. Commissioner of Wealth-tax, held that ancestral property in the hands of a sole surviving coparcener should be considered as the property of a Hindu undivided family due to the potentiality of another coparcener coming into existence. The judgment emphasized analyzing the nature of rights of existing and potential members to determine the property's status.
Contrary decisions from the Rajasthan and Madras High Courts, following Kalyanji's case, assessed the property in the hands of a sole surviving coparcener as individual property. The Mysore High Court, in Commissioner of Wealth-tax v. Lt. Col. D. C. Basappa, took a view consistent with the Orissa High Court's judgment, relying on the Ceylon case mentioned earlier.
The High Court emphasized that the potentiality of a coparcener coming into existence, either by law or nature, should determine the property's status. As long as this potentiality exists, the property must be considered that of a Hindu undivided family. The judgment highlighted the complexity that could arise if the property's status fluctuated based on the coparcener's presence, advocating for a consistent approach based on the potentiality of coparcenary.
Ultimately, the High Court answered the question in the affirmative, determining the petitioner's status as a Hindu joint family for assessment purposes. The judgment underscored the importance of considering the potentiality of coparceners and upheld the Orissa High Court's reasoning. Justice S. N. P. Singh concurred with the decision, affirming the assessment of the petitioner as a Hindu joint family.
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1965 (12) TMI 16
Issues Involved:
1. Reasonable opportunity of being heard.
2. Validity of service of notice.
3. Jurisdiction under section 33B of the Income-tax Act, 1922.
4. Alternative remedy under the Income-tax Act.
5. Repeal of section 33B and its implications.
Detailed Analysis:
1. Reasonable Opportunity of Being Heard:
The primary issue in this appeal was whether the respondent was given a reasonable opportunity of being heard as required under section 33B of the Income-tax Act, 1922. The respondent received a notice on May 8, 1963, for a hearing scheduled on May 9, 1963. The respondent contended that the short notice period made it impossible to produce the necessary evidence and requested additional time, which was denied. The court examined whether the service of the notice provided sufficient time for the respondent to prepare for the hearing.
2. Validity of Service of Notice:
The appellant argued that the notice was served in accordance with the law, citing sections 63 of the Income-tax Act, 1922, and section 282 of the Income-tax Act, 1961. Notices were sent to both the Basirhat address and 20 Mullick Street, Calcutta, by registered post and affixing copies. The service by affixing was challenged by the respondent, who argued that the serving officer did not use due and reasonable diligence as required by Order V, rule 17 of the Code of Civil Procedure. The court considered the Calcutta amendment to rule 17, which allows service by affixing if the defendant is absent and there is no likelihood of finding them within a reasonable time. The court held that the service of the notice by affixing at both addresses was valid under the amended rule.
3. Jurisdiction Under Section 33B of the Income-tax Act, 1922:
The respondent argued that the appellant had acted without jurisdiction as section 33B was repealed on April 1, 1962. The court noted that this point was not pressed before them as it was covered by a previous judgment (Kalawati Devi Harlalka v. Commissioner of Income-tax). The court emphasized that section 33B does not require a statutory notice like section 34; it only requires that the assessee be given an opportunity of being heard.
4. Alternative Remedy Under the Income-tax Act:
The appellant contended that the Income-tax Act provides a complete machinery for assessment and relief, and the respondent should have pursued the alternative remedy of appealing to the Tribunal under section 33B(3). The court agreed, citing Supreme Court decisions that emphasize the importance of exhausting alternative remedies before invoking the special jurisdiction of the High Court under article 226 of the Constitution. The court held that the respondent had an adequate alternative remedy and should have pursued it.
5. Repeal of Section 33B and Its Implications:
The respondent initially contended that section 33B was repealed, making the proceedings under it invalid. However, this point was not pressed before the court, as it was covered by a previous judgment. The court did not address this issue in detail, focusing instead on the other grounds of appeal.
Conclusion:
The court allowed the appeal, setting aside the judgment and order of the trial court. The rule was discharged, and the respondent was ordered to pay the costs of the appellants. The court emphasized that the service of the notice was valid under the Calcutta amendment to rule 17 of Order V of the Code of Civil Procedure, and the respondent had an adequate alternative remedy under the Income-tax Act. The appeal was allowed, and the judgment and order of Banerjee J. dated July 8, 1964, were set aside.
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1965 (12) TMI 15
Issues:
1. Whether the loss under the head "Income from property", which is exempt from taxation under section 4(3)(xii), should be set off against the assessee's income under other heads?
Analysis:
The case involved a private limited company claiming a loss of Rs. 69,265 under the head "Income from property" for the assessment year 1954-55. The company had paid interest on borrowed capital utilized in constructing a house in Calcutta, which was let out. The income from the property was not chargeable to tax due to specific provisions in the Indian Income-tax Act, 1922. The Income-tax Appellate Tribunal rejected the claim for setting off the loss against income from other heads, stating that as the property income was exempt from tax, the loss could not be set off under section 24(1) of the Act.
The High Court analyzed the relevant provisions of the Act, highlighting that the exemption under section 4(3)(xii) for income from the property in question was absolute and not to be included in the total income of the assessee. Therefore, the computation or determination of income or loss under section 9 of the Act did not arise. The Court emphasized that for a set-off under section 24(1), the loss must be of taxable profits or gains. Since the property income was not chargeable to tax, the loss could not be set off against income from other heads as per section 6 of the Act.
The Court discussed precedents where the Supreme Court clarified that set-off provisions apply to taxable profits or gains. It distinguished cases where tax-free income was involved, emphasizing that the allowance of expenditure under the Act does not depend on producing taxable income. The Court held that the loss under the exempt property income could not be set off against income from other heads. The judgment favored the department, requiring the assessee to bear the cost of the reference.
In conclusion, the Court answered the question in favor of the department, ruling that the loss under the exempt property income could not be set off against income from other heads. The judgment emphasized the distinction between taxable and tax-free income for the purposes of set-off under the Income-tax Act, 1922.
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1965 (12) TMI 14
Issues:
1. Nature of property in the hands of Sita Ramayya obtained under the will.
2. Nature of the estate after Sita Ramayya's death in the hands of his widow and son.
Detailed Analysis:
The judgment delivered by the High Court of Andhra Pradesh pertains to an income tax matter where the main issue was whether the income from property and money-lending was correctly assessed in the status of a Hindu undivided family. The case involved the property of Atyam Subbiah, who bequeathed his extensive properties to Chinna Sita Ramayya under a will. The court analyzed the nature of this property and concluded that it was separate property in the hands of Sita Ramayya, not ancestral or joint family property. The court referred to legal principles to establish that the property devolved on Sita Ramayya beyond recall, regardless of subsequent events like adoption. The intention of the testator was deemed to be exclusively for the benefit of Sita Ramayya, with unfettered powers of disposition and enjoyment.
Regarding the estate after Sita Ramayya's death, the court determined that his widow and son were entitled to equal shares in the property under the Hindu Succession Act. The widow's limited interest was transformed into an absolute right by section 14 of the Hindu Succession Act, as she was in actual possession of the property. The court rejected the income tax authorities' argument that the property was joint family property, emphasizing that the widow and minor son filed their returns as individuals, not as a Hindu undivided family. The court held that the property was not joint family property and, therefore, the assessment in the status of a Hindu undivided family was incorrect. Consequently, the court answered the main question in the negative, ruling in favor of the assessee and awarding costs.
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1965 (12) TMI 13
Income escaping from escapement - reopening of assessment u/s 148 on the ground that interim payments made by the Government under the Madras Estates Abolition Act XXVI of 1948 are income - It could not be said that the power to pay interest under the Land Acquisition Act on the market value of the property acquired till such time as the compensation is not deposited is ultra vires the powers of the legislature - petition of assessee is dismissed
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1965 (12) TMI 12
Tribunal cannot exercise the functions of the ITO and decide that an assessment can be sustained under cl. (a) or cl. (b) of sub-s. (1) of section 34 - If the Tribunal does not enjoy that jurisdiction, subsequenlty it does not have jurisdiction to convert an assessment made under cl. (a) to one under cl. (b).
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1965 (12) TMI 11
Order made by CIT u/s 33B - CIT acted on evidence or materials collected by the income-tax department behind the back of the respondent. The order made by CIT cannot be held to be bad on the ground that it had been made in violation of the principles of natural justice - revenue's appeal is allowed
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1965 (12) TMI 10
Issues Involved:
1. Jurisdiction of the Income-tax Officers in making assessment orders.
2. Violation of principles of natural justice.
3. Validity of assessments based on initial capital and income from business.
Detailed Analysis:
1. Jurisdiction of the Income-tax Officers in making assessment orders:
The appellant received a notice under section 33B of the Income-tax Act, 1922, challenging the jurisdiction of the Income-tax Officers who made the assessment orders for the years 1953-54 to 1961-62. The Commissioner found that the Income-tax Officer, "B" Ward, 24-Parganas, had no jurisdiction over the appellant, rendering all the assessments ab initio null and void. The appellant provided various addresses in her returns, none of which corresponded to the jurisdiction of the assessing officers. The court upheld the Commissioner's decision, emphasizing that the assessment orders were made without jurisdiction based on the appellant's own statements in the returns. The court concluded that the materials furnished by the appellant herself were sufficient to determine the lack of jurisdiction, and it was unnecessary to rely on additional evidence regarding her residence in East Pakistan.
2. Violation of principles of natural justice:
The appellant argued that the Commissioner relied on materials collected behind her back without giving her an opportunity to rebut them, thus violating the principles of natural justice. The court acknowledged that if an order is made relying on undisclosed materials, it must be treated as bad for violating natural justice. However, the court found that the Commissioner primarily relied on the appellant's own statements in her returns to conclude that the assessments were made without jurisdiction. The court referred to several Supreme Court decisions, including Union of India v. T. R. Varma and State of Mysore v. Shivabasappa Shivappa Makapur, which established that a party must be given an opportunity to contest materials used against them. The court concluded that there was no violation of natural justice as the primary basis for the Commissioner's order was the appellant's own admissions.
3. Validity of assessments based on initial capital and income from business:
The Commissioner found that the appellant's claims regarding initial capital and income from pawn-broking business were unsupported by evidence. The appellant did not maintain proper books of account, and there was no evidence of her carrying on a pawn-broking business. The court noted that the assessments were made hastily without proper enquiry, as evidenced by the short time between the filing of returns and the issuance of assessment orders. The court upheld the Commissioner's decision to set aside the assessments, finding that the appellant had full knowledge of the facts and that the assessments were made without proper investigation. The court also referenced the Supreme Court decision in S. N. Namasivayam Chettiar v. Commissioner of Income-tax, which allowed the use of undisclosed materials if they did not form the basis of the decision.
Conclusion:
The court dismissed the appeal, affirming the Commissioner's order to set aside the assessment orders for the years 1953-54 to 1961-62. The court found that the assessments were made without jurisdiction and in violation of the principles of natural justice, as the appellant was not given an opportunity to rebut undisclosed materials. The court also upheld the Commissioner's findings regarding the lack of evidence for the appellant's claims of initial capital and income from business. The appeal was dismissed with costs, and the judgment was certified for two counsel.
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1965 (12) TMI 9
Legal expenses - expenditure incurred in resisting an application by shareholders of the assessee-company under s. 153C of the Companies Act, questioning the appointment of some of the directors of the assessee-company, cannot be considered to be an expenditure laid out or expended wholly and exclusively for the purpose of the business of the company - not allowed as a deduction under s. 10(2)(xv)
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1965 (12) TMI 8
Issues Involved:
1. Interpretation of "set up" under Section 5(1)(xxi) of the Wealth-tax Act.
2. Eligibility for exemption under Section 5(1)(xxi) for the assessment year 1957-58.
3. Commencement of the five-year exemption period under Section 5(1)(xxi).
Detailed Analysis:
1. Interpretation of "set up" under Section 5(1)(xxi) of the Wealth-tax Act:
The primary issue was whether the new unit of the assessee-company was "set up" after the commencement of the Wealth-tax Act on April 1, 1957. The Wealth-tax Officer and the Appellate Assistant Commissioner held that "set up" meant the unit must be fully established and ready to start production. Since the unit was not ready by the valuation date (December 31, 1956), they denied the exemption.
The Tribunal, however, interpreted "set up" as meaning "completed or ready to commence business." This interpretation was supported by dictionary definitions and judicial precedents, such as *Ramaraju Surgical Cotton Mills Ltd. v. Commissioner of Wealth-tax* and *Commissioner of Wealth-tax v. Travancore Cements Ltd.*, which defined "set up" as "ready to commence business." The High Court agreed with this interpretation, stating that "set up" does not cover the entire process from commencement to completion but refers to the final stage when the unit is ready to be commissioned.
2. Eligibility for exemption under Section 5(1)(xxi) for the assessment year 1957-58:
The second issue was whether the assessee-company was eligible for the exemption in the assessment year 1957-58. The Wealth-tax Officer and the Appellate Assistant Commissioner argued that the exemption period should start only if the operations for establishing the unit commenced after the valuation date (December 31, 1956).
The Tribunal and the High Court rejected this argument, stating that the exemption under Section 5(1)(xxi) applies to units set up after the commencement of the Act, regardless of when the operations to establish the unit began. The High Court emphasized that the legislative intent was to encourage future industrial expansion, and thus, the exemption was available for units set up after April 1, 1957, even if the establishment operations began earlier.
3. Commencement of the five-year exemption period under Section 5(1)(xxi):
The final issue was determining the commencement of the five-year exemption period. The Tribunal held that the exemption period should start from the assessment year 1957-58, as the unit was set up after the Act's commencement. The High Court noted that the second proviso to Section 5(1)(xxi) specifies that the exemption applies for five successive assessment years starting from the year following the commencement of operations to establish the unit.
The High Court clarified that, in this case, the exemption period could start either from May 1955 (when the operations began) or from April 1, 1957 (the first date of the assessment year 1957-58). Since the assessment year 1957-58 falls within five years of either date, the assessee-company was entitled to the exemption for that year.
Conclusion:
The High Court concluded that the assessee-company was entitled to the exemption under Section 5(1)(xxi) for the amount of Rs. 33,01,964 for the assessment year 1957-58. The interpretation of "set up" was affirmed as meaning "completed or ready to commence business," and the exemption period was confirmed to start from the assessment year 1957-58, regardless of when the operations to establish the unit began.
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9911796707
