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Case Laws
Showing 61 to 76 of 76 Records
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1965 (4) TMI 17
Whether the dividend income of 300 shares of the Simbhaoli Sugar Mills Private Ltd. transferred by the assessee to S. Raghbir Singh Trust was the income of the assessee liable to tax ?
Whether the assessee was entitled to claim deduction of ₹ 19,856 paid as interest to R. B. Seth Jessa Ram Fatch Chand against the dividend income of the aforesaid 300 shares ?
Held that:- Unable to accept the argument of counsel for the revenue that by the use of the expression " indirectly " in the first proviso the legislature sought to bring within the purview of clause (c) cases where the settlor was under the guise of a trust seeking to discharge his own liability. The proviso contemplates cases in which there is a provision for retransfer of the income or assets and such provision is for retransfer directly or indirectly. It also contemplates cases where there is a provision which confers a right upon the settlor to reassume power over the income or assets directly or indirectly. It is the provision for retransfer directly or indirectly of income or assets or for reassumption of power directly or indirectly over income or assets which brings the case within the first proviso. Cases in which there is a settlement, but there is no provision in the settlement for retransfer or right to reassume power do not fall within the proviso, even if as a result of the settlement, the settlor obtains a benefit. Appeal dismissed.
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1965 (4) TMI 16
Whether on the facts and in the circumstances of the case the disallowance of a sum of ₹ 19,796 out of the remuneration paid to Mr. T. M. Ayyadurai is justifiable ?
Whether a sum of ₹ 17,346, which represented compensation received by the assessee for the loss of the managing agency of the Nellore Power and Light Company Ltd., is income liable to tax?
Held that:- It is true that if, on a consideration of the relevant materials, the Appellate Tribunal is of the opinion that a particular remuneration stipulated to be paid is not bona fide or is unreasonable, the High Court in exercising its advisory jurisdiction has no power to interfere with that opinion. But the material circumstances relating to the nature of the contract, the services to be performed and the nature of the duties by the employee were not at all taken into account by the Tribunal and the income-tax authorities. We, therefore, agree with the High Court that the first question should be answered in the negative.
The High Court was of the opinion that compensation received for taking over the Nellore Power and Light Company Ltd. was a capital receipt not liable to be taxed, and on the materials placed before us, we are unable to disagree with the High Court on this question. Appeal dismissed.
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1965 (4) TMI 15
Whether the depreciation allowance should be computed in respect of the 10/16th share in the factory on the basis of the original cost to the larger joint family or on the basis of the valuation at which the assessee took over the factory?
Held that:- Depreciation allowance should be computed on the basis of the valuation at which the assessee took over the assets. Appeal allowed.
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1965 (4) TMI 13
Whether the provisions of section 41 of the Income-tax Act, 1922 can be said to apply to the assessees in this case ?
Held that:- In terms of section 41 of the Act the nattamaigars are the managers of the properties on behalf of others and are entitled to receive the income therefrom on behalf of them. With the result, the income which they hold on behalf of the kasupangudars can be assessed only in their hands in the manner prescribed thereunder.
The High Court has rightly answered the question referred to it in the affirmative and in favour of the assessee that the managing trustee qua the surplus income managed the property and derived the income on behalf of the kasupangudars and that the assessment should be made on the said managing trustee to the extent of the interest of each of the kasupangudars in the income received by him . Appeal dismissed.
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1965 (4) TMI 12
Whether the profit arising to the assessee-company from miscellaneous insurance transactions of a mutual character was assessable under the Indian Income-tax Act ? and
Whether on the facts and in the circumstances of the case, if the answer to question No. (1) is in the affirmative, the balance of the profits as disclosed in the assessee-company's profit and loss account after deducting the various reserves should be the taxable profits within the meaning of section 2(6C) read with rule 6 of the Schedule of the Indian Income-tax Act ?
Held that:- It is true that the Bombay High Court was concerned with rule 2, but when we go to the Schedule and find out what is the balance of profits or surplus that has been made taxable, it does not make any difference to the construction of section 2 (6C) whether it is rule 2 that is applied or rule 6. Therefore, disagreeing with the High Court, we answer the first question in the affirmative.
Examining rule 6 in the light of this background, it seems to us that the intention of the rule is that the balance of profits as disclosed by the accounts submitted to the Superintendent of Insurance and accepted by him would be binding on the Income-tax Officer, except that the Income-tax Officer would be entitled to exclude expenditure other than expenditure permissible under the provisions of section 10 of the Act. It is common ground in this case that the reserves which were added to the balance of profits were not expenditure. Accordingly, agreeing with the High Court, we answer the second question in the affirmative. Appeal allowed in part.
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1965 (4) TMI 11
Whether, on the facts and In the circumstances of the case, the assessee was entitled to set off the business loss of ₹ 55,912 brought forward from the preceding year against the entire income including interest on securities held by the assessee ?
Held that:- Under section 24(2) of the Indian Income-tax Act, 1922 the income from the securities which formed part of the assessee's trading assets was part of its income in the business and, therefore, the loss incurred in the business in the earlier year could be set off against that income also in the succeeding years.
Thus the High Court was right in answering the question referred to it in the affirmative. Appeal dismissed.
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1965 (4) TMI 10
Whether, on the facts and in the circumstances of the case, the receipts of the assessee by the sale of loom-hours amounting to ₹ 53,460 and ₹ 1,85,230 in the assessment years 1949-50 and 1950-51 respectively were revenue receipts liable to tax under the Indian Income-tax Act?
Held that:- High Court was right in holding that the receipts from sale of "loom-hours" were in the nature of capital receipts and were not taxable. Appeal dismissed.
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1965 (4) TMI 9
Whether on a true interpretation of clause (viii) of sub-section (3) of section 4 of the Indian Income-tax Act the sum of ₹ 36,396 received by the assessee as an allowance during the previous year of the assessment year 1949-50 is revenue income liable to tax under the Indian Income-tax Act, 1922 ?
Held that:- The allowance is revenue income and not exempt from taxation as agricultural income. Therefore, we accept the appeal and answer the question referred in the affirmative
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1965 (4) TMI 8
Whether the sum representing the credit in the estate and property account for the estimated value of the rubber trees on the assessee's estate cut and used as fuel in the year of account is income liable to tax – held that receipts from such sale would be of revenue nature
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1965 (4) TMI 7
Issues:
Interpretation of section 5(1)(xiv) of the Gift-tax Act for exemption eligibility based on the circumstances of the case.
Analysis:
The High Court of Kerala was tasked with deciding whether the assessee was entitled to exemption under section 5(1)(xiv) of the Gift-tax Act concerning a gift made in the course of carrying on a business, profession, or vocation. The case involved Dr. George Kuruvilla, a practicing doctor, who gifted properties to his son, Thomas Kuruvilla, who had recently joined his father's profession. The key question was whether the gift deed satisfied the requirements of the Act.
The court highlighted the two essential criteria for exemption under section 5(1)(xiv): first, that the gift was made in the course of carrying on a business, profession, or vocation, and second, that it was made for the purpose of such business, profession, or vocation. The court noted that Dr. Kuruvilla was actively practicing as a doctor at the time of the gift, meeting the first criterion. The court dismissed the argument that a connected relation was necessary, stating that the principle from a previous Supreme Court decision was not applicable in this context.
Regarding the purpose of the gift, the court determined that it could be seen as beneficial for the orderly conduct of the business. The court emphasized that demonstrating commercial expediency and facilitating the business was sufficient, without the need to prove direct profit generation. Citing relevant precedents, the court supported its conclusion by referring to previous decisions that aligned with their interpretation.
Ultimately, the court ruled in favor of the assessee, holding that the gift met the requirements for exemption under section 5(1)(xiv) of the Gift-tax Act. The judgment would be forwarded to the Appellate Tribunal as required by law, and no costs were awarded for the reference.
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1965 (4) TMI 6
Set off of loss - If a person carries on two or more distinct businesses, the profits or losses of all of them ought to be added together and the aggregate sum so arrived at would represent his profits or gains in the business. If the net result of this calculation shows a loss, such loss may u/s 24 of the Act be set off against the profits or gains derived by the assessee from other heads of income of that year
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1965 (4) TMI 5
Fixed Assets - proviso (b) to s. 23A(1) of the IT Act was not applicable to the assessee - company is not obliged to show depreciation in its balance-sheet by way of reserves and indeed ought not to do so under the form prescribed by s. 211, depreciation cannot be considered in the context of reserves
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1965 (4) TMI 4
Issues:
Valuation of stocks for assessment year 1949-50 under the Income-tax Act, 1922.
Analysis:
The judgment delivered by Justice Masud pertains to a reference under section 66(2) of the Income-tax Act, 1922, regarding the assessment year 1949-50. The primary issue in question was whether the Appellate Tribunal correctly valued the stocks by considering both opening and closing stocks at cost to eliminate any profit or loss concerning unsold shares. The assessee, a holder of shares, valued the shares at the beginning of the year at Rs. 1,80,589 and at the end of the year at Rs. 1,65,869, claiming a loss of Rs. 15,002. The Income-tax Officer treated this as a loss from the revaluation of investment, disallowing the claimed loss. The Tribunal found that the assessee was a dealer in shares and held the shares as part of his stock-in-trade, disagreeing with the Income-tax Officer's valuation method.
The counsel for the assessee relied on legal precedents such as Gemini Pictures Circuit Ltd. v. Commissioner of Income-tax and Chainrup Sampatram v. Commissioner of Income-tax to argue that the valuation of shares should reflect the true profits or losses and that closing stock should be valued at cost price or market price, whichever is lower. However, the department's counsel contended that the assessee had not consistently followed a specific valuation method for shares in the past, citing the need for a definite and consistent valuation method. The court agreed with the department's argument, emphasizing the importance of a consistent valuation method for determining profit or loss in share dealings.
Justice Masud concluded that as the assessee had not adopted a consistent valuation method and had valued stocks arbitrarily in the past, the department was justified in valuing both opening and closing stocks at cost. Since there were no sales or purchases of shares during the accounting year, the court determined that there was neither profit nor loss regarding the shares for that year. Therefore, the question was answered in the affirmative against the assessee, who was directed to pay the costs of the reference.
Justice Mitter concurred with the decision, and the question was ultimately answered in the affirmative, upholding the department's valuation method and disallowance of the claimed loss by the assessee.
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1965 (4) TMI 3
Issues Involved:
1. Entitlement to registration of the assessee-firm for the assessment year 1958-59.
2. Genuineness of the partnership.
Detailed Analysis:
1. Entitlement to Registration:
The primary question referred to the court was whether the assessee-firm was entitled to registration for the assessment year 1958-59 under section 26A of the Indian Income-tax Act, 1922.
The assessee-firm was constituted under a deed of partnership dated December 6, 1956, and was duly registered with the Registrar of Firms on June 10, 1957. The application for registration under section 26A was made on October 8, 1957, and the Income-tax Officer granted the registration on March 16, 1959. However, the Commissioner of Income-tax cancelled this registration on March 15, 1961, under section 33B, stating that the order was erroneous and prejudicial to the interests of the revenue.
The Commissioner found that only the working partner, Baburao Narayanrao Phatak, was a genuine partner, while the remaining interest in the business was held by one Jagannath Darak in the names of the other five partners. The Commissioner based his conclusion on several facts, including the capital contributions, operational control, and financial transactions involving Jagannath Darak.
2. Genuineness of the Partnership:
The Appellate Tribunal reviewed the Commissioner's findings and considered each fact individually. It concluded that the partnership was genuine and allowed the appeal of the assessee-firm. The Tribunal's reasoning included:
- Capital Contribution: The Tribunal held that the capital emanating from Jagannath Darak did not justify a refusal of registration, citing the precedent in *Sundar Singh Majithia v. Commissioner of Income-tax* which emphasizes the real effect of the partnership instrument in governing liabilities and rights inter se.
- Operational Control: The Tribunal found it acceptable for partners to agree that one or more could operate the bank account.
- Personal Drawings: The Tribunal accepted the explanation that the partners were in affluent circumstances and did not need to draw money for personal expenses immediately.
- Non-Appearance and Evidence Discrepancies: The Tribunal accepted the reasons for Narayanlal Darak's non-appearance and considered the discrepancies in Godavari Devi's evidence as minor.
- Ante-dated Entries: The Tribunal regarded the corrections of dates in the account books as irrelevant.
- Monopoly Rights and Financial Transactions: The Tribunal found no issue with the monopoly rights transfer and financial transactions involving Jagannath Darak, considering them as normal business operations given the close family relations and interest charges.
The Tribunal concluded that the first five partners were not mere dummies for Jagannath Darak and that the partnership was genuine.
Legal Precedents and Principles:
The judgment referred to several legal precedents and principles:
- R. C. Mitter & Sons v. Commissioner of Income-tax: The Supreme Court outlined the essential conditions for a firm to be entitled to registration, including the genuineness of the partnership.
- Commissioner of Income-tax v. Sivakasi Match Exporting Co.: The jurisdiction of the Income-tax Officer is confined to ascertaining whether the application for registration is in conformity with the rules and whether the firm is genuine or bogus.
- Commissioner of Income-tax v. A. Rahim & Co.: The Supreme Court held that the mere fact that a partner is a benamidar does not preclude registration if the partnership is genuine and legal.
- G. Venkataswami Naidu & Co. v. Commissioner of Income-tax: The court can challenge a conclusion of fact if it is not supported by legal evidence or is perverse.
- Omar Salay Mohamed Sait v. Commissioner of Income-tax: The Tribunal must consider all relevant evidence and not base its findings on suspicions or conjectures.
Conclusion:
The court held that the Appellate Tribunal's conclusion that the partnership was genuine was rationally possible and supported by the evidence. The answer to the question referred was in the affirmative, in favor of the assessee-firm, and the firm was entitled to its costs fixed at Rs. 500. The judgment emphasized that the Tribunal's findings were based on a careful consideration of all relevant evidence and were not influenced by conjectures or suspicions.
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1965 (4) TMI 2
Issues Involved:
1. Assessability of income from properties under section 9 of the Indian Income-tax Act.
2. Interpretation of the deed of dedication (arpannamah).
3. Legal status and ownership of the debutter properties.
4. Role and liability of the shebait or trustee in managing debutter properties.
Issue 1: Assessability of Income from Properties under Section 9 of the Indian Income-tax Act
The primary question was whether the income from properties covered by the deed of dedication dated April 28, 1896, was assessable under section 9 of the Indian Income-tax Act in the hands of the respondent-assessee. The Tribunal found that no trust in the technical sense had been created by the arpannamah and that there was no formal conveyance in favor of any trustee or the idols. The Tribunal held that the idols were the legal owners of the property dedicated to them, and the assessee, as a shebait or manager, had no beneficial interest in the property. Consequently, the Tribunal concluded that the assessee was not liable to be taxed under section 9, and the assessments made in respect of the income from property could not be sustained.
Issue 2: Interpretation of the Deed of Dedication (Arpannamah)
The deed of dedication was examined in detail, and it was found that the translation of the arpannamah was not accurate. An official translation was obtained and marked as an exhibit. The deed indicated that the settlors divested themselves of all their rights, title, and interest in the properties and created a debutter for the seva and worship of various deities. The properties were put in the custody of Purna Chandra Daw, who was to act as the first trustee, with the descendants of the settlors becoming trustees according to seniority in age.
Issue 3: Legal Status and Ownership of the Debutter Properties
The court examined the position of a person who is a shebait of a deity or who holds properties belonging to a debutter estate described as a trustee in the deed of settlement. It was determined that the properties vested in the deities, who were the owners of the property. The shebait or trustee had the custody of the deities and the properties, the right to manage them, and the right to let out portions thereof and sue and be sued in respect of the property. However, the shebait was not the owner of the property. The property never vested in the shebait so as to make him the full owner, and therefore, no assessment could be made on him under section 9.
Issue 4: Role and Liability of the Shebait or Trustee in Managing Debutter Properties
The shebait or trustee was found to be a mere custodian of the property, with the duty to carry out the daily seva, puja, and periodical rites, and to preserve the debutter property. The shebait was to spend the income of the property towards deb seva work and repairs, and invest any surplus in purchasing property to be made debutter. The shebait had only a limited right of residence in some of the debutter properties. The court concluded that the shebait could not be assessed under section 9 of the Act by describing him either as shebait or as trustee for the deities.
Conclusion
The court answered the question in the negative and in favor of the assessee, concluding that Pulin Chandra Daw could not be assessed under section 9 of the Act. The judgment emphasized that the deities were the legal owners of the debutter properties, and the shebait, as a mere custodian, did not have the ownership required for assessment under section 9. The answer to the question proposed was in favor of the assessee, who was awarded the costs of the reference.
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1965 (4) TMI 1
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the transactions between the assessee and Messrs. Kedar Nath Hariram were speculative transactions within the meaning of the expression used in section 24(1) -Whether, Tribunal erred in rejecting the set-off of the loss claimed by the assessee under section 24(1)
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9911796707
