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Showing 81 to 100 of 106 Records
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1967 (4) TMI 26
Issues Involved:
1. Whether the loss of Rs. 1,93,750 due to enemy bombing is an allowable deduction under section 10 of the Indian Income-tax Act.
2. The distinction between business losses of stock-in-trade and capital assets.
3. The applicability of ordinary commercial principles in computing business profits and losses.
4. The relevance of prior judicial decisions in determining the nature of business losses.
Issue-Wise Detailed Analysis:
1. Allowable Deduction Under Section 10 of the Indian Income-tax Act:
The court examined whether the loss of Rs. 1,93,750 due to enemy bombing could be deducted under section 10 of the Indian Income-tax Act. The assessee argued that the loss should be deductible as it was part of the stock-in-trade of his money-lending business. The department contended that the loss represented capital assets and thus was not allowable. The Tribunal had initially upheld the department's view, stating that such loss was not incidental to the business as per the Supreme Court's decision in Badridas Daga v. Commissioner of Income-tax.
2. Distinction Between Business Losses of Stock-in-Trade and Capital Assets:
The court emphasized that the authorities below misdirected themselves by treating the destruction of stock-in-trade as a business loss requiring specific tests for deduction. Instead, the court noted that the destruction of stock-in-trade should be reflected in the accounting procedure, not as a loss incidental to the trade, but as part of the computation of profits and gains. The court cited the English decision in Green v. Gliksten & Son Ltd., which dealt with the destruction of stock-in-trade and how it should be accounted for in business profits.
3. Applicability of Ordinary Commercial Principles in Computing Business Profits and Losses:
The court highlighted that ordinary commercial principles should be applied in computing business profits and losses. Losses that are non-capital in nature and incidental to the trade should be allowable deductions. The court referred to prior decisions, including the Bombay High Court's decision in Pohoomal Bros. v. Commissioner of Income-tax, which applied the principles from Green v. Gliksten & Son Ltd. to a similar case of loss due to enemy action.
4. Relevance of Prior Judicial Decisions in Determining the Nature of Business Losses:
The court discussed the relevance of prior judicial decisions, including Badridas Daga v. Commissioner of Income-tax and Commissioner of Income-tax v. Nainital Bank Ltd. The court distinguished these cases by noting that they involved loss of money, which does not require further computation for accounting purposes. In contrast, the loss of stock-in-trade, such as goods destroyed by enemy action, should be accounted for in the computation of business profits and gains. The court upheld the principles stated in Pohoomal Bros. v. Commissioner of Income-tax and Motamal v. Commissioner of Income-tax, which allowed deductions for the loss of stock-in-trade on ordinary commercial principles.
Conclusion:
The court concluded that the loss of Rs. 1,93,750 due to enemy bombing was an allowable deduction under section 10 of the Indian Income-tax Act. The decision of the Bombay High Court in Pohoomal Bros. v. Commissioner of Income-tax, following the Patna High Court's decision in Motamal Jethumal v. Commissioner of Income-tax, set out the correct principles to be applied. The question was answered in favor of the assessee, allowing the deduction for the loss of stock-in-trade. The assessee was awarded costs, with an advocate's fee of Rs. 250.
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1967 (4) TMI 25
Computing the net-wealth - Tribunal was right in directing that the value of the depreciable assets should be included in the net wealth after allowing normal depreciation in place of the balance-sheet value. The Tribunal was not, however, right in directing the WTO to do so according to the computation for the purposes of income-tax assessment
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1967 (4) TMI 24
Issues:
Validity of notices issued under section 34(1)(b) before an order under section 23A(1) was made.
Analysis:
The case involved references under section 66(1) of the Indian Income-tax Act, 1922, where the common question was whether action under section 34(1)(b) could be initiated against shareholders before an order under section 23A(1) was passed in the assessment of the company. The assessees were shareholders in a company, and proceedings were initiated against them under section 34(1)(b) before an order under section 23A(1) was made. The key issue was the validity of the notices issued under section 34(1)(b) in this scenario.
Section 23A(1) of the Act deals with the distribution of profits as dividends by a company, and it was contended that once an order is made under this section, the dividends are deemed to have been distributed among shareholders. However, until such an order is made, no income can be said to have accrued in fact or law. Section 34(1)(b) allows the Income-tax Officer to initiate proceedings if there is reason to believe that income has escaped assessment. In this case, the Income-tax Officer issued notices under section 34(1)(b) before an order under section 23A(1) was made, raising questions about the basis for believing income had escaped assessment.
The court referred to previous judgments emphasizing that the fictional income created by section 23A(1) only comes into existence after an order is made under that section. The income must be deemed to have existed for the purpose of assessment only after such an order. The court highlighted that the requirements of section 34(1)(b) must be strictly construed, as it is a penal provision. As the conditions of section 34(1)(b) were not met in this case, the action against the assessees was deemed barred by time once the order under section 23A(1) was made.
In conclusion, the court answered the question in the negative, stating that no action under section 34(1)(b) could have been taken against the assessees based on the notices issued before the order under section 23A(1). The department was directed to pay the costs of the references, with the advocate's fee specified.
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1967 (4) TMI 23
Issues Involved:
1. Whether the department is a creditor and the application is maintainable.
2. Whether the application for relief under section 559(1) of the Act is barred by time.
3. Whether the company was wound up to defraud the creditors in general and the applicant-department in particular.
4. Whether the directors have not made any provision for income-tax demand against the company before the company went into voluntary liquidation.
5. Whether the liquidator was evasive and non-cooperative in respect of the pending assessment and acted with a mala fide and fraudulent intention.
6. Whether the department was deliberately kept in the dark about the liquidation proceedings.
7. Whether the department-petitioner is entitled to have the dissolution declared void under section 559(1) of the Act.
Detailed Analysis:
Point 1:
The court held that the Income-tax Officer, Companies Circle, could maintain the application as a creditor since a creditor is a person interested. The regular assessment order for the assessment year 1958-59 was passed on March 20, 1963, and the application was made on June 14, 1965. Therefore, the application is maintainable.
Point 2:
The court interpreted section 559(1) of the Companies Act, 1956, to mean that the application should be made within two years of the date of dissolution, but the court could pass an order at any time thereafter. This interpretation follows the reasoning in the case of In re Scad Ltd. Thus, the relief prayed for under section 559(1) of the Act is not barred by time.
Point 3:
The court examined the special resolution for voluntary winding-up dated May 16, 1960, and found no evidence to support the allegation that the company went into voluntary liquidation to defraud the creditors in general and the income-tax department in particular. The debts and assets of the company were disclosed, and no creditor had complained about the voluntary winding-up. Therefore, the point was held against the petitioner-department.
Point 4:
The regular assessment for the year 1958-59 was made on March 20, 1963, after the final account of the winding-up was registered by the Registrar on March 15, 1963. The court found no omission in noting the income-tax demand and concluded that the question of making provision for the income-tax demand before the special resolution for voluntary winding-up did not arise.
Point 5:
The court rejected the argument that the liquidator acted with an ulterior motive by obtaining adjournments from the Income-tax Officer. The court presumed that the adjournments were granted for good and sufficient reasons and found no evidence of fraudulent intent. The petitioner did not provide particulars of the adjournments granted, and the court noted that the Income-tax Officer was informed about the liquidation proceedings.
Point 6:
The Registrar of Companies stated that he had informed the Income-tax Officer, Nalgonda, about the liquidation by letter dated December 17, 1960. The court found that the letter was directed to the concerned office and reached the officer on January 23, 1961. Therefore, the court did not accept the petitioner's allegation that the department was deliberately kept in the dark about the liquidation proceedings.
Point 7:
The court held that fraud must be strictly proved to set aside the dissolution, as established in cases such as In re Pinto Silver Mining Company and Coxon v. Gorst. Since the fraud alleged by the petitioner was not proved, the petitioner was not entitled to the relief prayed for.
Conclusion:
The petition was dismissed without costs as the petitioner failed to prove the allegations of fraud and other claims.
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1967 (4) TMI 22
Issues:
Assessment revision by Commissioner of Agricultural Income-tax based on a partition deed.
Analysis:
The revision case involved the Commissioner of Agricultural Income-tax revising the assessment order of the Agricultural Income-tax Officer based on a partition deed executed by the assessee. The Commissioner took up the case suo motu and held that the partition deed amounted to an indirect transfer of property by the assessee to his wife and minor children, attracting specific provisions of the Madras Agricultural Income-tax Act, 1955. The Commissioner set aside the levy of agricultural income-tax and directed reassessment, which led to the filing of the revision case by the assessee.
The key contention in the case was the interpretation of the partition deed executed by the assessee. The High Court analyzed the document, noting that the assessee expressed his intention to treat the properties as joint family assets and divided them between himself, his wife, and children. The court observed that the deed indicated the assessee's desire to impress the self-acquired properties with a joint family character, continuing from prior joint family arrangements.
The High Court referred to established legal principles and precedents to support its decision. Citing cases such as M. K. Stremann v. Commissioner of Income-tax and Damodar Krishnaji Nirgude v. Commissioner of Income-tax, the court emphasized that when an assessee converts self-acquired property into joint family property and divides it among family members, it does not constitute an indirect transfer attracting tax implications. The court highlighted that the intention of the owner to abandon separate rights and invest property with joint family character is crucial, as formalities are not required for such conversions.
Ultimately, the High Court ruled in favor of the assessee, setting aside the Commissioner's order and reinstating the assessment order by the Agricultural Income-tax Officer for the relevant year. The court found that the partition deed indicated the assessee's intention to treat the properties as joint family assets, aligning with established legal principles regarding the treatment of self-acquired property in joint family contexts. The assessee was awarded costs, including counsel fees, as the petition was allowed.
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1967 (4) TMI 21
Issues Involved:
1. Validity of the gifts made by the assessee to his brother and nephew.
2. Ownership of the business run by Brijlal Nandkishore.
3. Jurisdiction of the Income-tax Officer to assess the income from the business in the hands of the assessee.
4. Consideration of evidence by the Tribunal and whether its findings were perverse.
Issue-wise Detailed Analysis:
1. Validity of the Gifts:
The primary issue was whether the gifts made by the assessee to his brother, Brijlal Lohia, and his nephew, Nandkishore Lohia, were validly made. The Tribunal initially found the gifts to be invalid, citing several reasons:
- The absence of witnesses to the gift.
- The improbability of gifting such large sums given the assessee's total assets.
- The donor's need to take an overdraft to make the gift.
- The business started by the donees was the same as that previously run by the assessee.
- The income from the business was not distributed among the partners in the first year.
- The possibility that the donees were benamidars for the assessee.
However, upon reassessment for subsequent years, the Tribunal considered additional evidence:
- The assessee's financial capability to make such gifts.
- Bank certifications and affidavits supporting the genuineness of the gifts.
- The assessee's charitable disposition and previous donations.
The Tribunal ultimately concluded that the gifts were real and valid, based on the new evidence presented.
2. Ownership of the Business:
The second issue was whether the business run by Brijlal Nandkishore was actually owned by the assessee. The Tribunal initially found that the business was a benami operation for the assessee. This conclusion was based on:
- The business being the same as the one previously run by the assessee.
- The lack of distribution of income among the partners in the first year.
- The suspicion that the donees were merely benamidars for the assessee.
Upon reassessment, the Tribunal considered:
- Registration of the firm under the Indian Partnership Act and Sales-tax Act.
- Affidavits and entries in the account books showing the distribution of profits and losses between the partners.
- Statements from banks confirming the separate accounts for the firm.
The Tribunal concluded that the business was a separate entity owned by Brijlal and Nandkishore, and not by the assessee.
3. Jurisdiction of the Income-tax Officer:
The third issue was whether the Income-tax Officer had the jurisdiction to assess the income from the business in the hands of the assessee. Dr. Radhabinode Pal, representing the assessee, conceded that if a former assessment had been made on a mistaken basis, the Income-tax Officer had the jurisdiction to reassess the income. The court, therefore, answered this question in the affirmative, based on the concession made by the assessee's counsel.
4. Consideration of Evidence by the Tribunal:
The final issue was whether the Tribunal's findings were perverse due to the non-consideration of important evidence, specifically the testimony of Mr. Amritlal Majumdar. The Supreme Court had previously noted that Mr. Majumdar's testimony discredited the assessee's story. However, the Tribunal, upon reassessment, considered:
- Additional evidence including affidavits, bank statements, and personal accounts.
- The financial capability of the assessee to make the gifts.
- The charitable disposition of the assessee.
The Tribunal found the new evidence convincing enough to support the assessee's version. The court noted that the Tribunal had not ignored Mr. Majumdar's testimony but found the new evidence weightier.
Conclusion:
The court concluded that the Tribunal's findings were based on a thorough consideration of all evidence, including new and additional evidence presented. The gifts were validly made, the business was a separate entity, and the Tribunal's findings were not perverse. The question referred to the court was answered in the negative, and the assessee was entitled to costs.
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1967 (4) TMI 20
Issues Involved:
1. Whether it was obligatory for the succeeding Income-tax Officer to give another opportunity of showing cause before imposing a penalty under section 28 of the Indian Income-tax Act, 1922.
Issue-wise Detailed Analysis:
1. Obligation of the Succeeding Income-tax Officer to Give Another Opportunity:
The primary issue in this case was whether the succeeding Income-tax Officer was required to provide another opportunity for the assessee to show cause before imposing a penalty under section 28 of the Indian Income-tax Act, 1922.
The facts of the case reveal that the assessee, engaged in the business of manufacturing and selling umbrellas, was assessed for the year 1957-58. The Income-tax Officer, Shri B. R. Kumbhat, issued a notice to the assessee on February 24, 1959, to show cause why a penalty should not be imposed for concealing income. The assessee did not appear in person but sent a written reply denying the concealment. Shri Kumbhat was later transferred, and his successor, Shri N. L. Jain, continued the proceedings and imposed a penalty of Rs. 5,000 on July 30, 1959, without giving a fresh opportunity for the assessee to be heard.
The court examined whether the succeeding officer was required to provide another opportunity for the assessee to show cause. The court noted that the assessee did not request a personal hearing or demand a rehearing under section 5(7C) of the Act. The court agreed with the respondent's counsel that in cases where the assessee submits a written reply and does not request a personal hearing, the succeeding officer can continue the proceedings and impose a penalty based on the written representation without providing a fresh opportunity for a hearing.
The court referred to various precedents, including the Calcutta Tanneries (1944) Ltd. v. Commissioner of Income-tax and Kanailat Gatani v. Commissioner of Income-tax and Excess Profits Tax, to understand the necessity of a rehearing by the succeeding officer. The court observed that if no witnesses were called and no arguments were advanced, the succeeding officer could continue from where the predecessor left off, provided the successor applied his mind to the materials before him.
The court also cited Murlidhar Tejpal v. Commissioner of Income-tax and Shop Siddegowda and Family v. Commissioner of Income-tax, which supported the view that the succeeding officer could pass an order based on the explanation provided to the predecessor, as long as the assessee did not demand a rehearing.
In conclusion, the court held that in the circumstances of this case, it was not obligatory for the succeeding Income-tax Officer to give another opportunity of showing cause before imposing a penalty on the assessee under section 28 of the Act.
Additional Observations:
The court addressed an oral contention raised by the assessee's counsel, alleging that Shri N. L. Jain had mechanically signed the order without reviewing the record. The court stated that it could not entertain this allegation as it was beyond the scope of the referred question. The jurisdiction of the court under section 66 of the Act is limited to answering the specific question referred and does not extend to raising or answering different questions. The proper course for the assessee would have been to raise this issue before the Tribunal.
Conclusion:
The court concluded that it was not obligatory for the succeeding Income-tax Officer to give another opportunity of showing cause before imposing a penalty under section 28 of the Indian Income-tax Act, 1922. The parties were directed to bear their own costs.
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1967 (4) TMI 19
Issues:
1. Refusal to direct the Income-tax Appellate Tribunal to state a case under section 66(2) of the Indian Income-tax Act, 1922.
Analysis:
The Supreme Court heard an appeal against the judgment of the Allahabad High Court, which had refused to direct the Income-tax Appellate Tribunal to state a case under section 66(2) of the Indian Income-tax Act, 1922. The case involved the assessment of an appellant's income, specifically focusing on the inclusion of a sum of Rs. 2 lakhs in the total income of the appellant-assessee for the assessment year 1949-50. The Income-tax Officer contended that the sum was the revenue income of the appellant from undisclosed sources. The Appellate Assistant Commissioner initially excluded the sum from assessment but was later overruled by the Appellate Tribunal. The Tribunal found that the sum was indeed the revenue income of the appellant for the relevant accounting year. The appellant sought to challenge this decision by applying under section 66(1) of the Income-tax Act, but the Tribunal rejected the application on the grounds that the findings were factual. The appellant then approached the High Court under section 66(2) with specific questions related to the assessment year and the undisclosed income source. The High Court rejected the application, leading to the appeal before the Supreme Court.
The appellant's counsel argued that questions regarding the assessment year and the source of undisclosed income should have been referred. The Supreme Court agreed that questions related to the assessment year and the nature of the undisclosed income should have been considered for reference. The Court noted that the Appellate Tribunal had addressed the issue of the income's relevance to the accounting year but had not specifically considered the aspect of the undisclosed income source. Despite the absence of explicit mention of certain aspects in the Tribunal's order, the Court held that if an aspect of a question arises from the Tribunal's decision, it can be subject to reference. The Court found merit in the appellant's argument that serious legal questions arose from the Tribunal's order, necessitating a reference to the High Court.
In conclusion, the Supreme Court allowed the appeal, directing the Appellate Tribunal to refer the question of whether the sum of Rs. 2 lakhs was assessable in the relevant assessment year based on the accounting year and the source of the undisclosed income. The Court also ordered that the costs incurred in the appeal would be part of the overall costs in the case.
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1967 (4) TMI 18
Issues Involved:
1. Applicability of the first proviso to section 12B(2) of the Income-tax Act.
2. Determination of the "full value of the consideration" for the sale of shares.
3. Validity of the findings of the Income-tax Appellate Tribunal and the High Court.
Issue-wise Detailed Analysis:
1. Applicability of the First Proviso to Section 12B(2):
The core issue was whether the transfer of shares fell within the ambit of the first proviso to section 12B(2) of the Income-tax Act. The proviso applies if the transferor is directly or indirectly connected with the transferee and if the transfer was effected with the object of avoiding or reducing the liability under section 12B.
The Income-tax Officer and the Appellate Assistant Commissioner initially held that the conditions of the first proviso were satisfied, asserting that the respondent and the transferee were directly connected and the sale was intended to avoid tax. However, the Appellate Tribunal rejected this view, stating that the sale was not effected with the object of tax avoidance or reduction. The Supreme Court concurred with the Tribunal, noting that the transfer occurred before the enactment of section 12B and hence could not have been made with the object of avoiding liability under this section.
2. Determination of the "Full Value of the Consideration":
The appellants contended that the "full value of the consideration" should be interpreted as the market value of the shares, which was Rs. 620 per share, rather than the book value of Rs. 136 per share at which the shares were transferred. The Supreme Court rejected this contention, clarifying that the "full value of the consideration" refers to the actual price received by the transferor and not the market value. The Court emphasized that the consideration is what the transferor receives in exchange for the asset, and the term "full value" means the whole price without any deductions.
The Court noted that the legislature made a clear distinction between "full value of the consideration" and "fair market value" in the first proviso to section 12B(2). Therefore, in the absence of the conditions specified in the proviso, the main part of section 12B(2) applies, and the actual price received by the respondent must be considered.
3. Validity of the Findings of the Income-tax Appellate Tribunal and the High Court:
The Supreme Court scrutinized the findings of the Appellate Tribunal and the High Court. The Tribunal had affirmed the order of the Appellate Assistant Commissioner but rejected the applicability of the first proviso. The Tribunal's order contained ambiguous language regarding the actual price received for the shares, leading to uncertainty about its findings.
The Supreme Court observed that the Tribunal's statement of the case did not accurately reflect its order, leading to confusion. The Court concluded that the Tribunal's language was obscure and its import could not be determined. Consequently, the Supreme Court remanded the case to the Appellate Tribunal for a rehearing. The Tribunal was directed to record a clear finding on the actual price received by the respondent for the shares after giving both parties an opportunity to present evidence and explanations.
Conclusion:
The Supreme Court set aside the judgment of the Calcutta High Court dated July 15, 1963, and remanded the case to the Appellate Tribunal for rehearing. The parties were instructed to bear their own costs up to that stage. The Tribunal was tasked with recording a clear finding on the actual price received for the shares and disposing of the appeal accordingly.
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1967 (4) TMI 17
Issues Involved:
1. Competence of the Income-tax Officer to initiate proceedings under section 34(1)(b) of the Indian Income-tax Act, 1922.
2. Whether the Tribunal was right in entertaining the assessee's contention relating to the applicability of section 34(1)(b) under rule 27 of the Appellate Tribunal Rules.
3. Validity of the reassessment proceedings initiated under section 34(1)(b) on the ground of excessive relief.
Issue-wise Detailed Analysis:
1. Competence of the Income-tax Officer to Initiate Proceedings under Section 34(1)(b):
The Income-tax Officer, Central Circle, Madras, had passed orders under section 23A of the Indian Income-tax Act, 1922, deeming certain amounts as dividends distributed among shareholders for the assessment years 1946-47 to 1951-52. The company subsequently resolved to distribute Rs. 3,54,716 as dividends, which had been deemed distributed under section 23A. The Income-tax Officer later issued a notice under section 34(1)(b) to reopen the assessment for the year 1956-57, contending that excessive relief had been granted. The High Court observed that the plea of the company that reassessment proceedings under section 34(1)(b) on the ground of "excessive relief" could not be initiated must be accepted. However, it held that proceedings under section 34(1)(b) could be initiated when rebate in the payment of super-tax was granted without reducing it as required by the Finance Act, 1956, thus assessing income at too low a rate. The Supreme Court reframed the question to determine whether the Income-tax Officer was competent to initiate proceedings under section 34(1)(b) for bringing to tax the excessive rebate granted to the assessee.
2. Whether the Tribunal was Right in Entertaining the Assessee's Contention Relating to the Applicability of Section 34(1)(b) under Rule 27 of the Appellate Tribunal Rules:
The Tribunal entertained the assessee's contention regarding the applicability of section 34(1)(b) under rule 27 of the Appellate Tribunal Rules. The High Court decided in favor of the company on this issue, indicating that the Tribunal was justified in its approach. The Supreme Court did not find any fault with the Tribunal's procedure, emphasizing that the first question raised related to a matter of procedure and did not imply that the Income-tax Officer lacked the power to initiate proceedings under section 34(1)(b).
3. Validity of the Reassessment Proceedings Initiated under Section 34(1)(b) on the Ground of Excessive Relief:
The High Court held that the reassessment proceedings under section 34(1)(b) on the ground of "excessive relief" could not be sustained based on the precedent set by the Bombay High Court and affirmed by the Supreme Court in the Simplex Mills case. However, the High Court expanded the scope of the enquiry to include whether the income was assessed at too low a rate, ultimately holding that proceedings could be initiated on this ground. The Supreme Court agreed with the High Court that the rebate of tax and the reduction of such rebate are matters of measure or standards of rate, and an assessee failing to pay the full measure of tax is assessed at too low a rate. However, the Supreme Court emphasized that the High Court should have addressed all aspects of the validity of the initiation of the proceedings under section 34(1)(b), including whether the notice served was valid. The case was remanded to the High Court to determine the validity of the proceedings based on the notice issued, with the High Court directed to call for a supplementary statement of the case if necessary.
Conclusion:
The Supreme Court remanded the case to the High Court to determine whether the proceedings were validly initiated on the notice issued against the company. The High Court was instructed to consider the form and contents of the notice and the validity thereof, and to dispose of the third question in light of the reasons set out in the Supreme Court's judgment. The costs of the appeal were to be costs in the High Court.
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1967 (4) TMI 16
Hiring out of specially built vaults and providing special services to the licensees - return received by the assessee is not the income derived from the exercise of property rights only but is derived from carrying on an adventure or concern in the nature of trade. Therefore, the income arising therefrom is assessable under s. 10.
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1967 (4) TMI 15
Partnership was, dissolved - tax liability - It does not mean that where the assessment is made under s. 23(5)(a) of a registered firm and the income of each individual partner is assessed, the partners become jointly and severally liable to pay the aggregate amount of tax attributable to their various shares, in their individual assessments - revenue's appeal dismissed
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1967 (4) TMI 14
Having found that the assessee was not able to explain satisfactorily the source of the credit of ₹ 1,37,000, whether the Tribunal had any material to come to the conclusion that the addition of ₹ 1,37,000 made by the Income-tax Officer as the income from undisclosed sources should be reduced to ₹ 50,000 only ?
Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in reducing the addition of ₹ 1,37,000 to ₹ 50,000 as income from undisclosed sources?
Held that:- The High Court correctly answered the two questions in the negative by observing that the Tribunal's conclusion that out of the amount brought to tax by the Income-tax Officer only ₹ 50,000 represented income from undisclosed sources was based on no evidence.
The judgment recorded by the Tribunal has not the merit of clarity or of consistency. The Tribunal commenced by disbelieving the explanation of the assessee relating to the source of the credit entry. After some inconclusive statements it proceeded to record that it was not unlikely that the assessee had some cash on hand from profits earned in the trade from jaggery, and from assets received on partition of the joint family of which the assessee was a member. In estimating ₹ 50,000 as the income from undisclosed sources, the Tribunal merely relied upon the offer made by counsel for the assessee. This was an unsatisfactory way of disposing of the appeal. The High Court has held, and we agree with the High Court, that the judgment of the Tribunal is based on no reasoning and is on that account speculative. Appeal dismissed.
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1967 (4) TMI 13
Issues:
1. Taxability of surplus derived from the sale of shares and securities as revenue receipt under the Income-tax Act.
Analysis:
The case involved an appeal against the High Court's judgment in an Income-tax Reference, where the question was whether the surplus derived from the sale of shares and securities by the assessee was taxable as a revenue receipt. The assessee was an investment company primarily engaged in investing in shares and stocks, deriving income from dividends and interest. The department had treated the surplus from the sale of shares as capital gains or losses. The Tribunal found that the company changed its investments as part of its usual activities and held that such variations constituted business activities. However, the Supreme Court found the Tribunal's reasoning insufficient to determine taxability under the Income-tax Act.
The Tribunal accepted that the company's business was investment and that varying investments was part of its usual activities. It relied on the Scottish Investment Trust Company v. Forbes case to conclude that the surplus arising from such variations should be considered revenue income. However, the Supreme Court noted that merely varying investments does not automatically render profits taxable. It cited the Bengal and Assam Investors Ltd. v. Commissioner of Income-tax case, emphasizing that carrying on business in shares is a prerequisite for taxing profits as income. The Court highlighted the need for clear objectives behind the purchase and sale of shares, questioning the purpose behind the specific investments made by the assessee.
The Supreme Court pointed out deficiencies in the Tribunal's order, stating that it should have clearly outlined the facts accepted from the Income-tax Officer and the Appellate Assistant Commissioner. The Court directed the Tribunal to provide a more detailed statement of the case, incorporating the Court's judgment, within three months. The judgment highlighted the importance of establishing a clear business purpose behind investment activities to determine the taxability of profits derived from the sale of shares and securities under the Income-tax Act.
In conclusion, the Supreme Court found the Tribunal's reasoning insufficient to determine the taxability of the surplus derived from the sale of shares and securities as revenue receipts under the Income-tax Act. The Court emphasized the need for a clear business purpose behind investment activities and directed the Tribunal to provide a more detailed statement of the case in line with the Court's judgment.
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1967 (4) TMI 12
Issues Involved:
1. Assessability of the sum of Rs. 1,28,716 as income.
2. Determination of the assessment years for the apportioned amount.
Issue-wise Detailed Analysis:
1. Assessability of the sum of Rs. 1,28,716 as income:
The primary issue was whether the sum of Rs. 1,28,716 received by the assessees as interest on compensation was assessable as income under the Income-tax Act. The High Court of Madras answered this question in the affirmative, leading to the appeal.
The background involves the requisition and subsequent acquisition of the property "Lutterals Gardens" by the Government of Madras under the Defence of India Rules, 1939, and the Requisitioned Land (Continuance of Powers) Act, 1947. The assessees received Rs. 6,28,716 as compensation, which included Rs. 1,28,716 as interest, pursuant to the High Court's order.
The Income-tax Officer assessed the interest amount as income, which was contested by the assessees. The Appellate Assistant Commissioner supported the assessment but suggested that the income should be calculated on an accrual basis from the notification date, leading to the reopening of previous years' assessments. The Income-tax Appellate Tribunal, however, accepted the assessees' contention that the interest was a capital receipt and not taxable.
The Supreme Court referenced the case of Dr. Shamlal Narula v. Commissioner of Income-tax, where statutory interest under section 34 of the Land Acquisition Act, 1894, was deemed a revenue receipt liable to tax. It was noted that interest represents the profit or loss due to the delayed use of money, distinguishing it from the compensation for the property itself.
The assessees argued that the interest in their case was not statutory, as neither the Requisitioned Land (Continuance of Powers) Act, 1947, nor the Defence of India Act, 1939, provided for interest on compensation. They cited cases like Commissioners of Inland Revenue v. Ballantine and Simpson v. Executors of Bonner Maurice, where interest calculated as part of damages or compensation was not considered taxable income.
However, the Supreme Court distinguished these cases, noting that the interest in question arose due to statutory provisions akin to those in the Land Acquisition Act, 1894, implying an obligation to pay interest from the date of dispossession. The court concluded that the interest received by the assessees was taxable as income.
2. Determination of the assessment years for the apportioned amount:
The second issue was whether the assessment years for the apportioned amount of Rs. 1,28,716 should be determined by suitable apportionment. The High Court declined to answer this question, stating it did not arise from the Tribunal's order.
The Supreme Court did not provide a separate analysis for this issue, as the primary focus was on the assessability of the interest amount. The conclusion that the interest was taxable income inherently addressed the apportionment concern, affirming the Income-tax Officer's approach of assessing the amounts in the years they were received.
Conclusion:
The Supreme Court upheld the High Court's decision, affirming that the interest amount of Rs. 1,28,716 received by the assessees was assessable as income. The appeals were dismissed with costs, confirming that the interest was a revenue receipt liable to tax under the Income-tax Act.
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1967 (4) TMI 11
Credit entries - proceedings for reassessment commenced under s. 34 - there was evidence before the Tribunal to hold that the credit of ₹ 55,293 in the account of the wife of the assessee did not represent the sale proceeds of her gold ornaments - assessee's appeal allowed
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1967 (4) TMI 10
Claim of the assessee that he was a non-resident during the previous year relevant to the asst. yr. 1945-46 - Tribunal was justified in holding that the assessee was a resident in British India during the relevant previous year - revenue's appeal allowed
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1967 (4) TMI 9
Held that properties which had been set apart by the commissioner for the performance of sheba and worship of the deities formed part of the residuary estate of the testator and they were not dedicated for charitable purposes - question was rightly answered by the High Court against the assessee
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1967 (4) TMI 8
Enhancing the assessment of assessee - since the ITO has not applied his mind to the question of taxability or non-taxability of the amount of Rs. 5,85,000 received as remittance, the AAC had no jurisdiction to enhance the taxable income of the assessee
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1967 (4) TMI 7
HUF - business of money-lending, and maintains its accounts on cash basis - Whether the receipt of Encumbered Estate Bonds during the previous year 1947-48 amounted to receipt of cash during that previous year and not during the previous year 1948-49 when the bonds were in fact sold at less than their face value - Held, yes - assessee's appeal dismissed
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