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1966 (10) TMI 78
Winding up – Appeals from orders ... ... ... ... ..... isfaction of the Registrar of this court, the injunction will continue till the disposal of the appeal. Liberty is given to the Registrar to accept properties outside the original jurisdiction of this court as security. (c)notwithstanding anything contained in clauses (a) and (b) above, the applicant shall be only entitled to carry on day to day business of the company and not to deal with or encumber the properties of the company except as aforesaid (d)in default of conditions as in clauses (b) and (c) above the order of interim injunction shall stand vacated (e)the hearing of the appeal is expedited and the settlement of index is dispensed with. Liberty to the appellant to prepare the requisite number of cyclostyled copies of the paper book and to file the same within January 3, 1967. Liberty to mention. Costs of this application shall be costs in the appeal. Let the order be drawn up as expeditiously as possible including the order appealed against. Masud J. mdash I agree.
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1966 (10) TMI 65
Winding up - Preferential payments ... ... ... ... ..... ruction. On a true reading of sub-section (1) of section 529, that sub-section does not attract the rules of priority in section 64 of the Insolvency Act. That being so, it is unnecessary to go any further, and, as was done in Northern Bengal Co. Ltd., In re 1937 41 CWN. 458 apply the rule of statutory construction that, where a section of an Act which lays down a general rule is incorporated in another Act which gives a particular rule on the same subject, the particular rule will abrogate the general rule. (Crates on Statute Law, 6th edition, page 223). For the foregoing reasons I am, with great respect, in agreement with the conclusion reached in Secretary of State v. Punjab Industrial Bank Ltd. 1931 ILR. 12 Lah. 678 and in Northern Bengal Co. Ltd., In re 1882 20 Ch. D. 545 and, with equally great respect, I am unable to agree with the view taken in Motor Emporium Co. v. N. H. Moos 1901 1 Ch. 9. In the result, I dismiss this application with costs. Advocate s fee, Rs. 250.
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1966 (10) TMI 53
Whether, after the execution of the deed of surrender on 21st July, 1955, the income from the trust properties was exempt from income-tax under section 4(3)(i) of the Act or not?
Held that:- The exemption of the income of the trust properties from liability to income-tax was not dependent entirely on the coming into operation of clause 8, and we, therefore, think that the question framed should have been broken up into two parts as follows:
"(1) Whether clause 8 of the trust settlement made on 25th November, 1946, came into operation immediately following the declaration made by Bai Kasturbai on 21st July, 1955 ? and
(2) Whether, in the circumstances of this case, the income that accrued or arose to the trustees from the trust properties from 21st July, 1955, onwards, was exempt under section 4(3)(i) of the Act ?"
If the question is so broken up, the first question becomes unnecessary, and the second question has to be answered in favour of the respondent. The answer to the second question is the only one that is material for purposes of determining the liability of the income of the trust to tax. That question has been answered by the High Court in favour of the respondent. The appeals, therefore, fail
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1966 (10) TMI 52
Whether, having regard to the provisions of section 12B(ii), the assessee is entitled to claim a deduction from the full value of the consideration of ₹ 45,262-50P. received for the capital asset, the sum of ₹ 37,630 or any similar sum ?
Held that:- In working out capital gain or loss, the principles that have to be applied are those which are a part of the commercial practice or which an ordinary man of business will resort to when making computation for his business purposes. The principles of accounting indicated by us above are clearly the principle that must be applied in order to find out the net capital gain or loss arising out of a transaction of the nature with which we are concerned. The application of those principles indicates that the claim of the appellant that the net capital gain by her is not re resented by the whole amount of ₹ 45,262.50P. realised by her on renouncement of her right to receive the new shares was correct and that the net capital gain can only be properly computed after deducting the sum of ₹ 37,630 which approxim ately represents the loss incurred simultaneously by the appellant in her original asset of 710 old shares as a result of the depreciation in their value. The question referred to the High Court must, therefore, be answered in favour of the appellant. The appeal is, consequently, allowed, the answer returned by the High Court is set aside, and the question is answered in the affirmative. Appeal allowed.
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1966 (10) TMI 51
Whether, on the facts and in the circumstances of the case, the inclusion, in the estate of the deceased, of the amount of ₹ 10,43,050 being the trust fund, was justified in law ?
Held that:- The High Court was right in holding that though the shares were not to be delivered over to Manubhai until he attained the age of twenty-five years, the shares belonged to him since the execution of the deed of trust, and he was also beneficially entitled to the income from the shares; that his interest in the shares and the income was not an estate in remainder or reversion, nor was his interest a future interest; and that he was presently entitled to the whole income of his one-half share in the said 160 shares and after provision of maintenance and advancement, if any surplus remained, it was to be accumulated and he was the beneficial owner of the accumulation of such surplus income and but for clause 5 he could dispose it of as he willed, and if he died it was heritable by his heirs. Appeal dismissed.
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1966 (10) TMI 50
Whether the High Court in appeal did not decide whether any primary facts on which the determination of the issue of reasonable belief in non-disclosure of material facts necessary for the assessment of the previous year and escapeme nt of tax in consequence thereof depended were not disclosed, the judgment of the High Court should be set aside?
Held that:- The High Court has pointed out that no final decision about failure to disclose fully and truly all material facts bearing on the assessment of income and consequent escapement of income from assessment and tax could be recorded in the proceedings before them. It certainly was not within the province of the High Court to finally determine that question. The High Court was only concerned to decide whether the conditions which invested the Income-tax Officer with power to re-open the assessment did exist, and there is nothing in the judgment of the High Court which indicates that they disagreed with the view of the trial court that the conditions did exist. Appeal dismissed.
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1966 (10) TMI 49
Whether the unabsorbed losses incurred by the assessee in the earlier years in its life insurance business are available to be set off against its profits from general insurance business for the assessment years 1951-52 to 1954-55?
Held that:- The High Court was right in holding that the life insurance business and the general insurance business constitute the same business within the meaning of section 24(2) of the Act. Appeal dismissed.
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1966 (10) TMI 48
Whether rebate under section 15(1) of the Income-tax Act, 1922, is admissible on the premia payable as per annexure 'A' during the minority of the assessee ?
Held that:- The object of enacting section 15(1) of the Act is the encouragement of thrift and the section should hence be interpreted in such a manner as not to nullify that object. Having examined all the clauses of the contract of insurance in this case, we are satisfied that it is in substance a contract of insurance on the life of the assessee and, therefore, rebate under section 15(1) of the Act is admissible on the premium payable as per annexure " A " of the statement of the case during the minority of the assessee. For these reasons We hold that this appeal must be allowed with costs of this court and of the High Court. Appeal allowed
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1966 (10) TMI 47
Whether the receipt in question was a revenue receipt from a venture in the nature of trade?
Held that:- Under section 4(3)(vii) receipts which are of a casual and non-recurring nature are not liable to be included in the computation of the total income of the assessee ; but the rule in express terms does not apply to capital gains, receipts arising from business or the exercise of a profession or vocation and receipts by way of addition to the remuneration of an employee. On the finding recorded by the Tribunal, the receipt arose from the business of the assessees, and is not exempt under section 4(3)(vii). Appeal dismissed
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1966 (10) TMI 46
Whether such delivery constituted sale by operation of law as a result of which the assessee ceased to be the owner of the coffee, the moment it handed over the produce to the Coffee Board?
Held that:- This court held that, under the relevant provisions of the Act, as soon as the producer of coffee handed over the produce to the Coffee Board, it ceased to be the owner and income accrued to him at that point of time. That case does not Jay down the proposition that income accrues to a producer of agricultural produce before the date of disposal, use or sale.
For the years 1955-56 and 1956-57, the appellant did not submit returns of income, but applied to compound the tax under section 65 of the Act, and paid the tax determined at the rates specified in Part II of the Act. Therefrom it cannot be inferred that the produce which was sold by him in the year of account to which these appeals relate had suffered tax in the earlier years. It has to be proved that the crop sold by the appellant related to the years in respect of which he had applied to compound the tax: and on that part of the case there is no evidence. Appeal dismissed.
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1966 (10) TMI 45
Whether, on the facts and in the circumstances of the case, the taxing of the entire interest earned on the fixed deposits made out of the profits earned in Pudukottai by the assessee's branches in the Pudukottai branch of the Bank of Madurai is correct ?
Held that:- The Income-tax authorities were right in holding that the entire interest earned on fixed deposits was taxable. The question referred to the High Court by the appellate Tribunal must be answered in favour of the Income-tax Department and against the respective assessee-companies and these appeals must be allowed
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1966 (10) TMI 44
Whether, on the facts and in the circumstances of the case, the property at No. 34, Mahatma Gandhi Road, Bangalore, was correctly included in the estate of the deceased as property passing or deemed to pass on his death under section 10 of the Act?
Held that:- The insertion of the second proviso to the section must be taken to have been made deliberately by Parliament to be effective from the date of the amendment. We, therefore, see no reason for holding that the earlier provision in section 10 should be interpreted with reference to the language of the amendment brought about by the Finance Act of 1965. We accordingly reject the argument of Mr. Srinivasan on this point.
The question was examined by the Board which found that the property was purchased entirely out of the funds of, the deceased, that for the purpose of income-tax the deceased had declared the entire property as his own, and that the income therefrom was exclusively assessed in his hands. On these facts, the Board held that, though the property stood in the joint names of the deceased and his wife, she was merely a name-lender and the entire property belonged to. the deceased and was rightly included in his estate for the purpose of estate duty. In view of this finding of fact it is not possible to accept the argument of the appellant that only half the share of the property should be taken for the purpose of estate duty assessment. Appeal dismissed.
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1966 (10) TMI 43
Whether the Roza properties were held in trust or under a legal obligation wholly for a religious purpose?
Held that:- Upon the facts found by the Appellate Tribunal we are of opinion that the Roza properties were held for a wholly religious purpose of a public character and therefore the income of the Roza properties was exempt from assessment under section 4(3)(i) of the Act. The appellant is entitled to exemption from being taxed on the ground that the income was derived from property held under a legal obligation wholly for a religious purpose. Decided in favour of the assessee
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1966 (10) TMI 42
Whether on a proper construction of the partnership deed dated March 19, 1950, the firm sought to be registered for the assessment year 1953-54 can be said to have been constituted under an instrument of partnership specifying the individual shares of the partners as required by section 26A of the Act ?
Held that:- The firm was entitled to be registered and that registration could not be refused merely because the deed of partnership set out in paragraph 8 therein the collective share of the yarn shop as 6 annas 9 pies, for in the preamble the division of the shares of profits and losses among the three members of the yarn shop and those admitted to the benefits of the partnership was clearly indicated. It was, however, pointed out that the yarn shop as such was not introduced as a partner and the agreement was in truth between the three major members out of those who constituted the yarn shop and four outsiders. Each of them had signed the application and the covenants of the partnership agreement bind the partners individually. The indication in the deed of partnership that three of them held qua the yarn shop a certain relation did not affect their status as partners of the appellant-firm individually. The principle laid down in this case applies also to the present case and, for the reasons already expressed, we hold that the assessee-firm was entitled to be registered under section 26A of the Act for the assessment year 1953-54 and the question referred to the High Court must be answered in the affirmative and in favour of the assessee-firm. Appeal allowed.
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1966 (10) TMI 41
Whether the aforesaid asset of ₹ 1,43,727 is exempt under section 5(1)(xxi) read with the second proviso thereunder of the Wealth-tax Act ?
Held that:- In the Wealth-tax Act, assessment year has been defined to mean the year for which tax is chargeable under section 3 of that Act. Since the Act came into force on 1st April, 1957, the financial year 1957-58 was the first assessment year for which tax became chargeable, and, consequently, for purposes of the second proviso to section 5(1)(xxi), the assessment year following the commencement of operations for establishment of the unit in the case of any company which commenced the operations any time before the 1st April, 1957, will be the assessment year 1957-58. Prior to the year 1957-58, there was no assessment year as defined under the Act, and, consequently, the first assessment year for which exemption could be claimed was this assessment year 1957-58. The respondent which had commenced operations for establishment of its new unit prior to 1st April, 1957, was rightly allowed exemption in respect of the amount that had been invested by them up to the relevant valuation date. The answer returned by the High Court was, therefore, correct. Appeal dismissed.
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1966 (10) TMI 40
Whether, on the facts and circumstances of the case, in computing the net wealth of the assessee under section 7(2) read with section 2(m) of the Wealth-tax Act, the liability for income-tax and business profits tax could be allowed as a deduction ?
Whether the liability in the sum of ₹ 25,02,675 which arose as a result of the awards dated 28th October, 1948, 28th November, 1956, and 17th October, 1954, before the valuation date or any part thereof is allowable as a deduction in determining the net wealth of the assessee under section 7(2) read with section 2(m) of the Wealth-tax Act ?
Held that:- Liability to pay income-tax was a present liability though the tax became payable after it was quantified in accordance with ascertainable data : there was therefore a perfected debt at any rate on the last day of the accounting year and not a contingent liability, and the amount of the provision for payment of income-tax in respect of the year of account was a " debt owed " within the meaning of section 2(m) on the valuation date and was as such deductible in computing the net wealth. The view expressed by the High Court on the second question, in so, far as it relates to provision for income-tax, cannot therefore be sustained and that part of the question should be answered in the affirmative.
The true function of section 7(2)(a) of the Wealth-tax Act was not appreciated. Section 7 does not deal with the computation of net wealth. It deals with the computation of the aggregate value of the assets. Under section 7 the Wealth-tax Officer is competent, where the assessee is carrying on business of which accounts are maintained regularly, to determine the net value of the assets of the business as a whole. But in doing so he determines the value of the assets of the business as a whole, and not the net wealth of the business. Appeal partly allowed.
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1966 (10) TMI 39
Whether the assessment on Viswanathan and Narayanan on a half share of the income of the estate of S.N.A.S. Chockalingam Chettiar is valid on a proper construction of the will dated 2nd February, 1943 ?
Held that:- There is no ambiguity in the terms of the will. The will gives the estate to the grandsons who were in existence and the other male children who may be born after the date of the execution of the will. Legal possession of the legatees was not deferred, and it is not open to the court to speculate whether the testator could have contemplated the birth of any male children to Meenakshi during his lifetime. The High Court was, therefore, right in holding that the estate belonged only to the two grandsons of the testator--Narayanan and Viswanathan--and that they were properly assessed to tax in respect of the income therefrom. Appeal dismissed.
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1966 (10) TMI 38
Whether the interest receipt constitutes income ?
Whether it is exempt under section 4(3)(vii) of the Income-tax Act as a receipt of a casual and non-recurring nature ?
Held that:- the interest paid to the assessee under the decree of the Supreme Court of Ceylon on the amount of estate duty directed to be refunded was income liable to be taxed under the Act.
When the action was commenced by way of a petition in the District Court of Ceylon, it was well within the contemplation and anticipation of the persons representing the estate that a successful termination of the action would not merely result in a decree for the tax illegally collected, but would also make the Crown liable to pay interest on that amount from the date of the petition till the date of the payment. The receipt of interest in the present case by virtue of the decree of the Supreme Court of Ceylon bears no semblance, therefore, to a receipt of a casual character. It is not therefore possible to accept the argument of the appellant that the receipt of interest obtained under the decree of the Supreme Court of Ceylon was of a casual or non-recurring nature. Thus reject the submission of the appellant on this aspect of the case. Appeal dismissed
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1966 (10) TMI 37
Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the assessee-company was one in which the public are substantially interested within the meaning of section 23A of the Indian Income-tax Act?
Held that:- The report had evidentiary value and could be taken into account. Undoubtedly the Report had to be brought to the notice of the company, and the company had to be given an opportunity to make its representation against the report and to tender evidence against the truth of the recitals contained therein. It is not suggested that this opportunity was not given. It was for the Tribunal to determine having regard to ordinary human experience whether it may be safely taken that the members of the Kedia family must have acted together as a controlling block. That enquiry has not been made, and the case has been decided on the application of a test which is erroneous. We are, therefore, unable on the statement of case to answer the question referred.
We, accordingly, set aside the order passed by the High Court and direct that the Tribunal do submit a supplementary statement of the case under section 66(4) of the Income-tax Act, 1922, because in our view the statement of the case already referred to is not sufficient to enable determination of the case raised thereby. The Tribunal may make such additions or alterations in the statement of the case in the light of the observations made in the course of this judgment. The Tribunal will submit the supplementary statement of the case to the High Court. The High Court will then proceed to determine the question according to law. The costs of this hearing will be costs in the proceedings before the High Court. Appeal allowed.
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1966 (10) TMI 36
Whether, on the facts and in the circumstances of the case, the assessments made on the assessee as on a Hindu undivided family consisting of the three sons of Sir Chinubhai Madhavlal, viz., " Udayan, Kirtidev and Achyut and the wife of Sir Chinubhai Madhavlal, viz., Lady Tanumati, were correctly so made ?
Held that:- When an order recognising the total disruption of a Hindu family has been passed under section 25A of the Indian Income-tax Act, 1922, and an order of assessment is made on the basis of such an order, it is not open to the Income-tax Officer to take proceedings for reassessment under section 34 of the Act ignoring the earlier order under section 25A of the Act on the ground that he has received information that the order under section 25A was obtained by misrepresentation. The proper course for the Income-tax Officer to adopt in such a case is to move the Commissioner of Income-tax to take action under section 33B of the Act to set aside the order under section 25A.
We agree with the High Court of Punjab that section 34 of the Indian Income-tax Act confers no general power of reviewing an order passed under section 25A(1), which is in its very nature effective for all subsequent years. Appeal allowed.
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