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2016 (4) TMI 1002 - SUPREME COURT

2016 (4) TMI 1002 - SUPREME COURT - [2016] 385 ITR 60 - Reopening of assessment - whether no income accrued or arose and no annual value which is taxable under Sections 22 and 23 of the Act was received or receivable by the assessee at any point of time during the previous year corresponding to the assessment year 1989-199? - Held that:- It is clear that no such right to receive the rent accrued to the assessee at any point of time during the assessment year in question, inasmuch as such enhance .....

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year 1989-1990 is without jurisdiction and authority of law. The said notice, therefore, is liable to be interfered with and the order of the High Court set aside. - Decided in favour of assessee. - Civil Appeal No(S) 4091 OF 2016 (Arising out of SLP (Civil)No(s)6384 of 2009) - Dated:- 19-4-2016 - MR. RANJAN GOGOI AND MR. PRAFULLA C. PANT, JJ For the Petitioner : Mr. S. Ganesh, Sr. Adv. Mr. Yashvardhan, Adv. Mr. S. Sukumaran, Adv. Mr. Anand Sukumar, Adv. Mr. Bhupesh Kumar Pathak, Adv. And Meera .....

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t-assessee for the assessment year 1989-1990 (for the period of 21 months commencing on 01.07.198 and ending on 31.03.1989). 4. The income in question being income from house property is liable to be computed in accordance with the provision of Sections 22 and 23 of the Act. The premises belonging to the appellant was let out on rent to the Government of India. The rent was enhanced from ₹ 4.00 to ₹ 8.11 per sq.ft. per month effective from 01.09.1987. The said enhancement of rent was .....

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his Court in 'E.D. Sassoon & Company Ltd. And Others vs. Commissioner of Income-Tax', (1954) 26 ITR 27, no income accrued or arose and no annual value which is taxable under Sections 22 and 23 of the Act was received or receivable by the assessee at any point of time during the previous year corresponding to the assessment year 1989-1990. Hence, the impugned notice seeking to reopen the assessment in question is without jurisdiction or authority of law. 6. To controvert the aforesaid .....

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e during the previous year. This Court in E.D. Sassoon (supra) has held in categorical terms that income can be said to have accrued or arisen only when a right to receive the amount in question is vested in the appellant-assessee. The following extract from the judgment in E.D. Sassoon (supra) amply illustrates the above position : The word "earned" has not been used in Section 4 of the Income-tax Act. The section talks of "income, profits and gains" from whatever source der .....

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"Income, their Lordships think, in the Indian Income-tax Act, connotes a periodical monetary return 'coming in' with some sort of regularity, or expected regularity from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall." Mukerji, J., has defined these terms in Rogers Pyatt Shellac & Co. v. Secretary o .....

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ies the idea of receipt, actual or constructive. The policy of the Act is to make the amount taxable when it is paid or received either actually or constructively. 'Accrues', 'arises' and 'is received' are three distinct terms. So far as receiving of income is concerned there can be no difficulty; it conveys a clear and definite meaning, and I can think of no expression which makes its meaning plainer than the word 'receiving' itself. The words 'accrue' an .....

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se of growing up by way of addition for increase or as an accession or advantage; while the word 'arises' means comes into existence or notice or presents itself. The former connotes the idea of a growth or accumulation and the latter of the growth or accumulation with a tangible shape so as to be receivable. It is difficult to say that this distinction has been throughout maintained in the Act and perhaps the two words seem to denote the same idea or ideas very similar, and the differen .....

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ivable and connote a character of the income which is more or less inchoate. One other matter need be referred to in connection with the section. What is sought to be taxed must be income and it cannot be taxed unless it has arrived at a stage when it can be called 'income'." The observations of Lord Justice Fry quoted above by Mukerji J. were made in Colquhoun v. Brooks (1888) 21 Q.B.D. 52 at 59 while construing the provisions of 16 and 17 Victoria Chapter 34, Section 2 , Scehedule .....

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igners residing in this country. The result would be that no income-tax would be payable upon profits which accrued but which were not actually received, although profits might have been earned in the kingdom and might have accrued in the kingdom. I think, therefore, that the words 'arising or accruing' are general words descriptive of a right to receive profits." To the same effect are the observations of Satyanarayana Rao J. in Commissioner of Income-tax, Madras v. Anamallais Timb .....

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income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro; See W. S. Try Ltd. v. Johnson (Inspector of Taxes (1946) 1 All E.R. 532 at 539 ), and Webb v. Stenton and Others, Garnishees 11 Q.B.D. 518 at 522, 527. Unless and until there is .....

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