TMI Blog1964 (9) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... hs from October 1, 1953, to March 31, 1955, being the total income determined for the assessment year 1955-56 was chargeable to tax at the rate applicable to such total income or at the rate applicable to the proportionate income of the period of 12 months? 2. Whether, on the facts and in the circumstances of the case, the income from property fell to be assessed for the period of 18 months from October 1, 1953, to March 31, 1955, or for the proportionate period of 12 months only? The assessee in each of the cases is an individual. He derives income from property and from dividends and bank interest. He is a partner in a firm besides. The previous year of his choice for purposes of assessment of income-tax hitherto, up to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition, relevant statutory provisions must be noticed. The liability to tax arises by reason of section 3 which is a charging section. Section 3 of the Income-tax Act enjoins that the tax should be charged on the total income of the assessee for the previous year at the rates fixed by the Finance Act for that year and in accordance with and subject to the provisions of the Income-tax Act. The total income of any previous year of a person, according to section 4 of the Income-tax Act, includes all income, profits and gains of that person from whatever source derived. If the source be income from property, section 9 enjoins that the tax shall be payable by the assessee under that head in respect of the bona fide annual value of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions as the Income-tax Officer may think fit; or.... It is manifest from the above provisions that according to the scheme of the Indian Income-tax Act the tax is charged for a financial year at the rate prescribed by the annual Finance Act on the total income of the previous year. Each previous year is the subject of a separate assessment in the relevant assessment year. Though the year of assessment is the financial year, the previous year of the assessee need not necessarily be the previous financial year, for this expression has to be understood as defined in section 2(11)(a). It substantially means the accounting year previous to the assessment year comprised of 12 months. There can be only one previous year to a given year o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 18 months has been included in the accounting year on grounds of convenience of the assessee and subject to the condition against any portion of the income of the period escaping from tax normally due, the taxable income would yet be of a period of twelve months only. It is obvious, but for the change in the previous year, the additional six months' income would have undoubtedly been brought to tax. It is also clear that the change permitted was not intended to allow any portion of the income otherwise taxable to escape taxation. As we have already noticed, the previous year hitherto adopted by the assessee was ending with the Fasli year (i.e., ending with September), and the assessee now chose to adopt the financial year which shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Normally, the previous year is only of 12 months' duration. But when, in the particular circumstances, it has been extended to 18 months because the previous year cannot be split up, and there can be only one previous year to a given year of assessment, the full period from the end of the previous year for the preceding year's assessment to the end of the new accounting date has to be taken into consideration. What all section 9 enjoins is that the bona fide annual value of the property shall be the measure of the assessment. The bona fide annual value or in other words the reasonably expected letting value for an year of 12 months being the standard for the accounting year of 12 months, total income in this case has to be worke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; notional income shall be taken into account for taxation. We, therefore, answer questions Nos. 1 and 2 in the following manner: (1) That the income of the period of 18 months from October 1, 1953, to March 31, 1955, being the total income determined for the assessment year was chargeable to tax at the rate applicable to such total income and not at the rate applicable to the proportionate income of the period of 12 months. (2) That, on the facts and in circumstances of the case, the income from property was liable to be assessed for 18 months from October 1, 1953, to March 31, 1955, that being the size of the previous year and not on the reasonably expected income of 12 months only. The reference is answered accordingly. The cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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