TMI Blog1967 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... "The firm of Mohanlal Hargovinddas had recovered from Kanhaiyalal an amount of Rs. 24,341 as sales tax for transactions effected during the period from 26th January, 1950, to 31st March 1951. Kanhaiyalal was allowed deduction on account of this amount of sales tax paid by him in the relevant assessment year. Subsequently, when the Assistant Commissioner of Sales Tax, Jabalpur, held in an appeal filed by Messrs. Mohanlal Hargovinddas that the sales effected during the period from 26th January, 1950, to 31st March, 1951, were not liable to sales tax and the Government refunded to the firm of Mohanlal Hargovinddas the amount of Rs. 24,341, the firm of Mohanlal Hargovinddas in its turn paid back to the assessee-firm, Messrs. Hukumchand Mohanlal, the sum of Rs. 24,341 by a draft. This draft was received by the assessee on 9th November, 1961, that is, after the death of Kanhaiyalal, and in the accounting year beginning from 1st April, 1961, and ending on 31st March, 1962. The Income-tax Officer, Ujjain, taxed this amount in assessment proceedings against the assessee for the assessment year 1962-63. He did so under section 41(1) of the Act rejecting the contention of the assessee, Hira ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the year 1962-63 against the assessee, Hira Laxmi, has to be decided with reference to section 41(1) of the Act. That provision is as follows : " 41. (1) Profits chargeable to tax.--Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not. " Under the general law, once a trading liability has been allowed as a business expenditure and if this liability is remitted in any subsequent year, the amount remitted cannot be taxed as the income of the year of remission ; nor can the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 41(1) on the amount of Rs. 24,341 received by her. There is no provision in the Act deeming a successor in business or the legal representative of an assessee to whom an allowance had already been granted as an assessee for taxability under section 41(1) of the amount remitted and received by the successor or the legal representative. Section 170(2) of the Act, which deals with an assessment on the successor in respect of the income of the predecessor when the predecessor cannot be " found ", that is to say, when he is dead or has disappeared, has no applicability here. Under that provision, the assessment can be made on the successor only in respect of the income of the previous year in which the succession took place up to the date of succession and of the previous year preceding that year. Here, the amount of Rs. 24,341 was not received by Kanhaiyalal in the account year in which he died and in which his widow, Hira Laxmi, succeeded to the business. It was received by Hira Laxmi in the account year ending on 31st March, 1962. It cannot, therefore, be urged that Hira Laxmi is liable to pay tax on Rs. 24,341 as successor to the business and, therefore, she is an " a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hands of Hira Laxmi as the legal representative of her deceased husband, Kanhaiyalal. Shri Adhikari, learned counsel appearing for the department, relying on sub-section (3) of section 159 urged that the amount of Rs. 24,341 could be taxed in the hands of Hira Laxmi under section 41(1). We are unable to accept this contention. Sub-section (3) of section 159 no doubt says that " the legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee. " But this provision read with section 2(7) defining the term " assessee " is not sufficient by itself to fasten liability on Hira Laxmi under section 41(1). Unless there is some provision in the Act providing that the amount remitted and received by the legal representative of an assessee to whom an allowance had already been granted shall be deemed to have been received by the deceased for the purpose of assessment under section 41(1), no assessment under section 41(1) can be made on the legal representative for the remitted amount received after the death of the assessee to whom the allowance had been granted. If sub-section (3) of section 159 by itself had been sufficient to impose liability on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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