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TMI Blog1969 (12) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Officer computed the total income of the assessee, the late Ganga Sagar Jatia, under the following heads: (1) Property 27,268 (2) Business 31,762 (3) Dividend 3,51,529 (4) Directors' fees 4,130 (5) Other sources 90,000 --------------- Total 5,04,689 -------------- Before the Income-tax Officer Smt. Indermani contended that as her late husband was an assessee under the Indian Income-tax Act of 1918 and she had succeeded to the business and the vocation carried on by him, she was entitled to the relief under section 25(4) of the Act. She claimed that such relief was allowable on the profits of the businesses and also on the income from all assets which she had inherited from her husband including immovable properties and shares of joint stock companies. Her contention was that all these assets were assets of the businesses, which her husband used to carry on and they were shown in the balance-sheets as such. The Income-tax Officer by his order dated February 17, 1955, which is annexure " A " to the case, held that the only relief which is admissible under section 25(4) was in regard to the sum of Rs. 31,762 which had been assessed as income from the business under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Income-tax Act, 1922, is restricted only to the profits and gains assessable under section 10 of the said Act ? " The view taken by the Tribunal, as already stated, was based on a decision of the Bombay High Court in the case of Commissioner of Income-tax v. Chugandas & Co. The decision of the Bombay High Court in that case was subsequently affirmed by the Supreme Court. The decision of the Supreme Court is reported as Commissioner of Income-tax v. Chuandas & Co. It was a decision on the terms of sub-section (3) of section 25 which relates to the relief allowable to an assessee, who had been assessed under the Act of 1918 (Act No. VII of 1918), on the discontinuance of his business. Sub-section (4) of section 25, with which we are concerned in this case, relates to succession to the business of an assessee, who had, at any time, been charged under the provisions of the Act of 1918. In order to appreciate the ratio of the decision of the Supreme Court in Chugandas's case and to consider its bearing on the facts of the present case, it would be necessary to set out the terms of both the sub-sections. Sub-section (3) of section 25, omitting portions not material to our purpose, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Amending Act of 1939, i.e., the 1st April, 1939. It would appear that under sub-section (3) relief is allowable in respect of the income of any " business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918 " if such business was discontinued in the relevant previous year. Similarly, under sub-section (4), relief is allowable in the case of succession to a person who was, at the commencement of the Amending Act 1939, carrying on any " business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918 ". The words " business, profession or vocation " occurring in sub-section (4) came in for the interpretation of the Supreme Court in the case of Chugandas & Co. referred to above. In that case the assessee was a dealer in securities which constituted its stock-in-trade. The assessee had been charged to tax under the Indian Income-tax Act, 1918, in respect of its business. In the years 1946 and 1947 the assessee had received the sums of Rs. 4,13,992 and Rs. 1,01,229 as interest on securities. The assessee-firm discontinued its business on June 30, 1947. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemption. " Elucidating the matter further their Lordships remarked that the different heads of income mentioned in section 6 of the Act do not exhaustively delimit sources from which income arises. Business, in terms, their Lordships pointed out, is broken up under different heads only for the purpose of computation of the total income : by that break-up the income does not cease to be the income of the business, the different heads of income being only the classification prescribed by the Act for computation of income. It would be noticed that sub-sections (3) and (4) of section 25 both relate to income from any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918. Hence, what the Supreme Court has said about the true connotation of the words " business, profession or vocation " mentioned in sub-section (3) would apply, with equal cogency, to the same words occurring in sub-section (4) and the different items of income earned by the assessee from the business activities carried on by him would qualify for the exemption irrespective of the consideration whether the items of income are assessable under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the following words : " The word 'business' connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose. " In the wider sense all income, profits or gains resulting from the exploitation of the assets of the business might be regarded as income, profits or gains of the business. Business assets not only include the stock-in-trade, or the circulating capital but also fixed assets including investments. Such assets are shown on the assets side of the balance-sheet of the business. The assessee claimed that the shares and immovable properties had been shown as assets of the business in his balance-sheets all along by the late Ganga Sagar Jatia. As already pointed out, it was common ground before the Tribunal that the shares and the immovable properties were held by the assessee as assets of the business. That being so, the entire income earned by the assessee by exploitation of the assets of the business, profession or vocation should be entitled to the exemption under section 25(4) of the Act although the different items of income derived from the different assets might be assessable under different heads. Our answer, therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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