TMI Blog1972 (10) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of Rs. 7,318 could be included in the income of the assessee-company for the assessment year 1961-62, under the provisions of section 10(2A) or section 12(5)?" - - - - - Dated:- 3-10-1972 - Judge(s) : K. K. DESAI., KANTAWALA. JUDGMENT The judgment of the court was delivered by KANTAWALA J.-This is a reference under section 66(1) of the Indian Income-tax Act, 1922. The question that is referred for determination is: "Whether, on the facts and in the circumstances of the case, the amount of Rs. 7,318 could be included in the income of the assessee-company for the assessment year 1961-62, under the provisions of section 10(2A) or section 12(5)?" The assessee is a limited company, which has gone into voluntary liquidati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-company ceased to carry on business as from March 30, 1958, that the liquidators did not have any business income and as such, the unclaimed liability which was a business expenditure allowed under section 10 could not then be taxed under section 10 as there was no business income during the year. However, the assessee-company wanted to claim that, as there was no business in the previous year, the virtual remission or unclaimed liability should not be assessed as income under section 12(5). The Income-tax Officer rejected the contention of the assessee-company and took the view that section 10(2A) contained a deeming provision and the stipulation laid down therein ought to be carried out to its logical conclusion. Accordingly, the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, profession or vocation was carried on during the year of account, or else, the fiction created by that section would be a super-structure without foundation. The Tribunal pointed out that in the latter part of the section itself it is provided that not only the amounts in question would be deemed to be profits and gains of business but they would be deemed to have accrued or arisen during the previous year. There could be no profit from business accruing during the previous year unless the business was carried on during that period. The deeming of accrual, therefore, necessarily pre-supposes deeming of business accruing during the year. The Tribunal was of the view that the amount was subject to tax in view of the provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 7,318, even if remitted, cannot be treated as income or profit under section 10(2A). It was urged that the question is directly covered by the decision of the Gujarat High Court and it is well-settled law that the High Court has consistently followed such a decision as far as possible in construing a statute which is an all India statute to have uniformity amongst the different High Courts. See Ambika Silk Mills Ltd. Commissioner of Income-tax . The question whether the amount of Rs. 7,318 could be assessed in view of the provisions of section 10(2A) is concluded by the decision of the Gujarat High Court in Baroda Tradeys Ltd. v. Commissioner of Income-tax. The Division Bench has taken the view in this case that sub-section (2A) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the business, though received in the accounting year, cannot be taxed because the source of the income does not exist in the accounting year. The allowances provided for in sub-section (2) also are to be made in respect of "such profits or gains", i.e., profits or gains in respect of the business, profession or vocation carried on during the accounting year. Sub-section (2A) being part of the main section, would, prima facie, seem to be governed by the requirement laid down in sub-section (1) unless there is something in the language of sub-section (2A) to read it as an independent provision. The object of enacting the sub-section clearly is to bring to tax as income that which has been earlier allowed as a deduction or an allowance. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese two fictions, the sub-section does not go further and provide that in a case where the business is discontinued before the commencement of that previous year, i.e., the year of remission or cessation, it shall be deemed to have continued during that year notwithstanding the discontinuance. In the present case, the Tribunal in its order in paragraph 5 has made it clear that the department did not challenge the position that the company was not carrying on the business after 31st March, 1958, and the assessee has not challenged the position that it obtained some benefit in respect of the liability by way of remission or cessation thereof. It is our duty to preserve uniformity in law in respect of an all India statute to follow the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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