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1948 (3) TMI 43 - BOMBAY HIGH COURT

1948 (3) TMI 43 - BOMBAY HIGH COURT - [1948] 16 ITR 109 - Income-Tax Reference No. 6 of 1946 - Dated:- 11-3-1948 - Chagla (CJ) And Tendolkar, JJ. For the Commissioner : Advocate-General with G. N. Joski For the Assessee : Sir J. B. Kanga with Kolah JUDGMENT Chagla, CJ. This reference is based on the following facts. Bai Navajbai, the assessee, made an oral trust in December 1940 in respect of securities of the face value of five lakhs of rupees and the object of the trust was to pay the income t .....

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enables the settlor to revoke this trust, either wholly or partially, and it is common ground that the oral trust made by the assessee in December 1940 was also subject to this power of revocation. It is contended by the Advocate-General on behalf of the Department that under Section 16(1)(c) the income which is derived from these securities is deemed to be the income of the assessee. Although the income arises to the trustees and not to the assessee by a legal fiction the Income-tax Act makes .....

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ubt that reading Section 16(1)(c) with Section 4(1), this artificial income created by Section 16(1)(c) would form part of the total income of the assessee. But Section 4(3) exempts certain classes of income from the total income of the assessee and sub-section (3) states that any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them and clause (i) of that sub-section with which we are concerned exempts the class of i .....

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the Advocate-General, although the assessee may be charged under Section 4 on the income both actually received by him as also the income artificially deemed to have been received by him under Section 16(1)(c), when it comes to exemption under Section 4(3) the only income which can be exempted is the income actually received by the assessee. There is no doubt in this case that the income which the assessee says should not be charged is derived from property held in trust or under a legal obligat .....

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sses of income exempted under the Act, if a revocable trust had been created with regard thereto the assessee would not be exempted in connection with that agricultural income because according to the Advocate- General the assessee does not actually receive that income but is only deemed to have received it under Section 16(1)(c). Now that would be a construction totally repugnant to all one's conceptions of the Income-tax Act because it has been held over and over again that agricultural in .....

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