TMI Blog1955 (3) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... d. This compensation was awarded on the basis of the claim made by the assessees. The two accounting years for the two assessments are 1944 and 1945. In regard to compensation for the year 1944 the claim which was accepted by the Government was as follows: Price of crop that the assessee would have realised if its tea manufacturing business had continued without interruption ₹ 2,74,698 Less (being saving of plucking and manufacturing expenses and food and clothing concession to the employees and proceeds of export rights)... ₹ 62,762 ₹ 2,11,936 2. Another sum of ₹ 10,000 was also allowed for repairs to coolie lines in addition to a sum of ₹ 144 which represented the assessors fee. The total receipt from the Government by way of compensation in the year 1944 came to ₹ 2,22,080. Similarly the sum received in the year 1945 amounted to ₹ 2,45,795. this included a sum of ₹ 15,231 for repairs to building. The assessment for the year 1945-46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were communicated to the assessees. It would appear that the orders of the two members deal only with the other sources. The copies of the two judgments were served on the assessees on October 30, 1952, under section 33(4) of the Income Tax Act. In consequence the Commissioner of Income Tax filed a petition under section 35 of the Income Tax Act asking for a filed a petition under section 66(2) of the Income Tax Act for rectification of certain incorrect statements of facts in the two judgments. The petition of the Commissioner for a reference and of the assessees under section 35 were heard on January 12, 1955. It was then discovered that as there was difference of opinion between the two members, the case had to be heard by a third member. The copies of judgments were found to have been sent to the assessees by inadvertence. The applications were therefore rejected as premature. The case was referred to a third member under section 5A(7) of the Income Tax Act. The third member who heard the case was the President of the Tribunal. He agreed with the Accountant Member that the sum paid specifically for building repairs had to be deducted from the receipts of the assessees from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting these two items for the two years. According to the statement of facts on which the questions have to be answered, the claim of the assessees for compensation was accepted by the Government for both the years. The assessees estimated the total yield on the assumption that no part of their property had been requisitioned, and deducted from the total amount the expenditure they would have incurred for plucking, collecting the crop and manufacturing tea. The balance was claimed as compensation. Apart from the damage to property for which separate sums were allowed, the claim for compensation was decided on the basis proposed by the assessees. They claimed to be placed in the same position in which they would have been if there was no requisition. The gross receipt was estimated. The expenditure which would have been incurred to earn that gross receipt was deducted and the balance represented the compensation which they got. No manufacture of tea was possible. It was in fact not manufactured. The business of manufacture had to be suspended temporarily. But the Government paid compensation for the use to the property requisited. In point of fact what the assessee got was compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case the agencies of the assessees were terminated. There was a complete cessation of the agency business. Compensation was paid for this cessation. The receipts could not possibly be regarded as receipts from the agency business as the business had terminated. They could be regarded as income derived from property. It was therefore held that the sum received by the respondent (assessee) was not taxable income under section 6(vi) (business) because it was not produce, nor the result, of carrying on the agencies of the oil companies in the year in which they were received; nor under section 6 (vi) (other sources) for the same reason. 6. Mr. Ghose has also relied on some observation of Sir George Lowndes bearing on the import of the expression income. Sir George Lowndes observed that the object of the Indian Act is to tax income, a term which it does not define. It is expanded, no doubt, into income, profits and gains, but the expansion is more a matter of words than of substance. Income, their Lordships think in this Act, connotes a periodical monetary return coming in with some sort of regularity, or expected regularity, from definite sources. The source is not necessarily on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yond enumeration. The decision in Raja Bahadur Kamaskshya Narain Singh v. Commissioner of Income Tax, Bihar and Orissa, is a complete answer to the argument of Mr. Ghose. It was not necessary in view of the pronouncements of their Lordships of the Privy Council that income should necessarily be a recurrent return from a definite source. It could consist of a series of separate receipts. Here in this case the property of the assessee was requisitioned in 1942 and the receipts of compensation ecurred for several years. Even the element of recurrence is not wholly wanting. Their Lordships of the Supreme Court referred to the decision in Shaw Wallaces case in Raghuvanshi Mills Limited v. Commissioner of Income Tax, Bombay of the Privy Council as one of general application. Bose, J., who delivered the judgment of the Court observed as follows: It is true the Judicial Committee attempted a narrower definition in Commissioner of Income Tax v. Shaw Wallace and Co., by limiting income to a periodical monetary return coming in with some sort of regularity, or expect regularity, from definite source but, in our opinion, those remarks must be read with reference to the particular facts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught that all that was to be seen under section 2(I) (A) of the Income Tax Act was that the landlord used the land for agricultural purposes and if a tenant by taking such land on lease made a different use, the landlord was not responsible and it could not be said that the rent derived by him from such land is not agricultural income. His conclusion was that even in Income Tax Rules. The Accountant Member also came to the same conclusion. The reason he gave in support of the conclusion was that the assessees must be deemed to have nationally carried on the business of tea planters. They actually were carrying on some processes in the tea garden itself which were possible in spite of the occupation of some part of the estate by the military. He, however, was not quite sure and agreed with the Judicial Member to the assessment of 40 per cent. only as was being done in former years. 12. Since there was no difference on this point the question was not dealt with by the President in his order. 13. The expression agricultural income has been defined in section 2(I) of the Income Tax Act. Agricultural income means- (a) any rent or revenue derived from land which is used for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural operations do not take place. If lands leased for cultivation should to be used for housing or accommodating refugees the rent would cease to be agricultural income. In Maharajadhiraj Sir Bijay Chandra Mahtab Bahadur of Burdwan, In re, it was emphasized that the user of the land for agricultural purposes must be in the year of accrual of income under depute not anywhere before or after. In Vishweswar Singh v. Commissioner of Income Tax Ramaswami, J., held down that in order to find out whether the income of the assessee is agricultural income, the test in not to find out the purpose of the lease but the test is actual use of the land for agricultural purposes. In his view as the land was not actually used for agricultural purposes the income was not expect from being taxed under the Income Tax Act. In this case the position is very simple. The land or property was not taken for agricultural purposes. It was taken under the law for non-agricultural purposes and it was used for non-agricultural purposes. In this state of facts it was held by this Court in Senairam Doongarmull v. State of Assam that the receipt in question did not constitute agricultural income. The decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that some part of the receipts represented compensation for loss, sterilisation or deterioration of capital assets had some force. The Accountant Member did not share this opinion. There was thus difference of opinion on this point and share this referred to the third member. There was in consequence no majority judgment nor was the reference to this Court complete. The contention though plausible is not sound. The Judicial Member no doubt noticed the contention that the plants bearing tea leaves had been damaged and had deteriorated during the period of occupation by the military and the compensation allowed to the assessees should be held to include compensation for such deterioration and damage to the plants. He though there was some force in the contention. But in the absence of adequate data he estimated compensation attributable to use and occupation of the land at 20% of the sum of ₹ 2,22,080 (1944-45). When dealing with the question whether the entire receipts were exempt from taxation under the Income Tax Act as rent or revenue received from land used for agricultural purposes, he came to the conclusion that 40% of the net receipts amounting to ₹ 46,832 (1945 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t estate represented merely a part of the business activity of the petitioners. 20. The Appellate Assistant Commissioner dealt with all the points on which orders of the Appellate Tribunal are silent. He agreed with the Income Tax Officer in respect of the income from the siding shop. The Assistant Commissioner stated that the assessees had preferred not to file any balance sheet in spite of repeated requests. No capital or personal account was maintained crediting profits year after year and debiting the drawings for personal expenses. This he regarded as strange and presumed that the assessees must have found it to their advantage not to file any balance sheet. He further found that sales and purchases were not all supported account was maintained. The gross profit disclosed was abnormally low in his opinion. He therefore estimated the profits at 7 1/2% on the total sales of rupees eight lakhs. This came to ₹ 60,000. The assessees had disclosed a profit of ₹ 33,193. To this he added ₹ 26,807 to make it ₹ 60,00. This figure was added to the profits disclosed by the assessees on estimate. 21. Another sum of ₹ 4,000 which represented staff boardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these points. 23. The first question is whether the grounds of attack in regard to the three items in question in this case were pressed before the Tribunal when the case was heard by the Judicial and Accountant Members. They produced separate judgments which are completely silent in regard to these points. It has been urged on behalf of the assesses that the points were argued and pressed at the hearing and for this statement of fact reliance is placed on the affidviy in support of the petition. As stated above this affidavit is from an employee of the firm of the petition. As stated above this affidavit is from an employee of the firm of the assessees. He on his own showing was not present at the hearing. A chartered accountant represented the firm. No affidavit from him has been put in. The important statement in the affidavit to the effect that questions not dealt with in the orders were pressed was on the strength of information received from Mr. Sharma, the chartered accountant. The firm has not produced any writing from Mr. Sharma to the effect that the points were pressed. The affidavit of an employee in these circumstances does not fulfill the requirement of the rules. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive. The reference made by your honour to the third Judge as well as the two judgments delivered on June 19, 1952, covers only the principles of taxation of the Sewpur tea compensation money leaving all other points undetermined without any reference thereto. Apart from this other points were raised and it was urged that the points involved in the case were varied, many and complicated and that the case therefore was fit for a hearing. The decision in Jan Mohammed v. Commissioner of Income Tax, U.P. V.P., Lucknow, was referred to in support of the request for a further hearing. Another application was put in on July 17, 1953, on grounds stated in the previous two petitions. As a result of these petitions the petitioner succeeded in obtaining a hearing on August 18, 1953. The order purports to dispose of the petition under section 35 by which a rectification of some mistakes and omissions was sought. The mistakes and omissions pointed out in the application included the omissions now complained of. The Tribunal observed that it was explained during the hearing of this application that there were really no mistakes but the applicant wanted the Tribunal to make it clear to the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im observed as follows :- In our view, the case with the opinion of the third member should go back to the Tribunal for final decision. The Tribunal, when finally disposing of the appeal, may, no doubt, allow other points to be raised before it, if they consider it proper. The question whether an assessee is entitled to a further hearing after the case comes back from the third member did not arise in that case, nor was it decided. The learned Judge did not hold that an assessee is entitled to a further hearing when the case comes back to the original Tribunal after the reference has been answered by the third member. He merely observed that when disposing of the appeal the Tribunal had power to allow the assessee to raise other points if the Tribunal thought it proper. The discretion in the Tribunal to hear on further points was conceded. But no right in the assessee was recognized. Section 33(4) in terms lays down that the Appellate Tribunal may, Appeal from the Judgment and Order dated for giving both parties to the to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase : Kshirode Chandra v. District Magistrate, Howrah. 29. The petitioners have not succeeded in making out a case for any extraordinary writs and even this petition must fail. It must however be observed that the omissions complained of have exposed orders of the Tribunal to just criticism. The orders ought to be complete and it should not be necessary in a mandamus petition or in a petition under section 66(2) of the Income Tax Act to presume what happened at the hearing. If a point is argued it should be dealt with and disposed of in express terms however weak the argument or baseless the contention. If a point raised in the ground of appeal is not pressed at the hearing, the fact itself should be stated. The Tribunal being the final authority on facts it is desirable that its views on facts should be stated comprehensively to cover all points in controversy. Omissions in the order can give rise to questions of law. The assessee should know on what basis any contention raised has been rejected. The order should embody a complete picture of what happens at the hearing. With these observations we dismiss the petition and discharge the rule. 30. The Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es might well fall under the second category, though the material facts are not sufficiently disclosed in the judgment itself. The assessee in the case was a printing press which carried on business on certain premises. As a result of requisition by the Collector of Bombay of the premises in question, the printing business had to be closed and presumably the machinery of the press itself had to be removed. I make this presumption because the counsel for the assessee in that case relied upon the analogy and the principle of the decision of the House of Lords in Glenboig Union Fireclay Co. Limited v. Commissioners of In land Revenue and contended that prevention from carrying on business in the circumstances amounted to sterilisation of capital asset. I quite agree that necessarily there is no relation between the measure that is used for the purpose of calculating a particular result and the quality of the figure that is arrived at by means of the application of that test. In other words the quality of the payment is not in every case co-related to the basis on which the amount is determined; but the rule is not invariable and absolute. There may be and in fact there are cases whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y opinion, must be therefore answered against the assessee. 36. I must concede that I was strongly inclined to allow Civil Rule 84 of 1954 which is a petition under article 226 of the Constitution based on the complaint that the Tribunal did not dispose of certain questions specifically raised in the grounds of appeal and urged at the hearing. The points relate to some deductions claimed by the assessee on account of actual trade expenses in the shape of salaries, wages etc. of employees and the estimate of profits from hessian bags account. Tax taxing officers dealt with those points and rejected the claim of the assessee,but the judgment of the Tribunal is silent thereon. It is rightly urged that the Tribunal had the right to review the decision of the tax in goffiers both on facts and law and as such it being the final Court of appeal, it was incumbent on the Tribunal to consider and decide those points after giving a proper hearing to the assessee and its failure to do so constituted a clear omission to exercise jurisdiction duly vested in it by law. It is also suggested that the Tribunal appears to have lost sight of those contentions probably because its attention as preoc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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