TMI Blog2019 (8) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... scertaining the rate, for existing liability under the Income Tax Act. But that is not the case here. Under the new provision, i.e. Section 64(1)(iii) a new liability has been prescribed and not the rate for ascertaining the liability. Such new liability under the Income Tax Act cannot be given a retrospective effect. Such liability can only be fastened on an individual if the same was existing at the time of accrual and not at the time of assessment. The observations of the Apex Court in paragraph 33 of the judgment in the case of Keshoram Industries and Cotton Mills (supra), clarifies this position. In view of the judgments of the Apex Court in the case of Keshoram Industries (supra) as well as Karimtharuvi Tea Estate Ltd (supra) this Court would have no hesitation in holding that for deciding the liability of a particular provision of the Income Tax Act, the date of accrual of income would be relevant. If the provision comes into force in a particular financial year, it would apply to the assessment for that year but cannot be made applicable in respect of assessment for a previous year. The Amending Act introduced a new Section 64(1) (iii) in the Income Tax Act with ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in force at the commencement of the assessment year. (See Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC) and Maneklal Vallabhdas Parikh and Sons v. CIT [1969] 72 ITR 637 (Guj). In the instant case, the assessment year is 1976- 77. Therefore, the law in force on April 1, 1976, would govern the assessment for the assessment year in question. The Tribunal, in our opinion, was right in holding that the share income of the minor sons from the firm to which they were admitted as partners was assessable in the hands of their fathers by virtue of the provisions of Section 64(1)(iii) of the Act as amended from April 1, 1976 by the Taxation Law (Amendment) Act, 1975 Our answer to the question referred to this Court is, therefore, in the affirmative and against the assessees. 4. It is when the issue arose for consideration in these two cases before the Division Bench that the decision of the Apex Court in the case of Kesoram Industries and Cotton Mills Ltd, vs. Wealth Tax Commissioner (Central), Calcutta, reported in AIR 1966 SC 1370 was relied upon by Counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1986 none appeared on behalf of the assessee. In the circumstances, this Court has requested Mr. Pathy to appear as Amicus Curiae in Tax Case No. 28 of 1986 also. We have also heard Mr. Rishi Raj Sinha, learned Senior Standing Counsel on behalf of the department. 11. The issues in both the cases are one and the same. 12. Mr. Pathy appearing on behalf of the assessee in both the matters has submitted that the provisions of the Amending Act have come into force with effect from the date specified in the notification issued under Section 2 of the Amendment Act i.e. with effect from 1.4.1976. It is his submission that even if the share income of the minor accrued prior thereto, the same was liable to be added in the income of the parent, for the purpose of computing taxable income of the father in compliance with the provisions contained in Section 64(i)(iii) of the Amendment Act. 13. Learned Counsel have placed reliance on the judgment rendered in the case of Badri Prasad (supra), the relevant extract of which has been extracted hereinabove at paragraph 3. It is their submission that in view of the consideration and opinion ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying the said law to the facts of the two cases under reference, it is seen that the provisions of the Amending Act came into force on the first day of April of the financial year 1976-77. As per the legal position settled in para 8 of the judgment in the case of Karimtharuvi Tea Estate Ltd. (supra), the amendment would apply to the assessment to be held for the financial year 1976-77 i.e. the assessment year 1977-78. This is the irresistible conclusion reached by applying the law laid down by the Apex Court in para 8 of the Constitution Bench judgment in the case of Karimtharuvi Tea Estate Ltd (supra). 16. The earlier judgment of the Apex Court in the case of Kesoram Industries (supra) decided on 24.11.1965 is in line with the Constitution Bench judgment of the Supreme Court in Karimtharuvi Tea Estate Ltd (supra) decided on 15.12.1965 . The relevant extract of the judgment of the Apex Court in Kesoram Industries (supra) is as follows:- 26. Uninfluenced by judicial decisions let us at the out-set look at the relevant provisions of the two Acts. Under Section 3 of the Income Tax Act, where any Central Act enacts that inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for quantifying the tax; for, this section gives an alternative for quantification in the contingency the of the Finance Act not having been made on the 1st day of April of that year. Even if such an Act was made, the charge under the Income Tax Act could be imposed and worked out only in terms of the provisions of the Income Tax Act. If that be the construction, the conclusion will flow that the tax liability at the latest will arise on the last day of the accounting year. 33. To summarize: A debt is a present obligation to pay an ascertainable sum of money, whether the amount is payable in praesenti or in futuro: debitum in praesenti, solvendum in futuro. But a sum payable upon a contingency does not become a debt until the said contingency has happened. A liability to pay income tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data. There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability. The rate is always easily ascertainable. If the Finance Act is passed, it is the rate fixed by that Act; if the Finance Act has not yet been passed, it is the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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