TMI Blog1989 (7) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, held that the sums received by-the assessee as arrears of professional fees were not received before his discontinuance of the profession, although it could have been included in the total income of the assessee had it been received before such discontinuance. Hence, he was of the view that the said amount would be chargeable to income-tax in view of section 176(4) of the Income-tax Act, 1961;(hereinafter referred to as "the Act"). Accordingly, he charged the same to tax in both the years. On an appeal having been preferred by the assessee, the Appellate Assistant Commissioner, by his order dated June 7, 1973, held in favour of the assessee. The Appellate Assistant Commissioner, following the decision of the Appellate Tribunal in Income-tax Appeals Nos. 2319, 2320 and 2321 (Cal) of 1969-70, held that the said amount received by the assessee is not taxable as section 176(4) of the Act, is not applicable to the case of the assessee. On an appeal preferred before the Appellate Tribunal, the Tribunal followed its earlier decision in the case of Hon'ble Mr. Justice C. N. Laik delivered on January 22, 1972, in Income-tax Appeals Nos. 2319, 2320 and 2321 (Cal) of 1969-70, held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the discontinuance of the: profession in this relevant year, the said receipts can not be charged under section 28 of the Act which is applicable in the case of profits or gains of any business or profession which has been carried on by the assessee at any time during the relevant previous year. The receipts also cannot be brought to tax under section 56 of the Act under the head "Income from other sources" Dr. Pal further submitted that even by the introduction of section 176(4) in the Act, such receipts cannot be brought to tax as income failing under the head "Profits and gains of business or profession". According to Dr. Pal, section 176(4) of the Act, by a deeming provision, has introduced two fictions, viz. (A) deeming the professional receipts after the discontinuance of the profession as the income of the recipient; and b) deeming such income to be the income in the year of receipt. Section 176(4) of the Act has not created a third or further fiction of deeming such receipts to be the business or professional income of the assessee. According to him, in the absence of a specific provision deeming such receipts to be of the nature of professional receipts taxable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ITR 428 is clearly applicable. In that case, the assessee who was an advocate, had adopted the calendar year as the accounting year and had kept his accounts on cash basis or receipt basis. He ceased to carry on his profession from March 1, 1957, when he was elevated to the Bench of a High Court. In the years 1958 and 1959, during no part of which he carried on any profession, he received certain moneys on account of fees outstanding for professional work done by him before March 1, 1957. The Supreme Court, on the above facts, held that the receipts were not chargeable to tax at all. The receipts were the outstanding dues of professional work done and were clearly the fruits of the assessee's professional activity. They were the profits and gains of a profession and they fell under the fourth head, namely, "Profits and gains of business, profession or vocation ". They were not, however, chargeable to tax under that head because, under the corresponding computation section, i.e., section 10 of the Indian Income-tax Act, 1922, an income received by an assessee, who kept his accounts on the cash basis, in an accounting year in which the profession had not been carried on at all was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th and subject to the provisions of the Act. The income, therefore, has to be brought under one of the heads falling under section 14 of the Act and can be charged to tax only if it is so chargeable under the computation section corresponding to that head. Income which comes under the head "Profits and; gains of business, profession or vocation", that is, professional income, can be brought to tax only if it can be so done under the rules of the computation provisions laid down in sections 28 to 43A of the Act: if it cannot be so brought to tax, it will escape taxation even if it is included in the total income under section 5 of the Act. It is also to be noticed that "total income" as defined in section 2(45) of the Act means the total amount of income referred to in section 5, computed in the manner laid down in the Act. It will, therefore, appear that the receipts in question in the present case can only be computed for chargeability to tax, if at all, under sections 28 to 43A of the Act as income under the head "Profits and gains of business, profession or vocation". If they cannot be brought to tax by computation under those sections, they would not be included in the "total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on and not for the purposes of letting out and not for the purposes of closing down or winding it up. The insertion of the words "whether during the continuance of the business or after the cessation thereof" in the proviso introduced by the amendment of 1949 only removed one Of the conditions for the exigibility of the excess to tax, viz., the third condition. After the amendment, the excess realised is deemed to be profits notwithstanding that the sale took place after the business ceased; but the amendment did not introduce further Action that the business must; also be deemed to have been conducted by the assessee during the previous year in which the sale took place. Therefore, even after the amendment of 1949, it was necessary that during the whole or a part of the previous year, the business should have been carried on by the assessee in order that the excess realised on the bale of the building, machinery or plant could be treated as profits of the business under the second proviso to section 10(2)(vii) of the Indian income-tax Act, 1922. The Supreme Court, in that case, further pointed out that the fiction created by the amendment introduced in 1949 is a limited on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year, the assessee receives, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or the assessee is benefited by the remission or cessation of a trading liability, the amount received or the amount of the liability which is extinguished is deemed by a fiction to be the profits and gains of the business or profession and, accordingly, chargeable to income-tax as the income of the previous year. Similarly, under section 41(2) of the Act, where a building, machinery, plant or furniture owned by the assessee is sold, discarded, demolished or destroyed, so much of the balancing profits as does not exceed the difference between the actual cost and the written down value is chargeable to income-tax as income of the business or profession of the previous year in which the money payable for the building, machinery, plant and furniture becomes due. The fiction introduced by section 41(2) of the Act also treats the balancing profits as, the income of the business or profession. Section 176(4) of the Act, unlike the, above provision, by fiction, merely treats the receipt in question as the income of the, recipient. The said section, however, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used". The Supreme Court applied the aforesaid rule of construction in the case of CIT v. Ajax Products Ltd. [1965] 55 ITR 741 and observed that (at page 747) the subject is not to be taxed unless the charging provision clearly imposes the obligation. Equally, it is also the rule of construction that if the words of a statute are precise and unambiguous, they must be accepted as declaring the express intention of the Legislature. In the light of the aforesaid rule of construction, the legislative intention indicated by the express language of section 176(4) of the Act does not warrant any assumption of a further fiction treating the receipts as the income chargeable under the head "profits and gains of business, profession or vocation". Wherever Parliament has intended to introduce such fiction, it has expressly said so as in section 10(5A) of the Indian Incometax Act, 1922, and in section 41 (1) and section 41(2) of the Act. In this connection, reliance has been placed by the Revenue upon the decision of the Andhra Pradesh High Court in the case of V. Parthasarathy v. Addl. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , while he was at the Bar and before his elevation to the Bench of, this court, cannot be treated as income falling under the head "Profits and gains of business, profession or vocation" even in spite of the introduction of section 176 (4) of the Act. In that view of the matter, as the receipts were the outstanding dues of the professional work done by the assessee, they were clearly the fruits of the assessee's professional activity. They were, the profits and gains of a profession and they fall under the head "Profis and gains of business, profession or vocation". If, in the absence of any legislative provision, such receipts cannot be treated as income failing under the head "Profits and gains of business, profession or vocation" carried on by the assessee during the relevant year, such receipts cannot be brought to tax under section 56 of the Act as income from other sources in view of the decision of the Supreme Court in Nalinikant Ambalal Mody [1966] 61 ITR 428. In our view, in spite of the introduction of section 176(4) of the Act, in the absence of any deeming provision treating such receipts as income failing under the head "Profits and gains of business, profession or voc ..... 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