TMI Blog1993 (5) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... t to tax the aforesaid receipts as the assessee's income for assessment years 1990-91 and 1991-92 by invoking the provisions of section 176(4) of the Act. The ld. CIT(A) confirmed the action of the Assessing Officer and dismissed the assessee's appeals. 3. Before we get down to the brasstacks, we might as well dispose of a preliminary objection raised by Shri R. P. Sawhney, the learned Departmental Standing Counsel. Shri Sawhney drew our attention to common ground No. 2(ii) which reads as under: " That the learned CIT(A) was not justified in not accepting the judgment of Andhra High Court, which had considered the judgment of Calcutta High Court that was followed by the ITO and the CIT(A). " Shri Sawhney's objection was that from this ground it appeared that the assessee had no grievance inasmuch as the ld. CIT(A) had already relied on the Andhra Pradesh High Court decision in the case of V. Parthasarathy v. Addl. CIT [1976] 103 ITR 508. 4. Shri M. L. Garg, the learned counsel for the assessee submitted that the main grievance of the assessee was recorded in common ground No. 2(i) and the ground No. 2(ii) was a mere elaboration of the main grievance of the assessee. It was, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther it should be deemed to be the profits of the business or profession falling under section 28 of the Act, was not there in section 176(4). According to him, section 28 taxes profits and gains of business or profession which was carried on by business at any time during the previous year. Since the assessee did not carry on any profession during the previous years, relevant to assessment years 1990-91 and 1991-92, the submission was that the assessee had no income which could be taxed under section 28. Relying on the Supreme Court decision in Nalinikant Ambalal Mody v. S.A.L. Narayan Row, CIT [1966] 61 ITR 428, it was submitted that as the heads of income were mutually exclusive and the receipts could be brought under the fourth head, they could not be brought under the residual head "income from other sources". In other words, the submission was that since the receipts were professional receipts, these could not be assessed under the head "income from other sources" because the heads of income were mutually exclusive. 7. Shri Garg further submitted that though the Legislature may have enacted section 176(4) so as to bring to tax arrears of professional receipts, if the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 ITR 236, CED v. R. Kanakasabai [1973] 89 ITR 251 and CIT v. Cellulose Products of India Ltd. [1991] 192 ITR 155. In short, the submission of Shri Garg was that the professional receipts of the assessee received after the discontinuance of the profession were not taxable in his hands in the years under consideration under sections 28, 56 or 176(4) of the Act. 10. Shri Sawhney submitted that section 176(4) was a complete answer to the issues at hand. According to him, the said section deemed all the fictions which were necessary for bringing to tax the professional income received after discontinuation of the profession. It was vehemently argued that certain defects and lacunae had been noticed under the Indian Income-tax Act, 1922 and the present Income-tax Act of 1961 had sought to plug and remove those defects. It was explained that under the 1922 Act, such arrears of professional income received subsequently could not be brought to tax and precisely for this reason, section 176(4) was enacted. According to Shri Sawhney, legal fiction had to be taken to its logical conclusion and had to be extended so that such legal fiction should be given full effect to the object for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss was taxable. A lot of emphasis was laid on the interpretation of a remedial section. According to Shri Sawhney, section 176(4) was a remedial section and while interpreting such a section, a construction which would defeat its purpose and, in effect, obliterate it from the statute book should be eschewed. If more than one construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. Reliance in this regard was placed on the Supreme Court decision in the State of Tamil Nadu v. M.K. Kandaswami [1975] 36 STC 191. It was vehemently argued that if section 176(4) was interpreted the way the Calcutta High Court had interpreted it, then it would be a dead letter. According to the learned Standing Counsel, every word in the said provision had to be given a meaning otherwise section 176(4) will stand obliterated. 13. The ld. Standing Counsel also relied on the following observations of the Full Bench of the Patna High Court in CIT v. Sheo Kumari Debi [1986] 157 ITR 13 : " In the commercial world of modern times and, in particular, in India where tax evasion is rampant, the early Victorian approach tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be taxed under section 28, then the residuary section 56 was there to come to the succour of the income-tax authorities. 16. In reply, Shri. Garg submitted that all the arguments which had been advanced by Shri Sawhney had been taken good care of in the Calcutta High Court decision in the case of Justice R.M. Datta. According to him, this was the only direct authority on the issue and there was no other direct judgment. The Tribunal had therefore to respect the decision of the Calcutta High Court. It was also submitted that the earlier decision of Calcutta High Court in the case of Mrs. Roma Bose was by a Single Judge and the same could not take precedence over a later judgment by a Division Bench in the case of Justice R.M. Datta. As regards the claim of expenses as a deduction, it was submitted that the assessee had received the entire amount of professional fees by way of cheques which included the fees of juniors and Munshis. It was submitted that only expenses relating to their fees were claimed as a deduction and no other expenses were claimed. According to the learned counsel, the juniors and Munshis had vested right in the professional receipts and the assessee only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a taxing statute fail, then so must the tax. The Calcutta High Court has amply shown in its judgment in the case of Justice R.M. Datta that the words of section 176(4) do fail inasmuch as all the three fictions necessary for bringing such arrears of professional fees to tax are not there. Section 176(4) gets only two cheers and is deficient in the third one. 20. We also find merit in the submissions of Shri Garg that if a taxing provision is ambiguous and is reasonably capable of more than one interpretation, that interpretation which is beneficial to the subject must be adopted. Even if it is assumed that the interpretation put by the Id. Standing Counsel is a reasonable interpretation, still the matter has to be decided in favour of the assessee because if a provision of the taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee has got to be accepted. This proposition of law is now well settled and even Shri Sawhney had no quarrel with this abstract proposition of law. 21 Taking into consideration the entire facts and circumstances of the case, we hold that the revenue authorities were not justified in bringing to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
