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Issues Involved
1. Inclusion of Rs. 18,184 in the assessment of the administratrix for the year 1939-40. 2. Interpretation of the term "due" in Section 7(1) of the Indian Income-tax Act. 3. Applicability of Section 24-B and Section 18 of the Indian Income-tax Act. 4. Set-off of losses against the income assessed. Detailed Analysis 1. Inclusion of Rs. 18,184 in the Assessment of the Administratrix for the Year 1939-40 The primary issue was whether the sum of Rs. 18,184, which was paid to the administratrix after the death of Mr. N. K. Roy Chowdhury, should be included in the assessment for the year 1939-40. The Income-tax Officer included this amount in the total income of the deceased for the year 1938-39, which was challenged by the assessee. The Appellate Assistant Commissioner initially excluded this amount, but the Commissioner later restored it, leading to the legal question: "Was the Commissioner correct in law in ordering the inclusion of the sum of Rs. 18,184 in the petitioner's assessment for 1939-40?" 2. Interpretation of the Term "Due" in Section 7(1) of the Indian Income-tax Act The interpretation of the term "due" in Section 7(1) was crucial. The Assistant Commissioner held that the term "due" should be limited to the salary due in respect of the previous or accounting year. However, the Commissioner argued that the term "due" should also include salary paid during the year, irrespective of when it was earned. The court agreed with the Commissioner, stating that limiting the term "due" to the accounting year would insert words into the section that were not there. Consequently, the court held that the commission due to the deceased for preceding years, paid to his administratrix after his death, was salary within the meaning of Section 7(1). 3. Applicability of Section 24-B and Section 18 of the Indian Income-tax Act Section 24-B(2) of the Indian Income-tax Act was applied to assess the income of the deceased, making the legal representative liable to pay the tax. The court noted that if Mr. Roy Chowdhury had not died, he would have been assessed for 1939-40 on the income of the previous year 1938-39. The court also addressed the proviso to Section 7(1), which states that where tax is deductible at the source under Section 18, the assessee shall not be called upon to pay the tax unless he has received the salary without such deduction. The court concluded that since the administratrix received the salary without the deduction of tax, she was liable to pay the tax. 4. Set-off of Losses Against the Income Assessed The court acknowledged the hardship faced by the estate due to a loss of Rs. 12,932 in 1938-39, but only a proportionate set-off of Rs. 1,509 was allowed for the period before the death of the deceased. The court noted that this result was inevitable based on the construction of Section 7(1) of the Act. Conclusion The court concluded that the sum of Rs. 18,184 was rightly included in the assessment for 1939-40. The answer to the question propounded by the Commissioner was in the affirmative. The court held that the administratrix was liable to pay the tax on the salary due to the deceased, as per Section 24-B(2) and Section 7(1) of the Indian Income-tax Act. No order was made as to costs.
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