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Issues Involved:
1. Taxability of outstanding professional fees received after the discontinuance of the profession. 2. Interpretation of Section 4 and Section 10 of the Indian Income-tax Act, 1922. 3. Applicability of English case law to the Indian context. 4. Computation of income based on the method of accounting employed by the assessee. Detailed Analysis: 1. Taxability of Outstanding Professional Fees: The primary issue was whether the outstanding professional fees realized by the assessee during the year under assessment are taxable as part of his income for that year. The assessee had ceased to practice as a consulting civil engineer from February 16, 1938, and claimed that the outstanding fees received after this date were not taxable. The court held that the outstanding fees are taxable. It was determined that the income, which was earned from the profession before its discontinuance, retains its character as income even if received after the profession has ceased. The court emphasized that the Indian Income-tax Act does not require the source of income to be in existence in the year of assessment. 2. Interpretation of Section 4 and Section 10: The court examined the relevant sections of the Indian Income-tax Act, 1922, particularly Section 4 and Section 10. Section 4 outlines the total income of any previous year, including all income, profits, and gains from whatever source derived. Section 10 deals with the taxability of profits and gains from business, profession, or vocation carried on by the assessee. The court concluded that the income, profits, and gains referred to in Section 4 are chargeable to tax even if the source has ceased to exist in the assessment year. The court rejected the argument that the source must be in existence at the time of receipt for the income to be taxable. Instead, the court stated that the income should be computed in accordance with the method of accounting regularly employed by the assessee, as per Section 13. 3. Applicability of English Case Law: The court considered the applicability of English case law, particularly the cases of Bennett v. Ogston and Hillerns and Fowler v. Murray. These cases suggested that outstanding fees received after the discontinuance of a profession are not taxable in England. However, the court noted that the Indian Income-tax Act and the English statutes are not in pari materia. The court highlighted that the English law requires the source of income to be in existence in the year of assessment, whereas the Indian Act does not contain such a requirement. The court emphasized that the Indian Act taxes the income of the previous year, unlike the English Act, which taxes the income of the current year. 4. Computation of Income Based on the Method of Accounting: The court examined the method of accounting employed by the assessee, which was the cash basis. The court noted that under Section 13, the income, profits, and gains should be computed in accordance with the method of accounting regularly employed by the assessee. The court concluded that if the assessee's interpretation of the law were upheld, a sum representing income from a profession would escape assessment merely because the assessee chose to maintain his accounts on the cash basis. The court rejected this interpretation, stating that the income should be taxed based on the method of accounting employed, and the outstanding fees received should be included in the total income for the assessment year. Conclusion: The court answered the question in the affirmative, holding that the outstanding professional fees realized by the assessee during the year under assessment are taxable as part of his income for that year. The court emphasized that the Indian Income-tax Act does not require the source of income to be in existence in the year of assessment and that the income should be computed based on the method of accounting regularly employed by the assessee.
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