1948 (9) TMI 11 - HC - Income Tax

Summary

Issues:
1. Inclusion of exempted sum in total income for determining income tax rate.
2. Liability to pay super-tax on share in partnership.

Analysis:

Issue 1:
The primary issue in this case is whether the sum exempted under Section 25(4) of the Indian Income-tax Act should be included in the total income of the assessee for determining the income tax rate. The contention raised was that all exempted sums must be included in the total income unless expressly excluded by the statute. However, the court held that Section 16 of the Act explicitly includes only certain exempted sums in the total income, thereby implying that sums not included are both exempt from tax and excluded from total income. The court emphasized that when the legislature intends for exempted sums to be included in total income, it expressly provides for it, as seen in Section 16. As Section 25(4) does not mandate the inclusion of the exempted sum in the total income, the court ruled that the share of profit from the partnership cannot be included in the assessee's total income for income tax rate calculation.

Issue 2:
The second issue pertains to the liability of the assessee to pay super-tax on his share in the partnership. The court noted that the proviso to Section 25(4) specifies that sub-sections (3) and (4) do not apply to super-tax unless certain conditions are met, which were not satisfied in this case. Therefore, there was a liability on the assessee to pay super-tax. The dispute arose regarding the correct amount on which super-tax should be paid, either on the partnership deed's share or the actual amount received. The court held that as the contention was not about the liability to pay super-tax but rather on the amount for assessment purposes, the correct figure for super-tax calculation was the actual amount received by the assessee, which was &8377; 41,000.

In conclusion, the court ruled in favor of the assessee, stating that the exempted sum should not be included in the total income for income tax rate calculation and that the liability to pay super-tax was on the actual amount received by the assessee from the partnership. The judgment was delivered by Chagla (CJ) and Tendolkar, JJ., with Tendolkar, J., concurring with the decision.