1984 (3) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Whether Rs. 1,34,390 was income assessable under section 41(2) of the Income-tax Act, 1961, for the assessment year 1966-67.
2. Validity of reopening the assessment for the assessment year 1959-60.
3. Determination of the correct assessment year for including the balancing charge.

Issue-wise Detailed Analysis:

1. Assessability under Section 41(2) for the Assessment Year 1966-67:
The primary issue was whether the sum of Rs. 1,34,390 was assessable as income under section 41(2) of the Income-tax Act, 1961, for the assessment year 1966-67. The assessee, a limited company running an electric supply undertaking, had its assets acquired by the Government. The final compensation was determined and paid in the previous year relevant to the assessment year 1966-67. The Tribunal held that the balancing charge became due in the previous year relevant to the assessment year 1966-67 and thus was includible in the total income for that year. The Tribunal's decision was based on the fact that the amount of compensation was ascertained only in the previous year relevant to the assessment year 1966-67.

2. Validity of Reopening the Assessment for the Assessment Year 1959-60:
The Income Tax Officer (ITO) reopened the assessment for the assessment year 1959-60, arguing that the income had escaped assessment due to the failure of the assessee to disclose fully and truly all material facts. The Tribunal upheld the reopening under section 147 read with section 297(2)(d)(ii) of the Income-tax Act, 1961. However, it was concluded that the balancing charge was not includible in the assessment year 1959-60 because the compensation amount became due only in the previous year relevant to the assessment year 1966-67.

3. Determination of the Correct Assessment Year:
The Tribunal had to determine whether the balancing charge should be included in the assessment year 1959-60 or 1966-67. The Tribunal held that the balancing charge was includible in the assessment year 1966-67 because the compensation amount was ascertained and became due in the previous year relevant to that assessment year. The Tribunal's decision was influenced by the fact that the compensation amount was not known or ascertainable at the time of the acquisition in 1959.

The Tribunal's approach was supported by precedents, including the case of Gulati, Voluntary Liquidator, Panipat Electric Supply Co. Ltd. v. CIT, where it was held that the amount becomes due when it is ascertainable. The Bombay High Court in Akola Electric Supply Co. Pvt. Ltd. v. CIT also supported this view, stating that the balancing charge is includible in the year when the compensation amount is ascertained.

Conclusion:
The court concluded that the sum of Rs. 1,34,390 was rightly includible in the total income of the assessee for the assessment year 1966-67. The reopening of the assessment for the assessment year 1959-60 was valid but the balancing charge was not includible in that year. The Tribunal's decision was based on the interpretation that the compensation amount became due in the previous year relevant to the assessment year 1966-67, aligning with the provisions of section 41(2) of the Income-tax Act, 1961. The court answered the referred question in the affirmative, in favor of the Revenue and against the assessee.