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Issues:
1. Jurisdiction of Civil Court to entertain the suit. 2. Right of the Income Tax Officer to deduct outstanding tax amount. 3. Interpretation of relevant sections of the Indian Income Tax Act. Detailed Analysis: 1. Jurisdiction of Civil Court: The plaintiff filed a suit claiming a refund of a balance amount of Income Tax and a deposited sum with interest. The defendant contested, arguing that the Civil Court lacked jurisdiction to entertain the suit. The learned Subordinate Judge dismissed the suit on this ground. However, the High Court held that the suit did not fall under Section 67 of the Indian Income Tax Act, which bars suits to set aside or modify assessments. Since the plaintiff's claim was for a refund and not to challenge an assessment, the Civil Court had jurisdiction to try the suit. 2. Right of the Income Tax Officer to deduct outstanding tax amount: The plaintiff contended that the Income Tax Officer had no right to deduct an outstanding tax amount from the refundable sum. The deduction was made under Section 49-A of the Indian Income Tax Act, which allows set-off against remaining payable tax. The plaintiff argued that the tax for the year 1930-31 became barred for recovery after a year from the demand. However, the High Court held that the arrears of tax for 1930-31 were legally recoverable in 1935. The Court reasoned that the right of set-off under Section 49-A was not limited to legally recoverable amounts, and the Income Tax Officer was entitled to deduct the outstanding tax from the refundable sum. 3. Interpretation of relevant sections of the Indian Income Tax Act: The Court analyzed the provisions of Section 46 and 49-A of the Indian Income Tax Act to determine the Income Tax Officer's authority to deduct the outstanding tax amount. It was established that Section 46 provides a summary remedy for tax recovery, but it does not preclude other methods of recovery. The Court held that the arrears of tax for 1930-31 were still payable in 1935, allowing the Income Tax Officer to deduct the amount under Section 49-A. The Court emphasized that the expression "remaining payable by the person" did not imply only legally recoverable amounts, supporting the Income Tax Officer's right to set-off. In conclusion, the High Court dismissed the appeal, upholding the Income Tax Officer's authority to deduct the outstanding tax amount and affirming the jurisdiction of the Civil Court to entertain the suit.
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