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Issues Involved:
1. Whether "veethapalisa" received by the assessee is income liable to be taxed under the Income Tax Act, 1961. 2. Whether the income from "veethapalisa" should be attributed to the assessee or another firm, M/s. M. George and Brothers, for the assessment years 1972-73, 1973-74, 1974-75, and 1975-76. Issue-wise Detailed Analysis: 1. Taxability of "Veethapalisa" as Income: The primary issue is whether "veethapalisa" received by the assessee qualifies as income and is liable to be taxed under the Income Tax Act, 1961. The court noted that the complexity of modern trade, commerce, and finance makes it difficult to define "income" precisely. The legislature has used the word "includes" in the interpretation clause, section 2(24) of the Act, indicating a broad meaning. The court referred to the Supreme Court's ruling in Raghuvanshi Mills Ltd. v. CIT, which held that all income from whatever source derived must be chargeable to tax unless expressly exempted. The court also analyzed section 10(3) of the Act, which exempts certain casual and non-recurring receipts from tax, provided they meet specific criteria. The court emphasized that "casual" means something received without expectation, calculation, or design. The court examined the definition of "veethapalisa" under section 3(15) of the Travancore Chitties Act, 1120, which describes it as the share of a subscriber in the discount available for rateable distribution among the subscribers at each installment of the chitty. The court concluded that "veethapalisa" is essentially a rebate and thus liable to be treated as taxable income. The court referred to its previous decision in CIT v. K. N. G. Brothers, which held that "veethapalisa" partakes the character of income and is liable to be taxed in the hands of the recipient. The court also noted that if the variola of a chitty provides for a guaranteed minimum discount to non-prized subscribers, "veethapalisa" should be considered income, not of a casual or non-recurring nature. The court emphasized that the assessee is a business firm aiming to make profits and that "veethapalisa" received in the course of conducting its business is inseparably connected with the business's ownership. The Tribunal had held that the scheme of profit-making is built into the chit fund's scheme, making "veethapalisa" a business receipt. The court found no challenge to these findings and concluded that "veethapalisa" is income in the hands of the assessee, attracting tax. 2. Attribution of Income to Assessee or M/s. M. George and Brothers: For the assessment years 1972-73, 1973-74, 1974-75, and 1975-76, the assessee contended that it was not the subscriber to the chitties but another firm, M/s. M. George and Brothers, and thus the "veethapalisa" should be attributed to that firm. The Appellate Assistant Commissioner (AAC) accepted this contention for these years, holding that the "veethapalisa" could not be treated as the taxable income of the assessee. However, the Tribunal, after detailed examination, held that it was the assessee who had subscribed to the chitties. The Tribunal confirmed the AAC's order for the assessment year 1970-71, which had affirmed the assessing authority's decision that "veethapalisa" is income in the hands of the assessee and liable to be taxed. The court agreed with the Tribunal's findings and held that the right to claim "veethapalisa" is vested in every subscriber in terms of the variola and the Chitties Act. Since the assessee is also the person conducting the business of chitties, "veethapalisa" in its hands is a trading receipt attracting tax. Conclusion: The court concluded that "veethapalisa" received by the assessee is income in its hands liable to be taxed. The question referred to the court was answered in the affirmative, against the assessee and in favor of the Revenue. The court ordered that a copy of the judgment be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.
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