1983 (9) TMI 85 - HC - Income Tax

Summary

Issues:
1. Whether the assessee is entitled to earned income relief on the share of income received from a business subject to wakf.
2. Whether the Income-tax Appellate Tribunal was correct in denying earned income relief to the assessee as the assessment was made directly in the hands of the beneficiary.

Analysis:
The judgment pertains to a case where the assessee was the Mutawalli of a wakf and a beneficiary of the wakf. The income from the wakf was treated as the assessee's income in the assessment, with a deduction for payment to another beneficiary. The Income Tax Officer (ITO) rejected the assessee's accounts, leading to an appeal by the assessee. The Appellate Tribunal upheld the assessment, denying earned income relief to the assessee. The Tribunal cited previous High Court decisions that went against the assessee's argument for earned income relief. The questions raised were referred to the High Court for opinion.

The assessee argued that a beneficiary of a wakf should be entitled to earned income relief based on a later Division Bench decision. The Division Bench referred to Supreme Court decisions emphasizing that income from business carried on by trustees could be considered earned income. The Department contended that the earlier High Court decision should prevail unless overruled by the Supreme Court. The Division Bench decision in favor of the assessee was not appealed, making it final between the parties.

The High Court held that the Division Bench decision in favor of the assessee should be followed, as it was based on settled law from the Supreme Court. The court rejected the Department's plea to refer the matter to a larger Bench, citing Supreme Court precedents on following decisions of co-ordinate courts. The court emphasized the importance of following established legal principles unless differed by the Supreme Court.

In conclusion, the High Court answered the first question affirmatively, stating that the assessee was entitled to earned income relief. The second question was answered negatively, upholding the denial of earned income relief by the Income Tax Appellate Tribunal. The assessee was awarded costs in the amount of Rs. 150.