1954 (5) TMI 40 - HC - Income Tax

Summary

Issues:
1. Determination of previous years for assessment years 1948-49 and 1949-50.
2. Interpretation of Section 2(11)(a) and Section 2(11)(c) of the Income Tax Act.
3. Impact of the amendment to Section 2(11)(c) in 1953 on the assessment.

Analysis:
1. The case involved the determination of the previous years for the assessment years 1948-49 and 1949-50 for an assessee firm that took over assets of a partnership and commenced business. The issue arose as to whether the accounting period should be considered from the date of business commencement to 31st March or as per the assessee's accounts made up to a specific date.

2. The main contention was regarding the interpretation of Section 2(11)(a) and Section 2(11)(c) of the Income Tax Act. The assessee argued that for the assessment year 1949-50, the firm should be assessed based on the previous year from a specific date to the following year, invoking the proviso to Section 2(11)(c) to avoid taxation for the assessment year 1948-49.

3. The judgment also analyzed the impact of the amendment to Section 2(11)(c) in 1953, which introduced a requirement that the option under the section should be exercised within 12 months of setting up the business. The court examined the pre-amendment provisions and the subsequent changes to determine the correct application of the law in the case at hand.

4. The court considered the principles of taxation under the Income Tax Act and the general scheme of assessment to interpret the provisions in question. It was noted that the accounts of the assessee were made for a period of 13 months, not a full year, which affected the applicability of certain provisions and the assessee's claim for exemption from taxation for the assessment year 1948-49.

5. Ultimately, the court upheld the decision of the Commissioner of Income Tax and the Tribunal, ruling that the assessee was not entitled to the benefit of the latter part of Section 2(11)(c) due to the specific accounting period of 13 months. The court affirmed that for the assessment year 1948-49, the accounting period should be considered from the date of business commencement to 31st March, 1948, and for the assessment year 1949-50, Section 2(11)(a) would apply.

6. The court answered the question framed by the Tribunal in the affirmative, against the assessee, and ordered the assessee to pay the costs of the respondent. The judgment provided a detailed analysis of the relevant provisions of the Income Tax Act and the application of those provisions to the specific circumstances of the case.