1980 (4) TMI 59 - HC - Income Tax

Summary

Issues Involved:
1. Whether the salary income of the assessee as a judge of the Andhra Pradesh High Court could be included for the purpose of assessment for the year 1969-70.

Issue-wise Detailed Analysis:

1. Inclusion of Salary Income for Assessment Year 1969-70:

Facts:
The assessee, an individual who practiced as an advocate, was appointed as a judge of the High Court of Andhra Pradesh effective August 21, 1968. Prior to this, he received remuneration as a liquidator and editor, which was assessed as salary income until the assessment year 1968-69. For the assessment year 1969-70, the remuneration was assessed under the head "Profession." The assessee maintained separate accounts for his salary as a judge, which were opened on August 21, 1968, and made up till July 31, 1969. The salary was not included in the return for the assessment year 1969-70, as the accounts were closed on July 31, 1969. The ITO accepted this and did not include the salary in the assessment for 1969-70. However, the Addl. CIT, under s. 263 of the I.T. Act, 1961, passed an order to include the salary for the period August 21, 1968, to March 31, 1969, in the assessment year 1969-70. The Tribunal later vacated the order of the Commissioner and restored the ITO's order.

Legal Analysis:
The primary issue was whether the salary income as a judge could be assessed for the year 1969-70. The assessee argued that under s. 3(1)(b) of the Act, he could choose the previous year for a new source of income, and since the accounts were made up to July 31, 1969, there was no previous year for the assessment year 1969-70. The Tribunal supported this view, stating that neither s. 3(i)(a) nor s. 3(1)(b) applied, and because the Central Board of Direct Taxes did not determine the previous year under s. 3(1)(c), the original assessment by the ITO was correct.

Scheme of the Act:
The Income-tax Act, 1961, is a self-contained code dealing with income-tax matters exhaustively. Income-tax is charged for any assessment year in respect of the total income of the previous year or years. The term "previous year" is defined in s. 3 of the Act, allowing different previous years for separate sources of income. Article 221 of the Constitution provides for the salaries of High Court judges, which are charged on the consolidated fund of the State.

Judgment:
The court examined whether a judge of a High Court could have a different previous year for his salary, treating it as a separate source of income. It was held that the salary payable to a High Court judge constitutes a separate source of income, allowing for a different previous year. Since the accounts were made up to July 31, 1969, which is beyond the financial year preceding the assessment year 1969-70, there was no previous year for this new source of income for 1969-70. Therefore, the salary income should not be included for the assessment year 1969-70, and the provisions of s. 3(1)(b) are applicable. The Tribunal's view that the crucial date is the making up of accounts, not the commencement of income, was upheld. The court also noted that the Tribunal corrected its error in the subsequent assessment year 1970-71, accepting the applicability of s. 3(1)(b).

Conclusion:
The court concluded that the salary income of the assessee as a judge of the High Court of Andhra Pradesh should not be included for the assessment year 1969-70. The answer to the reference was in the negative, and no costs were awarded.