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Issues Involved:
1. Whether the amount of Rs. 3,83,996 written off in the account of the assessee with the company could be treated as income under section 2(24)(iv) of the Income-tax Act, 1961, or under section 2(6C)(iii) of the Act of 1922. 2. If the answer to the first question is affirmative, whether the income is chargeable to tax for the assessment year 1957-58, as falling within the previous year relevant thereto. Issue-wise Detailed Analysis: 1. Treatment of the Written-Off Amount as Income: The court considered whether the sum of Rs. 3,83,996 could be treated as the income of the assessee. The department argued that the amount written off by the company constituted a benefit to the assessee, thus falling under the inclusive definition of "income" in section 2(24)(iv) of the 1961 Act and section 2(6C)(iii) of the 1922 Act. The court noted that the definition includes "the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company." The court found no satisfactory counter to the department's contention. It emphasized that the remission of the debt by the company resulted in a benefit to the assessee, which is covered by the inclusive definition of income. The court rejected the argument that the benefit should be tangible or that it should involve an expenditure by the company. The court also dismissed the relevance of English cases and the Madras High Court decision in CIT v. Venkataraman, which dealt with different types of transactions, such as embezzlement and unauthorized benefits. The court concluded that the sum of Rs. 3,83,996 clearly represents an item of income within the meaning of section 2(6C)(iii) of the 1922 Act. 2. Chargeability of the Income for the Assessment Year 1957-58: The court then examined whether the income was chargeable to tax for the assessment year 1957-58. It noted that under the Income-tax Act, an assessee is taxed on the total income of the previous year, which can vary for different sources of income. The assessee argued that the income should be considered under the same previous year as other incomes derived from the company, which was the year ending on September 30. The revenue contended that the source of this deemed income was the resolution passed by the company, and not the same as the sources of salary, dividend, or other business income. The court agreed with the revenue, stating that the source of this income was the resolution of the company and not the same as other sources of income recorded in the assessee's books. The court found that the Tribunal's view that the source of this item of deemed income is different and separate from other sources of income was correct. It concluded that the adoption of the financial year as the previous year for this income was justified. Conclusion: (i) The amount of Rs. 3,83,996 was rightly held as income of the assessee under section 2(6C)(iii) / 2(24)(iv) of the 1922/1961 Act. (ii) On the facts and in the circumstances of the case, the above income was chargeable to tax for the assessment year 1957-58 as the previous year relevant thereto was the financial year. The court made no order as to costs.
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