1979 (2) TMI 64 - HC - Income Tax

Cash Credits, Original Assessment, Question Of Fact, Question Of Law, Reference To High Court, Undisclosed Income

Summary

Issues:
1. Whether the sum of Rs. 24,000 was assessable in the hands of Abdul Rahiman for the assessment year 1971-72?
2. Whether the sum of Rs. 12,000 was assessable in the hands of Adam Sahib for the assessment year 1971-72?

Analysis:
The High Court of Madras addressed the issue of whether the sums of Rs. 24,000 and Rs. 12,000 were assessable in the hands of Abdul Rahiman and Adam Sahib, respectively, for the assessment year 1971-72. The facts revealed that Abdul Rahiman was the managing director of A.R.T. Bus Service (P.) Ltd., and the Income Tax Officer (ITO) considered Rs. 24,000 as his accrued salary for the previous year ending December 31, 1970. The ITO relied on a resolution passed by the company's board of directors entitling Abdul Rahiman to a monthly remuneration of Rs. 2,000. The Assessing Officer held that the salary accrued to Abdul Rahiman despite non-receipt, leading to its taxation. The Appellate Assistant Commissioner (AAC) disagreed, stating that since the salary was not credited in the company's books, it could not be treated as income. The Tribunal, however, upheld the ITO's view, emphasizing that the salary accrued as per the resolution and no waiver occurred before accrual. The same conclusion was reached for Adam Sahib, a full-time director. The High Court concurred with the Tribunal's findings, highlighting that once income accrues, any subsequent waiver merely amounts to an application of income. The Court cited precedents to support this position, emphasizing that the nature of the income, whether salary or other sources, did not alter the taxability post-accrual. The Court declined to delve into the aspect of appropriate relief for non-receipt, affirming the Tribunal's decision and ruling in favor of the revenue, entitling them to costs.

In conclusion, the High Court of Madras upheld the taxation of the accrued sums in the hands of Abdul Rahiman and Adam Sahib for the assessment year 1971-72, emphasizing that once income accrues, any subsequent waiver does not affect taxability. The Court relied on precedents to support its decision and ruled in favor of the revenue, declining to address the aspect of relief for non-receipt.