1974 (1) TMI 19 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of Rs. 97,685 as income in the hands of the assessee for the assessment year 1957-58.
2. Whether the sum collected as entertainment tax from January 1, 1956, to March 31, 1956, could be considered as the assessee's income for the financial year 1956-57.

Detailed Analysis:

1. Taxability of Rs. 97,685 as Income:
The primary issue was whether Rs. 97,685, collected as entertainment tax by the assessee, was taxable as income for the assessment year 1957-58. The assessee, who had created a trust in 1945, argued that the income from his cinema business was part of the trust and thus exempt from tax. However, this claim was previously rejected by the departmental authorities and upheld by the Tribunal.

For the assessment year 1957-58, the amount under consideration was part of the entertainment tax collected in 1956. The assessee had applied for an exemption from entertainment tax under the Bihar Entertainments Tax Act, 1948. The Commissioner of Commercial Taxes, by an order dated March 25, 1957, directed the payment of Rs. 20,000 out of the total collection of Rs. 1,17,685, leaving Rs. 97,685, which the Income-tax Officer treated as the assessee's income.

The court noted that the liability to pay entertainment tax under the Act is on the proprietor of the entertainment. The compounding of tax under section 5(2) should ideally occur before the realization of the tax. However, in this case, the compounding order was made after the tax had already been collected. The court observed that the remission granted by the government was for the charitable purposes of the trust, and thus, the money collected as entertainment tax was not the income of the assessee at the time of collection.

The court concluded that a constructive or implied trust was created for the charitable purposes of the trust before the income could be deemed to accrue to the assessee. Therefore, the sum of Rs. 97,685 could not be treated as the income of the assessee.

2. Income from January 1, 1956, to March 31, 1956:
The secondary issue was whether the sums collected from January 1, 1956, to March 31, 1956, could be considered the assessee's income for the financial year 1956-57. The court found that before the order dated March 25, 1957, the money collected was not the income of the assessee. If it were to be treated as income, it would be after the passing of the said order, and thus, the entire amount would be taxable in the assessment year 1957-58.

Conclusion:
The court held that the sum of Rs. 97,685 could not be treated as income of the assessee for the assessment year 1957-58. Consequently, the question of law was answered in the negative, in favor of the assessee, and against the revenue. The assessee was entitled to the costs of the reference, assessed at Rs. 100.

Separate Judgment:
NAGENDRA PRASAD SINGH J. concurred with the judgment, agreeing with the conclusion reached.

Final Decision:
Question answered in the negative.