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Issues: Assessment of revenue deduction under section 14(5), validity of Hyderabad Income-tax Act, taxation of income from the previous year.
Assessment of Revenue Deduction under Section 14(5): The appellant claimed a deduction of Rs. 2,65,226-11-10 under clauses (a) and (b) of section 14(5). The Appellate Tribunal allowed half of it as expenditure, but the High Court disallowed the deduction due to lack of documentation proving the grantor's authorization for the expenditure. The High Court's decision was based on a similar reasoning as in a previous case related to Jatprole jagir. However, the Supreme Court found that the High Court did not correctly interpret clause (a) of section 14(5). The expenses were categorized into three sections: expenditure over the army (allowed), expenditure over attendants (disallowed), and expenses in the palace (disallowed). The appellant argued that the expenditure on attendants should be allowed as it was part of the administrative machinery necessary for land administration. The Supreme Court agreed and allowed the expenditure of Rs. 37,681-13-6, connected with land administration, as a deduction in addition to the deductions already granted. The appeal was partly allowed, and each party was directed to bear their own costs. Validity of Hyderabad Income-tax Act: The Income-tax Tribunal referred the question of the Hyderabad Income-tax Act's vires to the High Court, which ruled against the appellant. The Supreme Court, following a previous decision, upheld the High Court's decision against the appellant, answering questions related to the Act against the assessee. Taxation of Income from the Previous Year: The question of whether the income of the previous year could be taxed in the subsequent year was raised. The Supreme Court answered this question against the appellant, aligning with its decision in related appeals. The judgment clarified the specific categories of expenditure under section 14(5) and emphasized the need for clear proof to claim deductions. The court's analysis focused on distinguishing personal expenses from those connected with land administration, ultimately allowing a specific expenditure as a deduction.
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