1993 (5) TMI 55 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of professional receipts received after discontinuation of legal profession.
2. Interpretation of section 176(4) of the Income-tax Act, 1961.
3. Applicability of judgments from different High Courts.
4. Ambiguity in taxing provisions and their interpretation.

Summary:

1. Taxability of Professional Receipts:
The assessee, a sitting Judge of the Supreme Court of India, received professional fees as an Advocate after discontinuing his legal profession. The Assessing Officer taxed these receipts u/s 176(4) of the Act for assessment years 1990-91 and 1991-92. The CIT(A) confirmed this action. The assessee contended that these receipts were not taxable based on the Calcutta High Court judgment in CIT v. Justice R.M. Datta, which held that such receipts were not taxable u/s 28, 56, or 176(4) of the Act.

2. Interpretation of Section 176(4):
The assessee argued that section 176(4) did not contain the necessary fictions to tax the receipts as income from the profession. The Supreme Court's decision in Nalinikant Ambalal Mody was cited to support the argument that heads of income are mutually exclusive, and professional receipts cannot be taxed under "income from other sources." The Department contended that section 176(4) was designed to tax such arrears and should be interpreted to fulfill its purpose.

3. Applicability of Judgments from Different High Courts:
The Department's counsel argued that the Calcutta High Court's decision in Justice R.M. Datta was not binding on the Tribunal at Chandigarh. However, the Tribunal noted that the Calcutta High Court's decision was the only direct authority on the issue and should be given due respect. The Tribunal also clarified that the earlier decision in Mrs. Roma Bose's case by a Single Judge was implicitly overruled by the Division Bench in Justice R.M. Datta's case.

4. Ambiguity in Taxing Provisions:
The Tribunal emphasized that if a taxing provision is ambiguous and reasonably capable of more than one interpretation, the interpretation beneficial to the assessee must be adopted. This principle was supported by several Supreme Court decisions, including CIT v. Vegetable Products Ltd. and CIT v. Naga Hills Tea Co. Ltd.

Conclusion:
The Tribunal held that the revenue authorities were not justified in taxing the arrears of professional receipts of Rs. 6,14,400 and Rs. 7,34,930 for assessment years 1990-91 and 1991-92, respectively, after the assessee had discontinued his legal profession. The appeals were allowed in favor of the assessee.