1987 (11) TMI 121 - AT - Income Tax

Summary

Issues:
1. Taxability of wages received by the assessee for the assessment year 1982-83.
2. Applicability of Section 5(i)(a) versus Section 15 of the Income Tax Act, 1961.
3. Interpretation of legal principles regarding the taxation of income.

Detailed Analysis:
The judgment pertains to an appeal by an individual assessee, who was previously a non-resident, regarding the taxability of wages received during the assessment year 1982-83. The assessee, a former employee of a foreign employer, claimed wages based on International Transport Workers Federation (ITF) rates, which were higher than the amount paid to him. The Income Tax Officer (ITO) held the amount taxable in the assessment year in question on a receipt basis, contrary to the assessee's contention that it accrued in the previous year when he was a non-resident. The Appellate Assistant Commissioner (AAC) upheld the taxability under Section 5(i)(a) of the IT Act, 1961.

In the appeal before the ITAT, the assessee argued that the amount became due and payable in the previous year when he was a non-resident, making it non-taxable in the current assessment year. The assessee contended that Section 15, not Section 5(i)(a), was applicable in this case. The ITAT considered legal precedents cited by both parties, emphasizing that income is taxable when it accrues or is received, whichever is earlier. The tribunal highlighted that taxability is a legal matter, not a matter of choice for the assessee or the assessing officer.

The ITAT analyzed the provisions of Section 15(a) concerning salary due to an assessee, emphasizing that such income is chargeable to tax under the head "Salaries" in the previous year, whether paid or not. The tribunal distinguished between accrual and receipt of income, citing legal precedents such as Bhuban Mohan Banerjee, Laxmipat Singhania, and Chunilal V. Mehta & Sons P. Ltd. These cases underscored that income cannot be taxed twice and that income accrued in a specific year should not be taxed in a subsequent year based on receipt alone.

Ultimately, the ITAT allowed the appeal, ruling that the wages in question could not be taxed for the assessment year 1982-83. The tribunal concluded that since the income accrued in the previous year when the assessee was a non-resident, it could not be taxed in the current assessment year solely based on receipt. The judgment reaffirmed the principle that income is taxable at the earliest point of accrual or receipt, as per the provisions of the Income Tax Act, 1961.