1971 (11) TMI 19 - HC - Income Tax

Whether the amount was liable to be taxed as deemed profit under section 10(2A) of the Indian Income-tax Act 1922 - case of the assessee was that section 10(2A) of the Act had no application - sub-section (2A) of section 10 of the Act envisages an actual allowance or deduction and not a notional one and in so far as there was no actual allowance or deduction in the assessment for any year in question the sub-section shall have no application to the facts of the case

Summary

Issues:
Taxability of amount under section 10(2A) of the Income-tax Act, 1922.

Analysis:
The case involved a reference by the Income-tax Appellate Tribunal regarding the taxability of an amount of Rs. 79,000 under section 10(2A) of the Indian Income-tax Act, 1922. The assessee, a Hindu undivided family, obtained a remission of Rs. 79,000 from the lessor, the Raja of Dharamjaigarh, in the assessment year 1958-59. The Income-tax Officer claimed to tax this amount as profit under section 10(2A) of the Act.

The assessee contended that the provisions of section 10(2A) did not apply to the case as no allowances or deductions had been made in the assessment for any year. The assessee had not maintained a profit and loss account for the forest contract, and profits were estimated based on sales figures and a percentage rate. The Appellate Assistant Commissioner and the Tribunal upheld the taxability of the amount, considering the lease money as part of the data in estimating profits.

The High Court analyzed the provisions of section 10(2A) which require an actual allowance or deduction to have been made in the assessment for any year. Since no such allowance or deduction was made in this case, the court held that the amount of Rs. 50,000 and Rs. 24,000 could not be taxed under section 10(2A). However, the court found that the item of Rs. 5,000, being a correction of a wrong entry made in 1953, was rightly included in the assessable income for the assessment year 1958-59.

In conclusion, the court ruled that only the amount of Rs. 5,000 out of the total Rs. 79,000 was liable to be taxed as deemed profit under section 10(2A) of the Indian Income-tax Act, 1922. The costs of the reference were to be paid by the respondent, Commissioner of Income-tax, along with counsel's fee of Rs. 200.