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Showing 41 to 60 of 90 Records
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1971 (1) TMI 50
Whether in order to constitute short-levy, some amount should have been assessed as payable by way of duty so as to make R. 10 applicable?
Whether the demands could be justified under Rule 9 (2)?
Held that:- By the interpretation placed by us on Rule 10, the position will be that an assessee who has been assessed to the smaller amount as well as an assessee who has been assessed to nil duty will all be put on par and that is what is intended by Rule 10.The above reasoning leads to the conclusion that Rule 10-A does not apply to the case on hand.
There is absolutely no material placed before us by the appellants which would justify the issue of the notice under Rule 9 (2). The proper provision under which action should have been taken if at all is Rule 10. The demands having admittedly been made long after the expiry of the period of three months, referred to in the said rule, it follows that the demands were not valid. The High Court was justified in striking down the notices dated November 3, 1961 Ex. G. as well as the demand dated December 2, 1961 under Ex. H. Appeal dismissed.
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1971 (1) TMI 49
Issues:
Validity of the notice issued under Rule 10-A of the Central Excise Rules, 1944.
Detailed Analysis:
The case involves an appeal against the order of the Bombay High Court confirming the quashing of a notice dated November 9, 1963, issued under Rule 10-A of the Central Excise Rules, 1944. The first respondent, a public limited company manufacturing steel wires, had imported steel wire rods and manufactured steel wires out of them. The dispute arose regarding the excise duty payable on these goods. The appellant demanded additional excise duty from the first respondent, which led to the filing of a petition in the High Court to quash the demand.
The main issue for consideration was the validity of the notice dated November 9, 1963, under Rule 10-A. The appellants argued that Rule 10-A applied, while the respondents contended that Rule 10 applied, and the demand was made beyond the prescribed period. The Court referred to a previous judgment and held that Rule 10-A was not applicable in this case. Even under a restricted interpretation of Rule 10, the Court found that the case involved the recovery of additional duty due to a misapprehension by the Department, which falls under Rule 10 and not Rule 10-A.
The Court emphasized that the demand for additional duty, based on the original imposition at a lower rate, was covered by Rule 10. As a result, the High Court's decision to quash the demand dated November 9, 1963, was deemed justified. The appeal was dismissed, and the costs were awarded to the first respondent, thereby upholding the decision of the High Court and settling the dispute regarding the excise duty on the imported steel wire rods and manufactured steel wires.
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1971 (1) TMI 48
Whether an order was made under section 10A of the Excess Profits Tax Act in a pending proceeding for assessment of excess profits tax?
Held that:- In the interests of justice, it is necessary that a supplementary statement of the case should be called for on the question whether there was any proceeding pending under section 15. On the question whether the proceeding under section 15, if pending, was valid, we express no opinion at this stage.
We direct the Tribunal to submit a supplementary statement of the case on the question whether the proceeding under section 10A was started in the course of assessment or reassessment proceeding commenced under section 15.
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1971 (1) TMI 47
Issues:
1. Liability of the assessee to gift-tax assessment on properties conveyed to children under a settlement deed.
2. Whether the transaction qualifies as a family arrangement exempt from tax.
3. Exemption under section 5(1)(xii) of the Act for the gift made for the education of the minor son.
Analysis:
1. The case involved a reference under section 26(1) of the Gift-tax Act to determine if the assessee was liable for gift-tax assessment on properties conveyed to his children through a settlement deed. The assessee contended that the transaction was a family arrangement not subject to tax and that the gift to his minor son for education should be exempt under section 5(1)(xii) of the Act. The courts reviewed the facts and previous decisions to assess the validity of the contentions.
2. The court established that for a transaction to be considered a family arrangement, there must be an agreement among family members to avoid disputes and maintain harmony. In this case, the settlement deed executed by the father in favor of his children was deemed a gift made out of love and affection without consideration. The court clarified that the terms of the document did not indicate a family arrangement as it was a unilateral action by the father, making it a taxable gift under the Act.
3. Regarding the exemption claim under section 5(1)(xii) for the gift made for the education of the minor son, the court emphasized that the burden of proof lies with the assessee to establish the intention behind the gift. The court noted that the document did not explicitly mention the gift for educational purposes, and the claim was raised late in the proceedings. The appellate authorities found no evidence supporting the claim, leading to the rejection of the exemption request. Ultimately, the court upheld the decision that the assessee was not entitled to the exemption under section 5(1)(xii) for the gift made to his minor son.
In conclusion, the court ruled in favor of the income-tax department, holding the assessee liable for gift-tax assessment on the properties conveyed to his children and denying the exemption claim for the gift made for the education of the minor son. The judgment highlighted the importance of establishing the intent behind gifts and the criteria for qualifying as a family arrangement under the Gift-tax Act.
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1971 (1) TMI 46
Petitioner challenges the notice issued under section 148 - When depreciation on machinery was claimed and allowed, if subsequently it is learned that the machinery did not exist, whether the assessment can be reopened – it would be unreasonable to say that the petitioner had disclosed truly and fully all primary facts. In that view of the matter the conditions precedent required for the issue of the notice have been fulfilled - held that that there was reasonable ground for reopening the assessment
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1971 (1) TMI 45
Issues Involved:
1. Inclusion of surplus from the sale of land and revaluation reserves in accumulated profits.
2. Applicability of rule 24's 40:60 ratio for determining accumulated profits.
3. Inclusion of general reserves, provision for taxation, and profit and loss account balances in accumulated profits.
Detailed Analysis:
1. Inclusion of Surplus from the Sale of Land and Revaluation Reserves in Accumulated Profits:
The assessee argued that the surplus from the sale of lands and reserves created from revaluation should be excluded from accumulated profits. The Tribunal held that only 40% of the profits from the sale of land and revaluation reserves should be included, as these were partly agricultural income. The Tribunal's decision was challenged on the grounds that the entire profit should be considered as accumulated profit. The court agreed with the assessee that the surplus from the sale of land and revaluation reserves should not be included in accumulated profits except for the amount assessed as capital gains under section 12B, which was Rs. 2,47,921 for T.T. Co. for the year 1949-50.
2. Applicability of Rule 24's 40:60 Ratio for Determining Accumulated Profits:
The Tribunal applied the 40:60 ratio from rule 24 to the profits from the sale of land and revaluation reserves, considering 40% as business income and 60% as agricultural income. However, the court found that rule 24 should not apply to capital gains. The court held that the entire profit from the sale of assets should be considered as accumulated profit unless it was assessed as capital gains. The court concluded that only Rs. 2,47,921, which was assessed as capital gains, should be included in accumulated profits.
3. Inclusion of General Reserves, Provision for Taxation, and Profit and Loss Account Balances in Accumulated Profits:
The Tribunal held that general reserves and provision for taxation, as well as profit and loss account balances, should be included in accumulated profits. The assessee contended that 60% of these amounts should be excluded as they were derived from agricultural income. The court rejected this argument, stating that once the profits are transferred to the balance sheet, they become commercial profits and should not be bifurcated further. The court held that the entire amounts in the general reserves, provision for taxation, and profit and loss account balances should be included in accumulated profits.
Conclusion:
The court concluded that the surplus from the sale of land and revaluation reserves should not be included in accumulated profits except for the amount assessed as capital gains. Rule 24's 40:60 ratio does not apply to capital gains. The entire amounts in general reserves, provision for taxation, and profit and loss account balances should be included in accumulated profits. The success was equally divided, and there was no order as to costs.
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1971 (1) TMI 44
Issues Involved:
1. Whether the sum of Rs. 29,800 is taxable in the hands of the assessee under section 10(2)(vii) of the Income-tax Act, 1922.
2. Whether the assessee-firm is a new and distinct entity or a continuation of the original firm.
3. Calculation of the written down value of the buses.
Detailed Analysis:
1. Taxability of Rs. 29,800 under Section 10(2)(vii):
The primary issue is whether the sum of Rs. 29,800 realized by the assessee from the sale of four buses is taxable under section 10(2)(vii) of the Income-tax Act, 1922. This section stipulates that in computing business profits, an allowance shall be made for the amount by which the written down value of the building, machinery, or plant sold exceeds the amount for which it is sold. The second proviso to clause (vii) states that if the sale amount exceeds the written down value, the excess (up to the difference between the original cost and the written down value) shall be deemed profits of the previous year in which the sale occurred.
2. Continuation vs. New Entity:
The decision hinges on whether the depreciation allowed to the previous firms can be considered for fixing the written down value of the buses in the hands of the assessee. This involves determining whether the assessee-firm is a continuation of the original firm formed in 1949 or a new and distinct entity. If it is a continuation, the past depreciation must be taken into account; if it is a new firm, it did not benefit from the past depreciation.
3. Written Down Value Calculation:
The Tribunal's supplementary statement clarified that when the second and third firms took over the buses, they were taken over at book values, i.e., cost less depreciation provided in the accounts of the predecessor firm. The Tribunal found that the written down value of the buses at the end of the second partnership was Rs. 18,328, not nil as contended by the department.
Judgment Summary:
Continuation of the Firm:
The court analyzed the deeds of partnership from 1949, 1952, and 1955. The first deed (1949) formed the firm "Messrs. Bhavnani Bus Service Company" with four partners. The second deed (1952) reconstituted the firm with new partners, stating that the first partnership had ended by efflux of time. The third deed (1955) further reconstituted the firm with only two partners, stating that the second partnership was dissolved. Despite these recitals, the court found that the business, assets, and management remained largely unchanged, particularly under the control of Tuljaram and Hiranand Bhavnani. The Tribunal's finding that there was no actual dissolution but only a change in the firm's constitution was upheld.
Depreciation and Written Down Value:
The court noted that the balance-sheet for the assessment year 1957-58 showed the value of the buses as per the last balance-sheet, indicating continuity. The written down value of Rs. 18,328 at the end of the second partnership was accepted, as both parties had agreed to these figures during the Tribunal proceedings.
Taxable Amount:
Given the written down value of Rs. 18,328, the taxable profit from the sale of the buses was determined to be Rs. 11,472 (Rs. 29,800 - Rs. 18,328). The court concluded that the sum of Rs. 11,472 is taxable under section 10(2)(vii) of the Act, not the entire Rs. 29,800.
Conclusion:
The court answered the reference by stating that the sum of Rs. 11,472 is taxable in the hands of the assessee under section 10(2)(vii) of the Income-tax Act, 1922. There was no order as to costs.
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1971 (1) TMI 43
Issues:
Penalty imposition under section 28(1)(c) of the Income-tax Act, 1922 based on alleged concealment of income and accuracy of stock maintenance.
Analysis:
The case involved the imposition of a penalty on an assessee, a registered firm engaged in grain commission agency, speculation, and business on its own account, for discrepancies in stock accounts and alleged concealment of income. The Income-tax Officer found that the assessee had pledged goods to the bank in excess of what was recorded in its stock accounts, leading to a determination of excessive stocks valued at Rs. 25,406. The assessee provided explanations for the discrepancies, attributing them to naming errors by bank authorities, pledging of stocks belonging to another individual, and a general practice of declaring excess grain. Despite the explanations, the Income-tax Officer imposed a penalty of Rs. 15,000, later reduced to Rs. 8,000 by the Appellate Assistant Commissioner.
Upon further appeal, the Tribunal considered whether the discrepancies and non-acceptance of explanations warranted the imposition of a penalty under section 28(1)(c) of the Income-tax Act, 1922. The Tribunal concluded that the mere rejection of the assessee's explanation did not establish concealment of income, emphasizing the absence of positive evidence linking the discrepancies to deliberate concealment. The Tribunal referenced the case law of Commissioner of Income-tax v. Anwar Ali, highlighting the requirement for cogent material evidence beyond the falsity of explanations to justify penalty imposition for concealment of income.
The High Court concurred with the Tribunal's reasoning, holding that the certificate from the bank indicating excess pledging of goods did not conclusively prove inaccurate stock maintenance or deliberate concealment of income. The Court emphasized the lack of substantial evidence establishing the guilt of the assessee, thereby upholding the Tribunal's decision that penalty imposition was unwarranted. The Court's decision was based on the principle that without concrete evidence of intentional concealment, penalties under section 28(1)(c) could not be levied. Consequently, the Court answered the question referred in the affirmative, affirming the Tribunal's decision.
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1971 (1) TMI 42
Issues:
Whether the transfer of interest in settled properties to the son constitutes a taxable gift under the Gift-tax Act.
Analysis:
The case involved a reference by the Income-tax Appellate Tribunal regarding the taxability of a gift made by an individual to his sons through a settlement deed. The settlement involved certain lands to be enjoyed by the individual, his wife, and then passed on to his son with absolute rights. The Gift-tax Officer determined the value of the gift to the son, which was disputed by the assessee. The Appellate Assistant Commissioner initially ruled in favor of the assessee, but the Income-tax Appellate Tribunal reversed the decision, leading to the reference to the High Court.
The key contention was whether the transfer of property to the son constituted a "gift" under the Gift-tax Act. The definition of "gift" under the Act includes the transfer of any existing property made voluntarily and without consideration. The court analyzed the provisions of the Act and the Transfer of Property Act to determine the scope of a gift. It was established that a gift involves the transfer of property from one person to another without consideration.
The court examined the settlement deed and concluded that the transfer of interest in the settled properties to the son amounted to a taxable gift under the Act. Despite the postponement of the son's right to possess and enjoy the property, a vested right had been created in the son on the date of the document. The court emphasized that the broad definition of "transfer of property" under the Act encompassed the grant or creation of an interest in the property, supporting the taxability of the gift to the son.
The court distinguished a previous Bombay High Court decision cited by the assessee, emphasizing that the son in the present case had acquired a vested right in the property, making it a valid gift under the Act. The court disagreed with the interpretation that there was no transfer of interest in the property at the time of the settlement. Ultimately, the court answered the reference question in the affirmative, ruling against the assessee and directing them to pay the costs of the reference.
In conclusion, the court determined that the transfer of interest in settled properties to the son constituted a taxable gift under the Gift-tax Act, based on the broad definition of a gift and the vested right acquired by the son in the property. The decision highlighted the legal principles governing gifts and the interpretation of relevant provisions under the Act.
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1971 (1) TMI 41
Whether Tribunal was right in holding that the registration granted to the assessee-firm would have effect for the assessment year 1963-64 under section 184(7) notwithstanding that there had been no ascertainment or division of the profits of the business among the partners of the firm - question is, answered in the affirmative and in favour of the assessee
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1971 (1) TMI 40
Issues Involved:
1. Whether the Tribunal was right in law in deleting the amount of Rs. 42,577.50 out of Rs. 48,660 from the assessment for the assessment year 1956-57.
Detailed Analysis:
1. Tribunal's Deletion of Rs. 42,577.50:
The primary issue pertains to whether the Tribunal was correct in law in deleting Rs. 42,577.50 from the total interest of Rs. 48,660 for the assessment year 1956-57. The assessee, a Hindu undivided family, had land acquired by the State Government, with the notification issued on June 21, 1950. The acquisition was later challenged and quashed by the Pepsu High Court on February 14, 1955. The Collector's award was made on September 30, 1955, and the assessee was due interest on the compensation awarded, amounting to Rs. 48,660, paid in the year preceding the assessment year 1956-57.
2. Accrual of Interest:
The Tribunal held that only the interest referable to the relevant assessment year could be brought to tax. The Tribunal referenced the Bombay High Court in Commissioner of Income-tax v. Associated Commercial Corporation and the Punjab High Court in Commissioner of Income-tax v. Jai Parkash Om Parkash Co. Ltd., noting that income must actually accrue or arise and not merely be claimed. The Tribunal concluded that the right to receive interest was finalized only after the High Court's judgment on February 14, 1955. Therefore, the interest accrued only during the previous year ending March 31, 1955.
3. Legal Precedents:
The Tribunal's decision aligned with the Mysore High Court in Commissioner of Income-tax v. Sampangiramaaiah, which held that interest accrued when it became legally due and recoverable. The Tribunal further referenced the Supreme Court's decision in E. D. Sassoon & Company Ltd. v. Commissioner of Income-tax, which stated that income accrues when a right to receive it becomes vested, though its valuation may be postponed.
4. Department's Contention:
The department argued that the right to compensation under the Land Acquisition Act is inchoate until an award is given. However, the Tribunal noted that section 34 of the Land Acquisition Act specifies the right to interest from the date of dispossession, compensating for the loss of income due to deferred payment of compensation.
5. Tribunal's Conclusion:
The Tribunal concluded that interest of Rs. 42,577.50 accrued in the previous years 1951-52 to 1954-55, and only Rs. 6,082.50 accrued and was received during the previous year relevant to the assessment year 1956-57. Thus, only Rs. 6,082.50 was includable in the total income for the assessment year 1956-57.
6. Court's Decision:
The High Court agreed with the Tribunal's decision, emphasizing that under section 34 of the Land Acquisition Act, the right to recover interest arises immediately upon dispossession. The High Court supported the Tribunal's view that the interest accrued each year and was payable as such after possession was taken from the owner. The court also referenced Commissioner of Income-tax v. Sham Lal Narula, affirming that interest under section 34 is not casual but regularly and recurrently payable.
Judgment:
The High Court answered the question in the affirmative, against the department and in favor of the assessee, affirming that the Tribunal was right in deleting Rs. 42,577.50 from the assessment for the year 1956-57. There was no order as to costs.
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1971 (1) TMI 39
The High Court of Karnataka allowed the writ petitions filed by an assessee under the Mysore Agricultural Income-tax Act, 1957, challenging rectification orders for assessment years 1964-65, 1965-66, and 1966-67. The court held that the Agricultural Income-tax Officer cannot rectify a mistake based on records from a different assessment year. The rectification orders were quashed. (Case citation: 1971 (1) TMI 39 - KARNATAKA High Court)
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1971 (1) TMI 38
Commissioner gave a consolidated notice u/s 33B -Commissioner had passed a consolidated order in respect of all the assessment years - validity of order of Commissioner setting aside assessments for 1957-58 to 1961-62 and directing the Income-tax Officer to make fresh assessments
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1971 (1) TMI 37
Issues:
1. Appeal against order refusing to register a firm.
2. Maintainability of appeal before the Appellate Assistant Commissioner.
3. Revision application seeking relief against the Income-tax Officer's order.
4. Consideration of revision application by the Additional Commissioner.
Analysis:
1. The main issue in this case is whether the order of the Income-tax Officer refusing to continue the registration of the firm for the assessment year 1965-66 can be considered as an order under section 185(1)(b) of the Income-tax Act, 1961. The court analyzed the provisions of sections 184 and 185 of the Act, which deal with the registration of firms. It was observed that the order refusing to register a firm under section 185(1)(b) pertains to the initial registration of a firm, whereas section 184(7) deals with the continuation of registration for subsequent assessment years if certain conditions are met, including no change in the constitution of the firm. The court held that the Income-tax Officer's order in this case did not fall under section 185(1)(b), and therefore, there was no appeal available against that order.
2. The court also addressed the issue of the maintainability of the appeal before the Appellate Assistant Commissioner. It was argued by the petitioners that the appeal was maintainable, contrary to the decision of the revenue authorities. However, the court upheld the decision of the revenue authorities, stating that there was no appeal against the Income-tax Officer's order in this case.
3. Another issue raised was the revision application seeking relief against the Income-tax Officer's order. The Additional Commissioner had not considered this aspect of the matter in the impugned order. The court noted that the revision application should have been considered against the Income-tax Officer's order as well. The petitioners had requested the setting aside of the Income-tax Officer's order and an opportunity to rectify any defects. The court directed the Additional Commissioner to consider the revision application against the Income-tax Officer's order.
4. Lastly, the court addressed the consideration of the revision application by the Additional Commissioner. The court observed that the Additional Commissioner had only examined the question of the appeal's maintainability before the Appellate Assistant Commissioner and had not considered the merits of the case regarding the defect in the declaration filed before the Income-tax Officer. The court directed the Additional Commissioner to reconsider the revision application against the Income-tax Officer's order in light of the observations made in the judgment.
In conclusion, the court allowed the petition, set aside the order of the Additional Commissioner, and directed a reconsideration of the revision application against the Income-tax Officer's order.
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1971 (1) TMI 36
Whether the expression 'decree for the payment of money' in rule 16(1) includes a decree for sale in enforcement of a mortgage under order XXXIV, rule 5, Code of Civil Procedure - held, no - held that terms "decree for the payment of money" have restricted meaning confining it to a simple money decree
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1971 (1) TMI 35
Issues Involved:
1. Whether the losses suffered by the assessee on the sale of shares in the relevant assessment years could be allowed as business losses.
2. Whether the assessee was a dealer in shares or an investor during the relevant assessment years.
3. The relevance of previous and subsequent assessment orders in determining the nature of the assessee's transactions.
4. The impact of the timing of share sales on the determination of the nature of the transactions.
5. The Tribunal's consideration of the assessee's transactions in private limited companies separately from those in public limited companies.
Detailed Analysis:
1. Allowability of Losses as Business Losses:
The primary question referred to the High Court was whether the losses amounting to Rs. 602, Rs. 91,778, and Rs. 9,897 suffered by the assessee on the sale of shares in the assessment years 1956-57, 1958-59, and 1959-60, respectively, could be allowed as deductions as business losses. The Tribunal had previously disallowed these losses, stating that the assessee was not carrying on any business in shares and that the sales were not effected in the course of any business. However, the High Court found that the Tribunal erred in its judgment by not considering the assessee's history of being taxed as a dealer in shares in previous and subsequent years.
2. Dealer in Shares vs. Investor:
The Tribunal had concluded that the assessee was not a dealer in shares during the relevant assessment years based on several factors, including the long intervals between purchase and sale of shares, lack of continuity in transactions, and the nature of the shares. However, the High Court noted that the assessee had been dealing in shares since 1941 and had been taxed as a dealer in shares in multiple assessment years, including 1942-43 to 1947-48, 1955-56, 1957-58, and from 1960-61 to 1962-63. This historical context was overlooked by the Tribunal, leading to an erroneous conclusion.
3. Relevance of Previous and Subsequent Assessment Orders:
The High Court emphasized that while there is no res judicata in tax matters, previous and subsequent assessment orders serve as "good and cogent evidence" of the nature of the assessee's transactions. The Tribunal's failure to consider these orders resulted in a flawed judgment. The High Court cited the Supreme Court's decision in Investment Ltd. v. Commissioner of Income-tax, which held that previous findings are significant and must be considered in subsequent assessments.
4. Timing of Share Sales:
The Tribunal had inferred that the dominant motive of the assessee's share sales was to save tax, particularly because many sales were effected towards the end of the accounting year. However, the High Court found this reasoning unconvincing. It pointed out that the timing of sales varied across the relevant years and that the motive to cut losses is a legitimate consideration for anyone dealing in shares. The High Court referenced the Supreme Court's observation in Commissioner of Income-tax v. A. Raman & Co., which stated that lawful tax avoidance is not prohibited.
5. Transactions in Private Limited Companies:
The Tribunal had made a distinction between the assessee's transactions in private limited companies and public limited companies, suggesting that the assessee was not a dealer in shares of private limited companies. However, the High Court found this distinction unjustified, noting that the bulk of the assessee's holdings were in public limited companies. The erroneous statement by the Appellate Assistant Commissioner that the bulk of the shareholdings were in private limited companies had influenced the Tribunal's view, leading to a misstatement in the Tribunal's judgment.
Conclusion:
The High Court concluded that the assessee was indeed a dealer in shares during the relevant assessment years and that the losses suffered on the sale of shares should be allowed as business losses. The Tribunal's judgment was found to be flawed due to its failure to consider relevant historical evidence and its erroneous conclusions based on misstatements. The High Court answered the referred question in the affirmative and directed the Commissioner to pay the costs of the assessee.
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1971 (1) TMI 34
Petitioner prays for a writ in the nature of certiorari against the notice under section 148 of the Income-tax Act, 1961, dated July 14, 1967, and a writ in the nature of prohibition restraining the Income-tax Officer from taking proceedings pursuant to that notice
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1971 (1) TMI 33
Loss in dealing with shares - Whether there was any evidence and/or material before the Tribunal to hold that the business of dealing in shares was not being carried on by the assessee in the year of account - Whether assessee is entitled to the loss as business loss in the year of account
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1971 (1) TMI 32
Issues Involved:
1. Whether the receipts in the hands of the beneficiaries are to be treated as earned income.
2. Whether the income falls under section 10 or section 12 of the Indian Income-tax Act, 1922.
3. Whether the assessee is entitled to any earned income relief on the share of income received from the business as a beneficiary.
Issue-wise Detailed Analysis:
1. Whether the receipts in the hands of the beneficiaries are to be treated as earned income:
The central question was whether the income received by the two beneficiaries, Abdul Hameed and Abdul Shakoor, from the bidi business under the wakf deed could be classified as earned income. The Income-tax Officer and the Appellate Assistant Commissioner both held that the sums did not represent earned income. The Tribunal, while dismissing the appeals, agreed with this view.
2. Whether the income falls under section 10 or section 12 of the Indian Income-tax Act, 1922:
The court examined whether the income should be classified under section 10 (profits and gains of business) or section 12 (income from other sources). The Appellate Assistant Commissioner had concluded that the source of income was the right under the deed of wakf and not business income. This was supported by the Accountant Member who discussed the necessity of determining whether the case fell under section 10 or section 12. The court concluded that the income in question falls under section 12 and not section 10, as the source of the receipts was the deed of wakf, not the business itself.
3. Whether the assessee is entitled to any earned income relief on the share of income received from the business as a beneficiary:
For Abdul Shakoor:
The court found that Abdul Shakoor did not carry on any business and merely received money as a beneficiary. Therefore, his income could not be classified as earned income under sub-clause (b) or (c) of clause (6AA) of section 2 of the Act. The receipts in his hands were not earned income.
For Abdul Hameed:
Abdul Hameed's case was more complex due to his dual role as mutawalli and beneficiary. The court emphasized that the income in question was received by him as a beneficiary, not as a mutawalli. Therefore, the receipts could not be classified as earned income under sub-clause (b) of clause (6AA) of section 2. Furthermore, the court held that the income was not immediately derived from his personal exertion as a beneficiary, thus failing to meet the criteria under sub-clause (c) either.
Separate Judgments:
Chief Justice's Opinion:
The Chief Justice concluded that the income in question falls under section 12 and not section 10. The receipts in the hands of both Abdul Hameed and Abdul Shakoor were not earned income.
H. N. Seth J.'s Opinion:
Justice H. N. Seth disagreed with the Chief Justice, stating that Abdul Hameed, who carried on the business as mutawalli, should be entitled to classify the income as earned income under section 2(6AA)(b). However, he agreed that Abdul Shakoor was not entitled to earned income relief.
Third Judge's Opinion:
The third judge, R. S. Pathak, agreed with the Chief Justice, holding that the income received by the assessee as a beneficiary could not be classified as earned income under either clause (b) or (c) of sub-section (6AA) of section 2. The income was derived from the wakf deed, not from personal exertion or business carried on by the assessee.
Final Judgment:
In view of the third judge's opinion, the court answered the question in the negative, in favor of the Commissioner of Income-tax and against the assessee. The Commissioner was entitled to costs assessed at Rs. 200.
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1971 (1) TMI 31
Surplus as a result of the association's activities connected with providing medical facilities to its members - whether ITO is justified in holding that the assessee was a trade association rendering specific services to its members for remuneration definitely related to such services and, therefore, the aforesaid, surpluses came within the purview, of section 10(6) of the Indian Income-tax Act, 1922
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9911796707
