1962 (10) TMI 51 - SC - Income Tax

Whether the sum of Rs. 37,847, Rs. 43,162, Rs. 34,899, Rs. 13,402 and Rs. 32,523 were assessable to income-tax in the hands of the assessee Amarchand N. Shroff, by his legal heirs and representatives in the five respective years under reference? Whether the income which was received subsequent to the previous year in which Amarchand died is liable to be assessed to income-tax under section 24B as his income in the hands of his heirs and legal representatives? Held that - Appeal dismissed. As the amounts which are sought to be taxed and which have been held not to be liable to tax are those which were not received in the previous year and are therefore not liable to tax in the several years of assessment. It cannot be said that they were income which may be deemed by fiction to have been received by the dead person and therefore they are not liable to be taxed as income of the deceased, Amarchand, and are not liable to be taxed in the hands of the heirs and legal representatives who cannot be deemed to be assessees for the purpose of assessment in regard to those years.

Issues Involved:
1. Interpretation of Section 24B of the Income-tax Act.
2. Taxability of income received by the heirs and legal representatives of a deceased person.
3. Validity of notices under Section 34 for assessment years following the death of the deceased.
4. Determination of whether the received amounts were capital or revenue receipts.

Issue-wise Detailed Analysis:

1. Interpretation of Section 24B of the Income-tax Act:
The primary issue in these appeals was the interpretation of Section 24B of the Income-tax Act. The court analyzed whether the amounts received by the heirs and legal representatives of Amarchand N. Shroff after his death should be deemed as income received by Amarchand and thus be liable to tax. The court emphasized that Section 24B extends the legal personality of a deceased assessee for the duration of the previous year in which he died, making the income received before his death and by his heirs in that year assessable to income-tax. However, the court clarified that Section 24B does not authorize the levy of tax on receipts by the legal representatives in the years of assessment succeeding the year of account in which the deceased person died.

2. Taxability of Income Received by Heirs and Legal Representatives:
The court examined whether the sums of Rs. 37,847, Rs. 43,162, Rs. 34,899, Rs. 13,402, and Rs. 32,523 received by the heirs and legal representatives of Amarchand were assessable to income-tax. It was argued by the Commissioner of Income-tax that these amounts should be taxable under Section 24B. However, the court held that the amounts were not taxable as they were received after the previous year in which Amarchand died, and thus, they could not be deemed as income received by the deceased.

3. Validity of Notices Under Section 34 for Subsequent Assessment Years:
The court also addressed the validity of notices issued under Section 34 for the assessment years 1951-52 to 1954-55. The Appellate Assistant Commissioner had quashed these assessments, holding that the notices were invalid. The court upheld this decision, noting that Section 24B does not extend to tax liability beyond the previous year in which the deceased person died. Therefore, the notices for the subsequent years were invalid.

4. Determination of Whether Received Amounts Were Capital or Revenue Receipts:
The court considered whether the amounts received by the heirs and legal representatives were capital or revenue receipts. The Appellate Tribunal had held that these amounts were capital receipts and not revenue receipts. The court agreed with this view, noting that the amounts represented inheritance or realizations of the assets of Amarchand, and thus, were not taxable as income.

Conclusion:
The court concluded that the amounts received by the heirs and legal representatives of Amarchand were not assessable to income-tax under Section 24B of the Income-tax Act. The High Court's decision to answer the question in the negative and against the Commissioner of Income-tax was upheld. The appeals were dismissed with costs.

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