1. This is a reference at the instance of the Commissioner but under section 66(2) of the Income-tax Act, and the following question is referred to us for our opinion :
'Whether, on the facts and in the circumstances of the case, the sum of Rs. 71,279 was liable to be included in the total income of the assessee under the provisions of the Indian Income-tax Act, 1922 ?'
2. A few facts may be stated : The assessees are the executors of Shri P. L. Paruck, who was a partner in two well-known firms of solicitors. We are concerned in this reference with the assessment year 1958-59, the accounting period being mentioned as November 23, 1957, to March 31, 1958. Actually, Shri Paruck was a partner in two firms, viz., M/s. Mulla & Mulla and Craigie Blunt and Croe and M/s. Mulla and Mulla. Both the firms maintained accounts on the cash basis. Shri Paruck died on November 22, 1957, and, therefore, ceased to be a partner in the said two firms from that date. Whilst he was alive he had received Rs. 69,073 from M/s. Mulla and Mulla and Craigie Blunt and Croe, and Rs. 16,407 from M/s. Mulla and Mulla. This income along with the other incomes such as income from property, dividends, interest on deposits, etc., was assessed for the very same assessment year but for April 1, 1957, to November 22, 1957, in the name of 'Shri P. L. Paruck through his executors, Shri Koki P. Paruck and Mrs. Piloo K. Arjanwalla'. We are not concerned with this assessment. After the death of Paruck the said two solicitors' firms allotted to his share the following amounts :
Accounting period Assessment Amount
23-11-1957 to 31-3-1958 1958-59 71,279
1-4-1958 to 31-3-1959 1959-60 1,12,600
1-4-1959 to 31-3-1960 1960-61 42,421
1-4-1960 to 31-3-1961 1961-62 53,800
We are concerned in this reference with the first amount of Rs. 71,279 only.
3. The Income-tax Officer assessed all these amounts for the relevant assessment years overruling the objections of the assessees. The assessees then appealed to the Appellate Assistant Commissioner and challenged the inclusion of the said amounts received from the said two firms after the death of Shri Paruck. The Appellate Assistant Commissioner disposed of the four appeals by a common order, observing that the sums were not income from any intangible investment but remuneration for the work done by the deceased. The Appellate Assistant Commissioner was of the opinion that the provisions of section 24B did not authorities levy of tax on such income in the hands of any representative of the deceased for the periods subsequent to the death of the deceased. The Appellate Assistant Commissioner accordingly directed deletion of the said amounts. From the decision of the Appellate Assistant Commissioner, the department went in appeal to the Tribunal only for the first assessment year and in respect of the amount of Rs. 71,279 only. The submission of the department was that the share income of Shri Paruck from the said two firms, though received by the executors after the death of Shri Paruck, was received in the previous year in the course of which Shri Paruck died and, therefore, it was taxable in the hands of the assessees. For this, reliance was placed on the decision of the Supreme Court in Commissioner of Income-tax v. Amarchand N. Shroff : 48ITR59(SC) . The Tribunal rejected the contention of the department, observing that the decision of the Bombay High Court, which was in appeal before the Supreme Court and which was earlier reported in : 36ITR124(Bom) , held that receipt from the assessee's profession after his death cannot be equated with income and has to be regarded as capital receipt; according to the Tribunal, this view expressed by the Bombay High Court was not disturbed by the Supreme Court in appeal and would, therefore, still stand. Accordingly, the appeal of the department was rejected. It is thereafter that, at the instance of the department, the reference has been made but under section 66(2) of the Act.
4. Mr. Joshi with his usual fairness stated that after the decision of the Supreme Court in Amarchand N. Shroff's case : 48ITR59(SC) , where it was observed that any income received in the year subsequent to the previous or accounting year could not be income received by the deceased partner, a review application had been made by the department to the Supreme Court drawing the attention of the Supreme Court that in the case of the said assessee certain income had been received in the previous year or the accounting year, and that, therefore, that aspect, should be dealt with by the Supreme Court. It was mentioned by him that the said review application had been rejected by the Supreme Court.
5. Mr. Joshi also drew our attention to a later decision of this High Court in Arvind Bhogilal v. Commissioner of Income-tax : 105ITR764(Bom) , where the effect of section 24B once again came to be considered and there was occasion also for applying the decision of the Supreme Court in Amarchand N. Shroff's case : 48ITR59(SC) . In Arvind Bhogilal's case : 105ITR764(Bom) , it was observed that section 24B came to be enacted by the Income-tax (Second Amendment) Act (18 of 1933) with the avowed object of filing in the lacuna pointed out in the judicial decisions that there was no machinery in the Act till then which dealt with the assessment of or recovering payments from the assets of a deceased person. After considering the statement of objects and reasons appended to the Bill, it was observed that there was no doubt that the provisions of section 24B must be taken to have been enacted for the purpose of inserting a machinery provision for assessment or giving of refunds in respect of the income of deceased persons and, if that be the object or purpose of the enactment, the legal fiction introduced by section 24B(1) should be restricted to the purpose for which it was meant and intended and could not be extended, as suggested on behalf of the revenue. This was on the basis of the well-settled principle that a legal fiction is to be limited for the purpose for which it has been created and cannot be extended beyond that legitimate field. It was further observed that in the circumstances it would not be proper to extend the legal fiction beyond its legitimate field as indicated above and to say that it was also intended to serve the purpose of creating an additional liability, that is to say, for rendering what is not an income of a deceased person to be his deemed income. In the judgment in the said case it is observed that strong reliance was placed by counsel on Amarchand N. Shroff's case : 48ITR59(SC) and that case has been fully and exhaustively dealt with at page 787 of the report ( 105 ITR). Reference to the review application filed before the Supreme Court, to which we have alluded earlier, will be found at page 793 of the report : 105ITR764(Bom) .
6. Mr. Kolah on behalf of the assessee drew our attention to the decision of the Patna High Court in Commissioner of Income-tax v. Kumar Tara Prasad Singh : 51ITR98(Patna) , in which independently of the decision of the Bombay High Court in Amarchand N. Shroff's case : 36ITR124(Bom) , it has been observed that where accounts had been maintained on cash basis by an assessee, the share of arrears of rents and royalties falling due during his lifetime but realised after his death which devolves upon his heirs is not stamped with the character of income and was not liable, therefore, to be taxed. In our case also there is a clear finding, which has not been disputed, that the accounts of the firm were maintained on cash basis.
7. As far as this court is concerned, the question appears to have been concluded by the earlier observations in Amarchand N. Shroff's case (of this court) reported in : 36ITR124(Bom) and the construction placed on section 24B in the later decision in Arvind Bhogilal's case : 105ITR764(Bom) . In view of these clear authorities it appears to us unnecessary to discuss the matter further and we now proceed to answer the question referred to us. The answer will be in the negative and in favour of the assessee.
8. The parties will bear their own costs of the reference.