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Commissioner of Income Tax Vs. Thakurdas Jaiparvesh and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberM.P. No. 199 of 1981
Reported in(1985)45CTR(MP)301
AppellantCommissioner of Income Tax
RespondentThakurdas Jaiparvesh and Co.
Excerpt:
- indian penal code, 1890.section 306 :[dalveer bhandari & harjit singh bedi,jj] abetment of suicide deceased, a married woman, committed suicide - allegation of abetment of suicide against appellant husband and in-laws - ocular evidence was sketchy - dying declaration recorded by tahsildar completely exonerated all accused in-laws of any misconduct dispelling any suspicion as to their involvement - letter of threat allegedly written by appellant to father of victim was concocted piece of evidence held, though presumption against appellant can be raised, it cannot be said that onus shifts exclusively and heavily on him to prove his innocence. conviction of appellant is liable to be set aside. .....the aac. the aac held that as the assessee was not carrying on business during the assessment year in question and since s. 176(3a) of the act came into force from the asst. yr. 1976-77 the amount in question could not be taxed during the asst. yr. 1975-76. the aac further held that since no actual allowance or deduction in respect of any loss, expenditure or trading liability had been allowed in any assessment year, the amount received by the assessee could not be subjected to tax under s. 41(1) of the act. the aac, therefore, allowed the appeal preferred by the assessee. aggrieved by that order, the department preferred an appeal before the tribunal. the tribunal upheld the findings given by the aac and dismissed the appeal. hence, at the instance of the department, the tribunal.....
Judgment:

INDORE BENCH

G. G. Sohani, J. - By this reference under s. 256(1) of the IT Act, 1961, (hereinafter referred to as the Act) the ITAT, Indore Bench, has referred the following question of law to this Court for its opinion :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law upholding the findings of the AAC that the sum of Rs. 2,00,930 received by the assessee from the Railways during the accounting year relevant to the asst. yr. 1975-76 is neither chargeable to tax as business profit not it is chargeable under s. 41(1) of the Act and consequently in upholding the AACs order deleting the sum of Rs. 91,748 taxed by the ITO ?

2. The material facts giving rise to this reference briefly are as follows :

The assessee-firm entered into a contract with the Chief Engineer (Construction), Central Railway, for executing earth work in connection with construction of bridges between Sumeri and Jeruwakhera. After partly executing the contract, the assessee abandoned the contract as one of the partners of the assessee-firm was abducted by the dacoits. Thereafter, the assessee did not carry on any business. Thus, from the asst. yr. 1967-68 onwards, on business was carried on by the assessee firm. On 3-8-1974, in the assessee received a sum of Rs. 2,00,930 in full and final settlement to its claims against the Railways, which were referred to arbitration. For the relevant asst. yr. 1975-76 the assessee contended that the amount received by it from the Railways was not taxable as business income as it related to discontinued business and that it was also not taxable under s. 41(1) of the Act. The ITO upheld the contention of the assessee that the amount was not taxable as business income since s. 176(3A) of the Act came into force in the asst. yr. 1976-77. The ITO was, however, of the view that the amount was chargeable to tax under s. 41(1) of the Act. Aggrieved by the order passed by the ITO the assessee preferred an appeal before the AAC. The AAC held that as the assessee was not carrying on business during the assessment year in question and since s. 176(3A) of the Act came into force from the asst. yr. 1976-77 the amount in question could not be taxed during the asst. yr. 1975-76. The AAC further held that since no actual allowance or deduction in respect of any loss, expenditure or trading liability had been allowed in any assessment year, the amount received by the assessee could not be subjected to tax under s. 41(1) of the Act. The AAC, therefore, allowed the appeal preferred by the assessee. Aggrieved by that order, the department preferred an appeal before the Tribunal. The Tribunal upheld the findings given by the AAC and dismissed the appeal. Hence, at the instance of the department, the Tribunal has referred the aforesaid question of law to this Court for its opinion.

3. The ld. counsel for the department conceded that provisions of s. 176(3A) of the Act were not attracted in the instant case and that in view of the findings of the Tribunal that the amount in question was received by the assessee when the assessee had ceased to carry on any business, the Tribunal was right in upholding the view of the AAC that the sum received by the assessee-firm from the Railways during the assessment year in question was not chargeable to tax as business profits. As regards chargeability under s. 41(1) of the Act, the Tribunal has found that the conditions prescribed for charging tax under s. 41(1) of the Act were not fulfilled. A Division Bench of this Court has held in Naubatram Nandram v. CIT, M.P. : [1972]86ITR805(MP) that s. 10(2A) of the IT Act, 1922, corresponding to s. 41(1) of the Act, envisages an actual allowance or deduction and not a notional one. In view of this decision, the Tribunal, in our opinion, was justified in holding that the provisions of s. 41(1) of the Act were not applicable.

4. For all these reasons, our answer to the question referred to this Court is in the affirmative and against the department. In the circumstances of the case, parties shall bear their own costs of this reference.


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