1959 (11) TMI 58 - HC - Income Tax

Court ruling on tax exemption and undisclosed income favors tax department and assessee in separate instances.

The court ruled in favor of the tax department regarding the tax exemption of Rs. 6,103 received by the assessee as casual income, and the justification ... - Issues Involved:1. Tax exemption of Rs. 6,103 received by the assessee as casual income.2. Justification of treating Rs. 3,150 as further income from undisclosed sources.3. Assessment of Rs. 11,000 cash credit in the names of the assessee's son-in-law and daughter as income from undisclosed sources.Issue-wise Detailed Analysis:1. Tax Exemption of Rs. 6,103 Received by the Assessee as Casual Income:The first issue revolves around whether the sum of Rs. 6,103 received by the assessee from the Assam Provincial Textile Co-operative Society qualifies as casual income exempt from taxation under Section 4(3)(vii) of the Indian Income-tax Act. The assessee argued that this amount, received as a bonus for his services as a director, was of a casual and non-recurring nature. However, the Tribunal rejected this contention, stating that the income was derived from a vocation and thus did not fall under the exemption.The court examined various precedents, including *Mahammad Faruq, In re [1938] 6 I.T.R. 1 (All.)*, where it was held that shares allotted for services rendered in company promotion were casual and non-recurring. However, in *David Mitchell v. Commissioner of Income-tax [1956] 30 I.T.R. 701 (Cal.)*, it was held that shares received for professional services were taxable as income from a vocation. The Supreme Court in *P. Krishna Menon v. Commissioner of Income-tax [1959] 35 I.T.R. 48 (S.C.)* also supported the view that income from a vocation is taxable, regardless of the motive behind the service.Applying these principles, the court concluded that the bonus received by the assessee was not a casual windfall but income derived from his role as a director, and thus taxable. The point was answered in the negative, favoring the department.2. Justification of Treating Rs. 3,150 as Further Income from Undisclosed Sources:The second issue addressed whether the sum of Rs. 3,150 could be separately assessed as the assessee's income, despite an additional Rs. 5,147 already being added as hidden profits. The assessee claimed that this amount represented savings from two sources: compensation for a requisitioned house in East Pakistan and agricultural income. The Tribunal disbelieved this explanation, treating the amount as income from undisclosed sources.The court referred to the principle that undisclosed income from a particular source and income from undisclosed sources are distinct. Citing *Ramcharitar Ram Harihar Prasad v. Commissioner of Income-tax [1953] 23 I.T.R. 301 (Pat.)*, which held that once an amount is added as undisclosed income from a specific source, it cannot be added again from the same source, the court distinguished this case. It held that the department was justified in treating Rs. 3,150 as further income from an undisclosed source, answering this point in the affirmative.3. Assessment of Rs. 11,000 Cash Credit as Income from Undisclosed Sources:The third issue involved the assessment of Rs. 11,000 as income from undisclosed sources, with Rs. 1,000 in the name of the assessee's daughter and Rs. 10,000 in the name of his son-in-law, Nisi Kanta Saha. The assessee provided a letter and testimony from his son-in-law claiming the amount was deposited by him. The department rejected this explanation, treating the amount as the assessee's income from undisclosed sources.The court emphasized the principle that when an amount is shown in the name of a third party, the onus shifts to the department to prove it belongs to the assessee. Citing *S.N. Ganguly v. Commissioner of Income-tax [1953] 24 I.T.R. 16 (Pat.)*, it held that the department failed to provide material evidence counteracting the assessee's version. The court concluded that the department was wrong in assessing the Rs. 11,000 as the assessee's income from undisclosed sources, answering this point in the negative.Conclusion:The court answered the first and second questions in favor of the department and the third question in favor of the assessee, with no order for costs as both parties shared some benefit.