Court rules unclaimed wages not taxable for 1972-73 assessment year

The High Court of Rajasthan ruled in favor of the assessee in a case concerning the taxability of unclaimed wages and bonus for the assessment year 1972-73. The Court upheld the Tribunal's decision, stating that the unclaimed amounts were time-barred trading liabilities and that the law of limitation does not extinguish the liability but only bars the remedy. Consequently, the unclaimed wages and bonus were rightly excluded from the assessee's total income for the assessment year 1972-73, with each party bearing their own costs.

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Issues Involved:
The judgment addresses the issue of whether unclaimed wages and unclaimed bonus, which were previously deducted but remained unclaimed by workmen, should be taxable in the assessment year 1972-73 u/s 41(1) of the Income-tax Act, 1961.

Summary:

The High Court of Rajasthan considered a reference u/s 256(1) of the Income-tax Act, 1961, regarding the taxability of unclaimed wages and bonus for the assessment year 1972-73. The Income-tax Officer included these amounts in the assessee's income, but the Tribunal held that there was no cessation of liability as the amounts were time-barred trading liabilities. The Revenue challenged this view, citing a decision by the Allahabad High Court. However, the High Court noted a consistent line of decisions by various High Courts in favor of the assessee's position, emphasizing that the law of limitation does not wipe out the liability but only bars the remedy. The Court found no reason to deviate from the established precedent and upheld the Tribunal's decision, ruling in favor of the assessee.

Therefore, the High Court held that there was no cessation of liability for the unclaimed wages and bonus, and these amounts were rightly deleted from the total income of the assessee for the assessment year 1972-73. The parties were directed to bear their own costs.

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