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Issues: (i) Whether the sum of Rs. 5,000 was assessable as income, profits and gains received in or brought into British India by or on behalf of a person resident in British India within the meaning of section 4(2) of the Income-tax Act, 1922. (ii) Whether, on partition of joint family property by private auction, the assessee's bid price could be treated as the original cost of the asset for depreciation purposes, or whether the original cost remained the cost to the joint family.
Issue (i): Whether the sum of Rs. 5,000 was assessable as income, profits and gains received in or brought into British India by or on behalf of a person resident in British India within the meaning of section 4(2) of the Income-tax Act, 1922.
Analysis: The amount was advanced by means of a negotiable hundi sent by post. In the circumstances, the posting of the hundi was treated as the borrower's act through the post office as agent, and the money was brought into British India by the recipient rather than by the assessee. The statutory requirement that the profit or gain be received in or brought into British India by or on behalf of the assessee was therefore not satisfied.
Conclusion: The question was answered against the Revenue and in favour of the assessee.
Issue (ii): Whether, on partition of joint family property by private auction, the assessee's bid price could be treated as the original cost of the asset for depreciation purposes, or whether the original cost remained the cost to the joint family.
Analysis: The asset had been acquired by the joint family before partition, and the assessee already owned an undivided half share. The bid at partition was only a mode of effecting division and did not alter the original acquisition cost of the property. Absent fraud or lack of bona fides, the tax authority was entitled to look to the real cost of the asset to the coparcenary and not to the notional value produced by the partition auction. The assessee's bid could not displace the original family cost as the basis for depreciation.
Conclusion: The question was answered against the assessee and in favour of the Revenue.
Final Conclusion: Both questions were resolved adversely to the assessee, and the reference was answered in favour of the Revenue on the substantive tax issues.
Ratio Decidendi: For purposes of tax assessment, a partition auction among coparceners does not by itself create a new original cost for depreciation, and receipt or bringing in of income under section 4(2) requires the statutory nexus of receipt or import by or on behalf of the assessee.
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