Court rules petitioner liable for tax on post-profession income, dismissing writ petition.

The court dismissed the writ petition, holding that the petitioner is liable to pay tax on income received after discontinuing his profession as an advocate, regardless of the temporary or permanent nature of the cessation. The court clarified that section 176(4) of the Income-tax Act, 1961 applies to income received post discontinuance, extending to both temporary and permanent cessation of profession. The petitioner's argument that the section only applies to retirement or death was rejected.

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Issues Involved:
1. Applicability of section 176(4) of the Income-tax Act, 1961.
2. Interpretation of "discontinuance" of profession.
3. Taxability of income received after cessation of profession.

Summary:

1. Applicability of section 176(4) of the Income-tax Act, 1961:
The primary issue in this writ petition u/s 226 of the Constitution of India is whether the income received by a person appointed as a judge of the High Court, in respect of the fees due to him while carrying on the profession of an advocate, is chargeable to tax u/s 176(4) of the Income-tax Act, 1961. The petitioner, who was an advocate before being appointed as a judge, received fees for professional services rendered prior to his appointment during the assessment years 1969-70 and 1970-71. The Income-tax Officer assessed these amounts to tax, and the Commissioner of Income-tax upheld this assessment.

2. Interpretation of "discontinuance" of profession:
The petitioner contended that section 176(4) is not attracted as he merely suspended his profession due to constitutional disability and did not discontinue it. He argued that sub-section (4) of section 176 applies only to discontinuance due to retirement or death, not other reasons. The court, however, rejected this contention, interpreting the clause to mean that discontinuance of profession includes cessation, retirement, or death. The court emphasized that "discontinuance" and "cessation" include both temporary and permanent stoppage of profession.

3. Taxability of income received after cessation of profession:
The court referred to the Supreme Court's decision in Nalinikant Ambalal Mody v. S. A. L. Narayan Row, Commissioner of Income-tax, which held that income received after cessation of profession is not chargeable to tax if it cannot be brought under the computing section corresponding to the professional income head. However, the court noted that section 176(4) of the new Act, which replaced section 25 of the old Act, explicitly includes income received after discontinuance of profession as taxable. The court concluded that irrespective of whether the discontinuance was temporary or permanent, the income received by the petitioner was liable to tax u/s 176(4).

Conclusion:
The writ petition was dismissed, and the court held that the petitioner is liable to pay tax on the income received after the discontinuance of his profession as an advocate, irrespective of whether the cessation was temporary or permanent. The court emphasized that the length of discontinuance does not affect the applicability of section 176(4). The petition was dismissed without costs, and the advocate's fee was set at Rs. 250.

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