1967 (1) TMI 2 - HC - Income Tax

Court rules widow's receipt from deceased's business not taxable under Income-tax Act; costs awarded to assessee.

Commissioner of Income-Tax, MP Versus Hukumchand Mohanlal

The court held that the amount received by the widow from her deceased husband's business is not taxable under section 41(1) of the Income-tax Act, 1961. ... Amount recieved as sales tax for transactions effected - Whether the sum of Rs. 24,341 was liable to tax under s. 41(1) - Held, no Issues:Taxability of amount received under section 41(1) of the Income-tax Act, 1961.Analysis:The judgment pertains to a reference under section 56(1) of the Income-tax Act, 1961, regarding the taxability of an amount of Rs. 24,341 under section 41(1) of the Act. The case involved a widow who succeeded to her deceased husband's business and received the amount in question after his death. The Income-tax Officer taxed this amount under section 41(1), considering it as the widow's income. However, the Tribunal allowed the appeal, stating that the deceased husband would have been liable for the amount if alive. The Tribunal emphasized the strict construction of section 41(1) and the requirement for the allowance or deduction to be made in the same assessee's assessment.The judgment further delves into the interpretation of section 41(1) in light of the British Mexican Petroleum Co. Ltd. v. Jackson case, highlighting that the provision deems the amount received as profits chargeable to tax if an allowance was previously granted for the same. The judgment discusses the definition of 'assessee' and the absence of provisions deeming a successor or legal representative as an assessee under section 41(1) for taxability of remitted amounts. The liability of a legal representative is examined under section 159, emphasizing that the legal representative is liable only for sums the deceased would have been liable to pay if alive.The judgment addresses the revenue's argument that the amount represents profits of the business and should be taxed as personal income of the widow. However, the court declines to rule on this issue as the question referred was limited to the taxability under section 41(1). Ultimately, the court concludes that the amount received by the widow is not liable to tax under section 41(1) of the Income-tax Act, 1961. The court awards costs to the assessee and fixes the counsel's fee at Rs. 200.