Advance tax can be adjusted against capital gains tax because capital gains remain part of total income and income-tax

Capital gains formed part of total income under the Income-tax Act, 1922, and the tax levied on them remained income-tax. The special exclusion of capital gains from advance-tax computation under section 18A(12) reflected only the method of estimating advance tax for non-recurring income; it did not change the character of the levy. Accordingly, advance tax paid under section 18A could be appropriated against the ultimate tax liability attributable to capital gains, and the argument that such tax was of a different nature from income-tax was rejected.

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Issues: Whether advance income-tax paid under section 18A of the Income-tax Act, 1922 could be adjusted towards tax levied on capital gains included in the total income.

Analysis: Capital gains were treated as a head of income and formed part of the total income chargeable under sections 3 and 4 of the Income-tax Act, 1922. The fact that capital gains were excluded while computing advance tax under section 18A(12) only reflected the special mode of estimating advance tax, because capital gains are not recurring income. That exclusion did not alter the character of tax on capital gains as income-tax, nor did it prevent the tax already paid in advance from being appropriated towards the ultimate tax liability on total income, including capital gains.

Conclusion: Advance tax could validly be adjusted against the tax attributable to capital gains. The contention that such tax was of a different character from income-tax was rejected.

Ratio Decidendi: Capital gains are part of total income and the tax levied on them is income-tax; therefore, advance tax paid under section 18A of the Income-tax Act, 1922 may be adjusted against the ultimate tax liability on such capital gains.

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