TaxTMI 
TaxTMI 
2013 (9) TMI 482
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....odi Vs. SAL Narayan Rao (61 ITR 428) had decided the appeal in favour of the assessee as per the earlier Income-tax Act, 1922 in which specific provision for taxation of such receipt was not available unlike provision of section 176(4) of Income- tax Act, 1961, where such receipts are specifically taxable. 3. In the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition made by the AO on account of arrear of professional fees of Rs. 67,86,669/- received by the assessee after he had discontinued his legal profession in utter disregard to the principles laid down by the Hon'ble Supreme Court in case of Nalinikat Ambalal Modi Vs. SAL Narayan Rao stating that the fruit of professional activity is taxable irrespective of the time when it was received. 4. In the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition made by the AO on account of arrear of professional fees of Rs. 67,86,669/- received by the assessee after he had discontinued his legal profession not appreciating the fact the departmental review petition in the case of DCIT, New Delhi Vs. Justice Swatanter Kumar Agnihotri (ITA No. 160/2000) on the same issue is pend....
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.... as a Judge, assessee was carrying on legal profession as an advocate, arrears of professional receipts received after discontinuation of legal profession were not assessable in his hands after he has discontinued his legal profession. Attention in this regard is drawn to the judicial decisions in the cases of Commissioner of Income Tax v. Justice R.M. Datta (1989) 180 ITR 86 and Justice Kuldip Singh v. ITO (1993) 46 ITD 251 (Chand [AT]). In Justice Kuldip Singh case (supra) a special leave petition was preferred by the Revenue, which was dismissed. In view of aforesaid legal precedents, the assessee is claiming arrear of professional receipt as exempt, though as an abundant caution, the assessee has deposited advance tax under protest in respect of such income." 4. However, the Assessing Officer was of the view that by claiming the exemption, the assessee had neither offered the amount of Rs. 67,10,362/- for taxation in the year in which the professional activity was carried out by him, nor in the year of receipt, nor in any other year, and so, allowing the claim of exemption would result in the receipt never being taxed. Referring to the decision of the Hon'ble Calcutta High Cou....
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....re the Hon'ble Delhi High Court; that as such, the order passed by the Ld. CIT (A) on this issue is an erroneous one, liable to be set aside; and that accordingly, the same may be ordered to be set aside and that passed by the Assessing Officer be restored on accepting Ground Nos.1 to 4 raised by the Department. 7. On the other hand, the ld. counsel for the assessee has strongly supported the impugned order. It has been contended that the Ld. CIT (A) has allowed the claim of the assessee by passing a speaking elaborate well-reasoned order on the issue at hand, which order requires no interference whatsoever at our hands; that the Assessing Officer had wrongly relied on the decision of the Hon'ble A.P. High Court in 'V. Parthasarathy vs. Addl. CIT', 103 ITR 508 (AP), though the facts in that case were totally different from the facts of the assessee's case; that the Assessing Officer failed to consider that the orders in the case laws relied on by the assessee had all been passed after having duly considered 'V. Parthasarathy' (supra); that the Ld. CIT (A), while rightly allowing the assessee's claim, has duly taken into consideration all these aspects and has rightly deleted the a....
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....on 4 of the Act, which provides for the charge of Income Tax, lays down in its sub-section (1), that income tax shall be charged 'in accordance with and subject to the provisions of this Act in respect of the total income of the previous year.' So, income tax has been provided by Section 4 (1) to be chargeable subject to the provisions of the Income Tax Act, 1961. Now, Section 14 of the Act mandates that for the purposes of charge of income tax, all income shall be classified under the five heads delineated therein, if not provided otherwise by the Act. And if a particular income according to its nature and quality falls under any head, its computation should be made in accordance with the directions contained in the group of sections relating to that head, that head only, and in accordance with no other head. This is what is the purport of Section 4, the charging section, when it makes it mandatory for charge of income tax in accordance with and subject to the provisions of the Income Tax Act, 1961, as noted above. 12. Now, it is trite law that where the language employed in a Section is clear, nothing other than the words used are to be read, permitting of nothing else to be rea....
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....d to in Section 5, computed in the manner laid down in the Act), for the purpose of chargeability. Therefore, as held in 'Justice R.M. Datta' (supra), even in spite of introduction of Section 176 (4) in the Act, the receipts in question cannot be treated as the assessee's income falling under the head "Profits and Gains of Business, Profession or Vocation", even though they were, being the fruits of the assessee's professional activities, the profits and gains of a profession, under the very same head of "Profits and Gains of Business, Profession or Vocation." It is due to the absence of any legislative provision that these receipts cannot be treated as business income falling under the head "Profits and Gains of Business, Profession or Vocation" carried on by the assessee during the relevant year. They cannot be included in the total income of the assessee, even though the amount was received by the assessee before the discontinuance of his profession due to his elevation as High Court Judge. 14. In 'Nalinikant Ambalal Mody vs. SAL Narayan Rao' (supra) [as considered in 'Justice R.M. Datta' (supra)], when there is a case to which the computation provisions pertaining to a chargin....
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....deleted the disallowance. 20. The Ld. DR has contended that the disallowance has wrongly been deleted by the Ld. CIT (A), without taking into consideration the fact that the expenses claimed pertained to the period when the assessee did not carry on any profession. 21. The ld. counsel for the assessee has relied on the impugned order in this regard, contending that the expenditure in question was a nominal expenditure incurred on account of conveyance, accounting charges, printing and stationery, telephone, etc, laid out in order to maintain proper accounts and for recovery of outstanding fees; that the Assessing Officer did not, anywhere, challenge the bona fides of the expenses which were duly vouched and ledgerised, the details thereof having been submitted before the Assessing Officer, as required; and that the Assessing Officer had also failed to take into consideration the fact that the arrears of professional fee received by the assessee on discontinuance of his profession were not liable to tax and so, there was no question of disallowing any expenditure pertaining thereto. 22. In this regard, while dealing with ground Nos. 1 to 4, we have upheld the CIT (A)'s action in ....