TaxTMI 
TaxTMI 
1954 (9) TMI 21
X X X X Extracts X X X X
X X X X Extracts X X X X
....iso to Section 10(2) (vii) of the Indian Income-tax Act. Clause (vii) as substituted by Section 11 of the Indian Income-tax (Amendment) Act of 1939 was further substituted by the present clause by Section 3 of the Indian Incometax (Amendment) Act, 1946 (VIII of 1946). The present clause reads as follows : " (2) Such profits or gains shall be computed after making the following allowances, namely : (vii) in respect of any such building, machinery or plant which has been sold or discarded or demolished or destroyed, the amount by which the written down value thereof exceeds the amount for which the building, machinery or plant, as the case may be, is actually sold or its scrap value : Provided that such amount is actually written off in the books of the assessee : Provided further that where the amount for which any such building, machinery or plant is sold, whether during the continuance of the business or after the cessation thereof, exceeds the written down value, so much of the excess as does not exceed the difference between the ori....
X X X X Extracts X X X X
X X X X Extracts X X X X
....46-47. 5. The method of accounting of the assessee company at the relevant : time was 'mercantile.' 6. On 4th October, 1944, Mr. M. A. Master, the general manager of the assessee company, addressed the following letter to Mr.. N. R. Pillar, Secretary to the Government of India, Department of Commerce :- "You are aware that to ships of the Scindia, namely the S. S. ' Jalarajan ' and S. S. 'EL Madina' were lost at sea by enemy action. The S. S. Jalarajan was lost in January 1942, and the S. S. El Madina in March, 1944. Similarly two ships of the Bombay Steam, namely the S. S. 'Pravhavati' and the S. S. 'Parvati;, which were commandeered for the purpose of local naval defence, were lost by enemy action. Certain advances have been paid both to the Scindia and to the Bombay Steam in connection with the loss of these steamers. The final amount to be paid, in connection with each of these four ships, has, however, not yet been settled. Whenever it is settled and the payments in connection with these ships are made, they will be obviously deferred payments. The company ought to have received these fill payments immediately after loss of these ships. You ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d be way of hire and for compensation for loss of ships had not been finalised by the Government till 1946, the policy of the Government being to make ' on account payments both for hire and for compensation for loss of ships. " 10. Relying upon the letter of Mr. Gholap, the assessee company contended that the compensation for the loss of the ship ' El Madina' should be deemed to have been received on April 16, 1944, that is to say in the year of account prior to the previous year for the assessment year 1946-47. It was further contended that what Government paid on July 17, 1944, December 22, 1944, and August 10, 1946, was in discharged of a book debt created on April 16, 1944. In this connection, it was pointed out that the sum of Rs. 20 laces received on July 17, 1944, was credited by the assessee company to the " Fleet Replacement Account " as on June 30,. 1944. Similarly, the sum of Rs. 23 lacs received on December 22, 1944 was credited to the " Fleet Replacement Account " as on June 30, 1945, Apparently, the sum of Rs. 23 lacs was credited to the Fleet Replacement Account as on June 30, 1945, because the books for the year ended on June 30, 1944, had been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies to the assessment of the assessee. A preliminary point was raised by Mr. Joshi that this question does not arise because it was not argued before the Tribunal, and Mr. Joshi says that this question does not arise out of the order made by the Tribunal. In our opinion it is open to the assessee, looking to the form in which the question has been raised, to contend before us that it is not liable to pay tax on the sum of Rs. 9,25,532 having regard to any provision of the Income-tax Act. The Tribunal has taken the view that the sum of Rs. 9,26,532 must be included in the total income of the assessee. It does not follow that because a particular aspect of the question was not urged before the Tribunal that it is not open to the assessee to urge that aspect before us. If all the facts necessary to decide a question from a particular aspect are before the Court, then the assessee is entitled to justify its contention that it is not liable to pay tax having regard to the provisions of the Indian Income-tax Act. It is not incumbent upon the assessee in order to put forward a particular point of law before this Court that it should necessarily have urged that very point of law b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecomes liable to tax. If these two basic facts are borne in mind, then the position in law becomes very clear and very simple. Now, the income of the previous year of the assessee is for the year 1945-46 which ended on the 31st of March, 1946, and it was the Finance Act of 1946 that imposed a liability upon the assessee to pay tax on this income at the rate mentioned in that Act. When we turn to the Finance Act of 1946, sub-section (9) of Section 11 makes this provision : "For the purposes of this section and of the rates of tax imposed thereby, the expression 'total income' means total income as determined for the purposes of income-tax or super-tax, as the case may be, in accordance with the provisions of the Indian Income-tax Act, 1922, and the expression 'earned income' has the meaning assigned to it in clause (6AA) of Section 2 of that Act." Therefore the total income that has to be computed is in accordance with the provision of the Indian Income-tax Act and it is clear that as this provision is being made on the 1st of April, 1946, the provisions of the Indian Income-tax Act are th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct of 1939 and the provisions of Section 16(1) (c) were incorporated in the Act, and by the provisions of this section the assessee was liable to be taxed in respect of the income received by his daughters from the properties settled under these trust deeds. The income received by the the daughters was in the year of account 1938-39. The assessee objected to this income being assessed to tax on the ground that the Income-tax Officer was giving retrospective effect to Section 16(1) (c). His contention was that in the year in which the income has received Section 16(1) (c) was not in force. This contention was rejected by the Madras High Court and the learned Chief Justice points out at page 6 : "When the Income-tax Officer made the assessment in this case the amending Act had come into force. The Income-tax act says that the assessee shall pay tax in respect of an assessment year based on the income received by him in the previous year. The assessee's income which the Income-tax Officer had to assess for the year 1939-40 included the income received from the properties which were covered by these revocable dee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....art I of Schedule II and rates of super-tax are also provided for, and by sub-section (3) it is provided that 'for the purpose of this section and of Schedule II, the expression "total income" means total income as determined for the purposes of income-tax or super-tax, as the case may be, in accordance with the provisions of the Indian Income-tax Act, 1922. This can only refer to the Indian Income-tax Act, 1922, as it stood amended at the date of the Indian Finance Act, 1939, and necessarily includes the alterations made by the amending Act, which had already come into force on the 1st April, 1939." Therefore, what the Privy Council says is that not only the liability to pay tax but the authority to make the assessment order arose from the Finance Act. The language of the Finance Act which the Privy Council was considering is identical with the Finance Act which we are considering and the Privy Council construed that language to mean that the computation of the total income in accordance with the provisions of the Indian Income-tax Act means the Indian Income-tax act as it stood amended at the date of the coming into force to the Finance Act. Now, it will be noticed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 I. T. R. 471) There the Calcutta High Court was considering an application for a writ under Article 226 to prevent the Income-tax Officer from assessing his income under the amended Section 34 of the Indian Income-tax Act. The new Section 34 came into from the 30th of March, 1948, and the Income-tax Officer was seeking to assess escaped income of the assessee for the years 1942-43, 1943-44 and 1944-45, and the contention of the assessee was that Section 34 did not have retrospective effect and the provisions of the new Section 34 did not apply to the assessment years prior to the 1st of April, 1948. This contention was rejected by the Calcutta High Court. Now, in the first place it should be noted that the Calcutta High Court took the view that Section 34 in express terms permitted the Income-tax Officer to assess escaped income for eight years previous to the amending section came into force, and therefore the learned Chief Justice in his judgment at page 487 points out that in the view he has taken of Section 34 no question of retrospective operation as a question of interpretation arises in that case. But reliance is placed on certain observations of the learned Chief Justice ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rgument is that there is nothing to prevent the Parliament from making it clear that it wishes to give retrospective effect to an Act which amends the Indian Income-tax Act. It is always open to the Parliament whenever it amends the Indian Income-tax Act, to provide that that amendment shall be operative as from the beginning of the assessment year, and our attention has been drawn to various amending Acts passed by the Central Legislature where that intention has been made perfectly clear by a language which is both simple and clear. There was an Ordinance passed in 1949, being Ordinance No. XXI of 1949, and that the Ordinance introduced various amendments in the Indian Income-tax Act. Now, by clause (5) of that the Ordinance it was provided that the amendments specified in the First Schedule shall be made in the Indian Income-tax Act, 1922, and shall be deemed to have been made therein with effect from the 1st day of April, 1949, and in clause (6) there is a similar provision with regard to the amendment of Act XXI of 1947. Therefore by this Ordinance the Governor-General made it clear that he wanted to the amendments introduced into the Indian Income-tax Act to have a r....