1940 (9) TMI 21

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....ere not happily worded in the application of the assessee and can be summarised, as the learned Commissioner has done, in one question. The question is:- "Whether in the circumstances of the case the assessee was entitled under Section 14(2)(b) of the Income-tax Act to claim an exemption in respect of the amount of ₹ 59,011 received by him from the registered firm of Sadhuram Tularam at Calcutta when the firm itself was assessed to income-tax on a smaller sum, viz., ₹ 12,829 only." This question arises before us in connection with the assessment year 1934-35 when Seth Kanhaiya Lal was being assessed to income-tax by the Additional Income-tax Officer of Meerut. He was assessed on a total income of ₹ 59,371 and ....

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....he firm that the profits or gains of the firm should be computed after making allowance for the amount of interest paid in respect of the advances made by the partners to the firm. The submission obviously was repelled by the Income-tax Officer of Calcutta, presumably on the view that the sums advanced or invested by the partners did not represent the capital borrowed by the firm for the purposes of the business. The question whether the Income-tax Officer of Calcutta was right in his method of assessment is not before us, and all that we have got to see for the purposes of the present reference is whether the income which Kanhaiya Lal has received from the Calcutta firm of Sadhuram Tularam, namely the sum of ₹ 54,735, is liable to ta....

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....ng the sum payable by an assessee as income-tax and not when calculation only of the profits and losses have been made". The last sentence is tersely put and I take this opportunity of amplifying its meaning. Section 14 gives exemptions of a general nature and provides for relief in certain cases where but for that section there might have been double taxation. I am concerned at the present moment with Section 14(2)(b) which says that a tax shall not be payable by an assessee in respect of such amount of the profits or gains of any firm which have been assessed to income-tax as is proportionate to his share in the firm at the time of such assessment. It postulates that the firm made certain profits and those profits were assessed to i....

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....made any profits and if those profits were taxed, then the proportionate share of the profits in the hands of the assessee could not be re-taxed when the assessee's assessment was being made, and this is all that the section says and this relief has been given to the assessee in the present case. The Calcutta firm made a profit of ₹ 12,829; the assessee's one-third share in this profit is ₹ 4,276, and this amount of profit or income has not been re-taxed in the hands of the assessee. Beyond this the assessee is not entitled to any relief in respect to the sum of ₹ 54,735. This represents the interest which the Calcutta firm paid to the assessee and this sum or any multiple of this sum was never treated as the incom....