PETITIONER:
COMMISSIONER OF INCOME TAX, MADHYA PRADESH,NAGPUR
Vs.
RESPONDENT:
HUKAMCHAND MOHANLAL
DATE OF JUDGMENT17/09/1971
BENCH:
GROVER, A.N.
HEGDE, K.S.
CITATION:
1971 AIR 2591 1972 SCR (1) 786
ACT
Income Tax Act, 1961, s. 41(1)- Assessee successor in business to her deceased husband--Amount received by assessee by way of remission of sales tax paid by husband -If liable to tax in the hands of the assessee under s. 41(1).
HEADNOTE
The assessee who was successor-in-business to her deceased husband was sought to be taxed under s. 41 (1) of the Income-tax Act, 1961, in respect of certain amount received by her by way of remission from the sales tax recovered from her husband. On the ’question whether the amount was assessable under s. 41(1) of the Act. HELD : Section 41(1) does not apply, because, the assessee who is sought to be taxed is not the assessee contemplated by the section. If the husband of the assessee had been alive and had received the amount which had been remitted during his life time he would certainly have been liable to pay tax under the provisions of s. 41(1). But the husband having died the Revenue could not take any advantage of its provisions. The Act does not contain any provision making a successor-in-business or the legal representative of an assessee to whom an allowance has already been granted liable to tax under s. 41(1) in respect of the amount remitted and received by the successor or the legal representative. [788 C-D, 789 A-B] C.I.T., Bombay City v. Amarchand N. Shroff 40 I.T.R 59 and C.I.T Bombay v. James Anderson, 51 I.T.R. 345, referred to.
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2421 of 1968. Appeal from the judgment and order dated January 31, 1967 of the Madhya Pradesh High Court in Misc. Civil Case No. 88 of 1966. R. N. Sachthey and B. D. Sharma, for the appellant. Rameshwar Nath and Swaranjit Sondhi, for the respondent. The Judgment of the Court was delivered by Grover, J. This is an appeal by certificate from a judgment of the Madhya Pradesh High Court in an Income tax Reference. The Reference related to the assessment made on the assessee for the year 1962-63 for which the accounting period was the year ending March 31, 1962. The assessee carried on business as sole, selling agent of M/s. Mohanlal Hargovindas, Jabalpur. The assessee succeeded to this business on the death of her husband on or about February 17, 1960. It would appear that M/s. Mohanlal Hargovindas had recovered a certain amount towards sales-tax from the assessee’s husband relating to the period January 26, 787 1950 to March 31, 1951. In an appeal filed by the said firm, however, the Assistant Commissioner of Sales Tax remitted the sum of Rs. 24,341/- so recovered by the firm by an order dated November 31, 1960. Consequently M/s. Mohanlal Hargoving das refunded that amount to the assessee by means of a draft dated October 31, 1961. This draft was received by the assessee on November 9, 1961 which fell in the accounting period. The Income tax Officer sought to tax this amount under the provisions of s. 41 (1) of the Income tax Act 1961, hereinafter called the ’Act’. He did not accede to the contention of the assessee that the income, if at all, was the income of the assessee’s deceased husband and not her income. The Appellate Assistant Commissioner dismissed the appeal filed by the assessee. The Tribunal acceded to the contention of the assessee that since the allowance or deduction in question had been obtained by a different assessee, namely, her husband she was not liable to pay tax on that amount under s. 41 (1) of the Act. The Tribunal was moved by the Commissioner of Income tax for stating a case and referring the following question to the High Court :
"Whether the sum of Rs. 24,341 was liable to
tax under s. 41 (1) of the Income tax Act,
1961 ?"
The High Court answered the question in favour
of the assessee.
Section 41(1) is in the following terms:-
"41 (1) Where an allowance or deduction, has
been made in the assessment for an year in
respect of loss, expenditure or trading
liability incurred by the assessee, and
subsequently during any previous year the
assessee has obtained whether in cash or in
any other manner
whatsoever, any amount in respect of such loss
or expenditure or some benefit in respect of
such trading liability by way of remission or
cessation thereof, the amount obtained by him
or the value of benefit accruing to him,
shall be deemed to be profits and gains of
business or profession and accordingly
chargeable to income tax as the income of that
previous year, whether the business or
profession in respect of which the allowance
or deduction has been made is in existence in
that year or not".
As pointed one by the High Court under the
general law if a trading liability has been
allowed as a business expenditure and, if this
liability is remitted in any subsequent year
the amount remitted cannot be taxed as income
of the year of the remission nor can the
account for the year id which the liability
was allowed be reopened or adjusted. Section
41(1) was enacted to supersede this principle
but this section can apply only to the a In
788
the present case if the husband of the
assessee had been alive and had received the
amount which had been remitted during his
lifetime he would certainly have been liable
to pay tax under the provisions of S. 41(1).
But Kanhaiyalal having died and his widow
being the assessee she cannot possibly be
brought within the section. Section 2(7) of
the Act defines the word "assessee". The
definition is very general and assessee is
stated to mean a person by whom income tax or
super tax or any other sum of money is payable
under the Act and includes every person as
mentioned in clauses (a), (b) and (c). The
assessee, in the present case, does not fall
within any of those clauses. There is no
specific provision in the Act under which it
can be said that the assessee is a person by
whom income tax is payable on the amount of
Rs. 24,341/- which came to her by way of
remission on account of what had transpired in
the lifetime of her husband. The Act does not
contain any provision making a successor in
business or the legal representative of an
assessee to whom an allowance has already been
granted liable to tax under s. 41(1) in
respect of the amount remitted and received by
the successor or the legal representative.
The only provision which relates to the
liability of the legal representative is s.
159 of the Act. Sub-section (1) thereof
provides that where a person dies his legal
representative shall be liable to pay any sum
which the deceased would have been liable to
pay if he had not died in the like manner and
to the same extent as the deceased. The
corresponding provision in the Income tax Act
1922 was s. 24B. In Commissioner of Income
tax Bombay v. Amarchand N.,’ Shroff (1) it was
laid down by this Court that s. 24B did not
authorise the levy of tax on receipts by the
legal representative of a deceased person in
the year of assessment succeeding the year of
account being the previous year in which such
person died. The assessee had ordinarily to
be a living person and could not be a dead
person. By S. 24B the legal personality of
the. deceased assesses was extended for the
duration of the entire previous year in the
course of which he died. The income received
by him before his death and that received by
his legal representative after his death but
in that previous year became assessable to
income tax in the relevant assessment year.
Any income received in the year subsequent to
the previous year or the accounting year could
not be called income received by the deceased
person. Thus the provisions of s. 24B did not
extend to tax liability of the estate of a
deceased person beyond the previous or the
accounting year in which that person
Income tax, Bombay v. James Anderson(1).
Indeed the learned
counselfor the Revenue did not and could
not rely on the provisions of s. 159 of the
Act in the present case nor was any reliance
(1)1. T. R. 59.
(2) 51 1. T. R. 345. 789 placed on any other section in the Act apart from s. 41 (1). The, question referred is also based on that very section. That section, in our opinion cannot possibly apply to the present case because the assessee who is now sought to be taxed is not the assessee contemplated by that section. The assessee within s. 41 (1), namely, Kanhaiyalal having died the Revenue could not take any advantage of its provisions. The High Court rightly observed that the question whether the amount of Rs. 24,341/- was liable to tax as the personal income of the assessee did not arise in the present case in which the sole point to be decided was whether that amount was assessable in the assessee’s hands under s. 41 ( 1 ) of the Act. We, therefore, entirely concur in the view of the High Court and agree with the answer returned by it. In the result the appeal fails and it is dismissed with costs. K.B.N. Appeal dismissed. 790