Commissioner of Lncome Tax, Madhya Pradesh, Nagpur v. Hukamchand Mohanlal

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 3 l, 1962. The assessee carried on business as sole sell- ing 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. Mohan­ lal Hargovindas had recovered a certain amount towards sales-tax from the assessee's husband relating to the period January 26. C.I.T. v. HUKAMCJ.iAND (Grover, J.) 787 1950 to March 31, 1951. In an appeal filed oy 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 Hargovin­ 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 In­ come 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 i;ncome of the assessee's deceased hus­ band 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 de· duction 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 Com­ missioner of Income tax for stating a case and referring the fol­ lowing 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 t_he following terms:- "41(1) Where an allowance or deduction has beerr made in the assessment for any 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 ex­ penditure or some benefit in respect of such trading lia­ bility by way of remission or cessation thereof, the amount ob~ined by him or the value of benefit accru­ ing 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 allow­ ance or deduction has been made is in existence in that year or not". As pointed out by the High Court under the general law if a trad­ ing liability has been allowed as a business expenditure and if this liability is remitted in any subse.quent year the amount remit­ ted cahnot be taxed as income of the year of the remission nor H can the account for the year in which the liability was allowed be reopened or adjusted. Section 41(1) was enacted to supersede this principlo but this section can apply only to tho assosseo. In A the present case if the husband of the assessee had been alive and had received the amount which had bjeen remitted during his life-- time he would certainly have been liable to pay tax under the provisions of s. 41(1). But .ll:anhaiyalal having died and his \'VidoW being the assessee she cannot possibly be brought within tlie section. Section 2(7) of the Act defines lhe wotd "assessee". The definition is very general and assessee is s~ated to mean a B person by whom income tax or super tax or any other sum of money is payable un<t~r the· Act and includes every person as mentioned in clauses (a), (b) and (c). The assessee, in the pre­ sent 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 tihe amount c of Rs. 24,341/• which came tel !ier by way of remission on account of what had transpired ill 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 Ul)der 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 D of the legal representative is s. )59 of the Act. Sub-section (I) thereof provides that where a person dies his legal representative shall be liable tb 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 extefit as the deceased. The corresponding provision in the Jficome tax Act 1922 was s. 24B. In Commissioner of In­ come tax Bombay v. Amarchand N. Shroff(') it was laid down by this Court that s. 24B did not authorise the levy of tax on receipts by the Jegal representative of a dece-ased person in the year of assessment succeeding the year of account beifig the previous year in which such penion died. The assessee had ordinarily to be a living person and could not be a dead person. By s. 24B the F legal personality of the. deceased assessee 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 pre­ vious year became assessable to income tax in the relevant assess­ ment 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 btyo,nd the previou~ or the accounting year in which that person died. To the same l!lloct is the decision in Commissioner of fntome rax, Bomba.v v. James Anderson('). Indeed the learned coun~l for the Revenue did not afid could not rely on the provi­ sions af s. 159 cl' the Act in the :present case nor was any reliance al 31 I. T. R. 343. C.l.T. v. HUKAMCHAND (Graver, J.) 789 A placed on any other section in the Act apart from s. 41 ( l). The question referred is a.lso based on that very section. That section, in our opinion cannot possibly apply to the present case bec.ause the assessee who is roow sought to be taxed is noc the assessee con­ templated by that section. The assessee withhn s. 41 (1), namely, Kanhaiyalal having died the Revenue could not take any advantage B of its prnvisions. The High Court rightly observed that the ques­ tion whether the amount of Rs. 24,341/- was )iable to tax as the personal income of the assessee did not arise in the present case in which the sole point to b\e 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 Cow.t and agree with the answer ret1.1rned by it. In t;bei result ,the ,appeal fails .and it is dismissed with costs. K.B.N. Appeal dismissed_