LexCOMMISSIONER OF INCOME-TAX BOMBAY versus CHUGANDAS AND CO., BOMBAY
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- """· 29 332 SUPREME COURT REPORTS COMMISSIONER OF INCOME-TAX BOMBAY v. CHUGANDAS AND CO., BOMBAY (K. SUBBA RAo, J.C. SHAH ANDS. M. SIKRI, JJ.) Indian Income·tax Act (XI of 1922), 1. 25(3)-Ex•mption applicable to wllot incom1. The respondent was a firm dealing in oecuritiea and was charaed to lncome·tax under the Income-tax Act (VII of 1918). It rea:ived certain IUDla of money as interest on securitiea in the accounting years 19-46 and 1947 (assessment years 1947-48 and 1948-49) respectively It cl;.. continued its business on 30th June 1947, and, for the assessment )'l&r 1948-49. claimed exemption from taxation under s. 25(3) of the Inoome- tax Act (XI of 1922). The income-tax officer and the Appel:ate Assistant Commissioner, held that, the income fell under the hel4 .. interest on securities'' under s. 8 and not under the bead "profits and 1ains of business, profession or vocation'' under s. 10 and that therefore, !be respondent was not entitled to the exemption. The Appellate Tn1>Unal reversed that order and the High Court (by a majority) coofirme4 the order of the Tnl>unal. The Commissioner of Income-tu appealed to the Supreme Court. Hild: The appeal should be dismissed. When s. 25(3) of the Indian Income·tax Act (XI of 1922) enacll that "'where any business, profession or vocation on which tax was at any time charged", it is intended that the tax was at any time charged on the owner of the business. If that condition be fulfilled in respect of the income of the bu(tnoa,, under the Indian Income-tax Act (VII of 1918), the owner will be entitled to get the benefit of the exemption under the section if the business is discontinued. The section in tenm men to tax charged on any business, that is, tax charged on any person hi respect of all income earned by carrying on the business. There k ao reason to restrict the condition of th1> applicability of the exemption only to income on which tax was payable under s. I 0 of the Act under the bead "profita and gains of business, profession or vocotion". The United Commercial Bank Ltd., Calcutta Y. Th• Comml1,1on11 of Income-tax, Weit Bengal, [1958] S.C.R. 19 and Th• Commi1sioner of lncome-tax, Madra1 v. The Expre" New1paper1 Limited, MadrOI, [1964] 8 S.C.R. 189, reierred to. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 685 & 686 of 1963. 8 S.C.R .. ' SUPREME COURT REPORTS_ 333 _ 1964 - C.LT. "· Appeal from the judgment and order dated December 17, 18, 1958, of the Bombay High Court·· in Income-tax Reference No. 27/X of 1954. Chugandai KJ N. Raiagopala Sastri and R. N. Sachthey, for tho !!:::.. appellant. N. A. Palkhivala, J. B. Dadachanil, 0. C. Mathur and Ravinder Narain, for the respondent. July 29, 1964. The Judgment of the Court was delivered by: SHAH, J.-M/s. Chugandas and Co.-a firm dealing in securities-received in the year 1946 Rs. 4,13,992/- as interest on securities held by it. In 1947 it received Rs. 1.01,229/~ as interest from the same source. On June 30, 194 7 the firm discontinued its business. In proceedings for assessment for 1947-48 and 1948-49 the firm, relying upon s. 25(3) of the Indian Income-tax Act, 1922, claimed exemption from payment of tax on income earned in tho relevant previous year, on the plea that the firm was carry- ing on business before the Indian Income-tax Act, 1922, was enacted, and on that business, tax had been charged under the provisions of the Indian Income-tax Act 7 of 191& in respect of the business done immediately before that Act was repealed. The firm also applied to substitute· the income earned in the year 194 7 for the income of tho previous year. The Income-tax Officer held that the inter- . est earned by the firm on securities being "liable to be assessed to tax" under s. 8 and ' not under s. 10 of the Income-tax Act, the firm was not entitled to the benefit of the exemption claimed. The order of the lncome-ta:r Officer was confirmed in appeal by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal; how- ever, reversed the order and held that the firm was entitled" to the benefit of the exemption in respect of the cntitc income of the business including income from securities in the year in which the business was discontinued. At the· instance of the Commissioner, tho Tribunal referred under s. 66( 1) ·of the Act a question, whiclr S/UJIJ 1· 1964 - CJ.T. v. :hugmultU and Co. - Shah· 1. 334 SUPREME COUR
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