COMMISSIONER OF INCOME-TAX, MADHYA PRADESH versus LADY KANCHANBAI

Citation: [1970] 3 S.C.R. 323 · Decided: 16-12-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

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COMMISSIONER OF INCOME-TAX, MADHYA PRADESH 
i·. 
LADY KANCHANBAI 
December 16, 1969 
[J. C. SHAH AND K. S. HEGDE, JJ.j 
Income-tax Act, 1922-S. 2(1l)(i)(a) and proviso-Previous year 
relevant to assess111ent year 1950-51 in respect o/ sources of income out-
side "taxable" territory-'Assessee', 'assesse~·, meaning of. 
Prior to the assessment year 1950-51 the assessee was assessed under 
the Indian Income-tax Act, 1922 in the status of a non-resident Hindu 
Undivided Family. 
The income received by the assessee in the former 
Indian State of Madhya Bharat was not subject to tax under the Act but 
was taken into consideration in computing its "world incorile" for the 
purpose of determining the rate. After the Constitution calne into force 
the present definition of "taxable territories" was incorpo,.ted into the 
Income-tax Act by the Finance Act, 1950 and the areas' in which the 
assessee was carrying on business with which this appeal 
is 
concerned 
were included therein with the result that for the assessment year 1950-
51 the assessee who was a resident of Madhya Bharat was deemed to be 
a resident in the "taxable territories" 
during the 
"previous year" 
and . 
hence liable to be taxed in respect of its income received in Madhya 
Bharat. Prior to the assessment year 1950·51 the assessee had proceeded 
on the basis that its account year ended on Diwali day, but fdr the 
assessment year 
1950-51, in respect of its income from business in 
Madhya Bharat it chose the financial year ending on March 31, 1950 as 
the "previous year". 
The Income Tax Officer as well as the Appelate 
Assistant Commissioner rejected the claim of the assessee that it could make 
such a choice. The Tribunal reversed the finding of the Income Tax Officer 
and the High Court on reference agreed with the tribunal. On the ques· 
tion whether under the circumstances of the case, 
having 
regard to 
s. 2( ll)(i)(a) of the Income Tax Act, 1922, the assessee is entitled to 
take the year ended on 31-3-1950 as the "previous year" relevant to the 
assessment year 1950-51 in respect of his sources of income arising outside 
tl•e '1axable territory", 
HELD : The High Court was right in answering in favour of the 
assessee. 
(I) le is clear from the provisions of s. 2(11) (i)(a) that in respect 
of any separate source of income, profits or gains unless the asses,,ee ·has 
made a choice in accordance with the second part of s. 2(1l)(i)(a) the 
12 months ending on 31st day of March next the preceding year for 
which the assessment is made is the "previous year''. 
The section does 
not refer to the income of the assessee generally but to his 
"separate 
~ources of income, profits and gains". 
H.;-nce it is possible for an assessec 
to have a different "previous year" for each "separate source of income, 
profits and gains" : and the business of the assessee in Madhya Bharat 
constituted a separate source of income. [326 C-0] 
Commissio11er of Income Tax v. Sarumamuratlty. [1946] I.T.R. 185; 
RA<Hhsia Metals Lrd. v. Commissioner of Tt4es, (1941) J.T.R. Supp. 45, 
referred to. 
324 
SUPREME COURT REPORTS 
(1970) 3 S.C.R. 
(2) Fdr the purpose of finding out the total "world income" of the 
assessee, the income derived by the assessee from its businesses outside 
the "taxable territories" had been taken into consideration in the past;· 
but that was done only for the purpose of determining the rate at which 
the assessee's income should be assessed. No tax was imposed on the in-
come from those business. 
The 
expression 
that 
"where in respect of 
a particular source of income, profits and gains" in 
the 
proviso to s. 
2(11)(i)(a) means the income from a particular source which has been 
brought to tax under the Act and not which has been taken into considera-
tion for computing the total world income of the assessee. 
In the con-
text the word "assessee" in the proviso to s. 2(11)(i)(a) refers to the 
person whose income, profits or gains in respect of a particular source ,. 
had been once assessed to tax. 
The word "assessed" 
in 
that 
provh~o 
means subject to levy or imposition of tax not compu.ted. [327 C-F] 
Conimissioner of Income Tax, Bombay v. Kemchand Ramdas, (1938) 
VI, I.T.R. 
414 and 
Seth Badridas Daga and Anr. v. Commissioner of 
Income Tax Central and United Provinces ( 1949) XVII l.T.R. 209, 
re-
ferred to. 
CIVIL APPELLATE JURISDICTION : 
Civil Appeal No. 19 of 
1969. 
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