COMMISSIONER OF INCOME-TAX, MYSORE, BANGALORE versus THE BANGALORE TRANSPORT COMPANY LTD., BANGALORE

Citation: [1967] 3 S.C.R. 393 · Decided: 03-04-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

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COMMISSIONER OF INCOME·TAX, MYSORE, 
BANGALORE 
v. 
THE 
BANGALORE TRANSPORT COMPANY, 
LTD., 
BANGALORE 
April 3, 1967 
(J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.] 
Indian Income-tax Act, 1922 (Act 11 of 1922)-Business carrk?d for a 
part of year, if profits taxah/e-
Tbe undertaking and business of the assessee-company were taken over 
by the Government and the assessee \Vas paid compensation. 
The asses-
see sub mitt~. a return, claiming that it had earned no income from its 
business, since it was taken over by the Government. 
The Income-tax 
Officer brought to tax a certain sum. disclosed by the assessee's audited ac-
counts as its taxable business income during that part of the year before it 
closed the business. 
This 9rder was upheld by the Assistant Commissioner 
and the Appellate Tribunal with certain reduction in the amount. 
On re· 
ference the High Court answered the question against the Revenue. In 
appeal to this Court :-
HELD : The assessee was liable to be taxed. 
Under S. 10(1) of the Income-tax Act, tax is payable by an assessee 
under the head "Profits aud gains of business, profession or vocation" in 
respect of profits or gains of any business, profession or vocation carried 
on by him. 
There is nothing in the Act which supports the assessee's 
argument that for profits of the business to be taxable, the business must 
be actively earried on for the whole of the previous year, or till the end 
of the previous year. Under the ocheme of the Act, whenever an assessee 
receives in the course of his business money or money's worth, income 
embedded therein accrues or arises to him. and 
becomes subject to an 
ambulatory charge. 
If at the end of the previous year, on making up 
accounts there is no ovetall income, the charge does not crystallize, because 
there is no income on which the charge of tax may settle. 
[39SF-H] 
Turner Morrison &; Cotnpany Ltd. v. Co1nn1issioner of 
Income-ta~ · 
West Bengal, 23, I.T.R. 152, followed. 
· ' 
Con11nissioner o( lnco1ne-tax, Gujarat v. Ashokhhai Cltimanhhai rt965] 
1 S.C.R. 758. explained. 
The Dep~ent ·v.:as not seeking to tax either the whole o·r any part of 
~e compe!lsation ~ece1ved by the assessee and the discussion as to what the 
in ~:11~t~~ rec~iv~d by assessee was. intended to replace was not relevant 
prior to its cl~s':.ree ofe~h~hi.;.r:;~~. w~~'9~~~~led or arose to the asses..ee 
196~IYIL APPELLAT!! JURISDICTION: 
Civil Appeal No. 435 of 
Feb~~~a~9byl~eJia~ lthav]Jrom the. judgment and order dated 
Referred Ca~e No. I~ of e196~~ore High Court in 
Income-tax. 
the :p~ll~::.ai, A. N. Kirpal, S. P. Nayyar and R.H. Dhebar, for 
ChaTud. hV .. ~iswahnath Iyer, K. Rajind~r Chaudh11ri 
d K 
urz, ior t e respondent. 
an 
· R. 
The Judgment of the Court was delivered by 
394 
SUPllBMB COURT llBPOllTS 
(1967] 3 S.C.ll, 
Shah, J, The Bangalore Transport Company Ltd. hereinafter 
called 'the Company'-operated a public motor transport service 
in the town of Bangalore for several years. The Legislature of 
the State of Mysore enacted the Bangalore Road Transport Service 
Act, 1956 (Mysore Act VIII of 1956) with a view to provide for 
the acquisition of the unde.rtaking of the Company. By virtue 
of s. 3 of the Act the undertaking, assets and documents of the Com· 
pany vested in the Government of Mysore, on October l, 1956, and 
the Company was paid Rs. 15,50,000/ • as compensation for loss 
of its undertaking, assets and documents. 
In respect of the previous year ending March 31, 1957, the 
Company submitted a return under the Income-tax Act, claiming 
that it had earned no income from its business, since its undertak· 
ing and business was taken over by the Government of Mysore 
on October l, 1956. The Income-tax Officer, Urban Circle, Ban· 
galore, brought to tax Rs. 4,01,954/· disclosed by the Company's 
audited accounts as its taxable business income. This order was 
confirmed by the Appellate Assistant Commissioner in appeal. The 
Income-tax Appellate Tribunal modified the order of assessment 
and allowed Rs. 97,208/· as development rebate for the previous 
year and after making certain adjustments brought to tax an amount 
of Rs. 3,16,439/· as taxable income of the Company in the pre· 
;ious year. 
At the instance of the Company, the following question was 
submitted by the Appellate Tribunal to the High Court of Mysore 
under s. 66(1) of the Income'tax Act, 1922 : 
"Whether the sum of Rs. 3,16,439/· was income and 
liable to

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