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PETITIONER: COMMISSIONER OF INCOME TAX, MADHYA PRADESH,NAGPUR

       Vs.

RESPONDENT: HUKAMCHAND MOHANLAL

DATE OF JUDGMENT17/09/1971

BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S.

CITATION:  1971 AIR 2591            1972 SCR  (1) 786  CITATOR INFO :  D          1991 SC  70  (3)

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

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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

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             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

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             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