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PETITIONER: NANIKANT   AMBALAL MODY

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, BOMBAY

DATE OF JUDGMENT: 04/05/1966

BENCH: SARKAR, A.K. (CJ) BENCH: SARKAR, A.K. (CJ) MUDHOLKAR, J.R. BACHAWAT, R.S.

CITATION:  1967 AIR  193            1966 SCR  295  CITATOR INFO :  F          1968 SC  70  (7)

ACT: Indian Income-tax Act 1922, ss. 46, 10, 12-Outstanding  fees from legal profession received after cessation of  practice- Oash  system  of accounting-Receipts whether  can  be  taxed under s. 12 income from ’other sources’.

HEADNOTE: The appellant an advocate who maintained his accounts on the cash  system  gave up practice when he was elevated  to  the Bench  in 1957.  Certain outstanding professional dues  were however  received  by him in the accounting years  1958  and 1959.   These  receipts were shown by him as income  in  his return for the assessment years 1959-60 and 1960-61 and were assessed by the Income-tax Officer.  The appellant then went in  revision  to the Commissioner of  Income-tax  contending that the said receipts were not income and had been  wrongly taxed.  The Commissioner having decided against him the appellant came   to  this  Court  under  Art.  136  of   the Constitution. HELD:     (i) The receipts in the present case were  clearly the fruits of  the assessee’s professional activity and fell under  the fourth head of s. 6 of the Indian Income-tax  Act 1922.   They were however not chargeable to tax  under  that head because under the corresponding computing section  that is.  s. 10. an income received by the assessee who kept  his accounts  on the  cash basis in an accounting year in  which the  profession  had  not  been carried on  at  all  is  not chargeable. [297 D-F] Commissioner  of Income Tax v. Express Newspapers  Ltd.,  53 I.T.R. 250, relied on. (ii) The  income  could  not be taxed under  S.  12  either. Section 12 deals    with income which is not included  under any other preceding heads     covered  by ss. 7 to  10.   If the  income  is  so included, it falls outside  S.  12.   It follows  that  if,  as in the present case,  the  income  is profits and gains of profession it cannot come under s.  12. [301 E] The  heads of income in s. 6 are mutually exclusive  and  it would be incorrect to say that as the receipts could not  be

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brought  to  tax under the fourth head they could  not  fall under that head and must therefore fall under the  residuary head  ’other  sources’.  There is no justification  for  the assumption  that an income falling under one head has to  be put  under  another head if it escapes  taxation  under  the computing  section corresponding to the former head. [298 A; 300 E-F] The character of the income cannot change merely because the assessee received it at a certain time or adopted a  certain sYstem of accounting. [301 B] Section  4 does not say that whatever is included  in  total income must be brought to tax.  The income has to be brought under one of the heads mentioned is s. 6 and can be  charged to  tax  only  if it is so chargeable  under  the  computing section corresponding to L/S5SCI 296 that head.  Income which falls under the fourth head can  be brought to tax only if it can be so done under the rules  of computation laid down in s. 10. [298 G-299 B] In re: B, M. Kamdar, 14 I.T.R, 250, not approved. The  United  Commercial Bank v. The Commissioner  of  Income Tax, [1958] S.C.R. 79, Salisbury House Estate Ltd., v.  Fry. 15  Tax  Cases 266 and Commissioner of In tax  v.  Cocanada Padhaswami Bank Ltd., 57 I.T.R. 306, relied on. Probh  At  Chandra  Barua v. King  Emperor,  57  I.A.  228, distinguished, Per Bachawat J. (dissenting)- The receipts in question were chargeable under s. 12. Any  income Chargeable under a specific head can be  charged only  under  that head, and no part of that  income  can  be charged  again under S. 12.  But any part of a total  income of  the  assessee  not me*sable under  a  specific  head  is assessable  under the residuary head covered by s. 12,  [305 C] The  income in question was not exempt under s.  4(3).   The receipts were liable to be included in total income under s. 4.  This income could not be included under s. 10  owing  to the  method of accounting adopted by the assessee.  Nor  did it  fall under any other head.  It followed that the  income must fall under the residuary head specified in s. 12,  This was not a case where the Revenue had taxed or could tax  the income under s, 10 and again sought to tax the income  under a. 12. [306 C. G-H]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos, 731-732  of 1964. Appeals  by special leave from the order dated  January  29, 1963  of the Commissioner of Income-tax, Bombay  City-1,  in No. 1/RP/BBY/40 and 41 of 1961. N.   A.  Palkhivala, T. A. Ramachandran, S. P. Mehta and  O, C. Mathur, for the appellant. Sarjoo Prasad, R. Ganapathy Iyer and R. N. Sachthey, for the respondent. The Judgment Of SARKAR, C.J. and MUDHOLKAR, J. was delivered by SARKAR, C.J. BACHAWAT, I. delivered a dissenting opinion. Sarkar.  CJ.  The assessee was an advocate of the High Court of Bombay and was practicing his profession there till March 1, 1957 when he was elevated to the Bench of that Court.  He then  ceased to carry on his profession and has not  resumed it since.  As an advocate he had been assessed to income-tax on  his  professional income, his accounting years  for  the

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assessments being the calendar years, When he was raised  to the  Bench, various fees for professional work done  by  him were outstanding.  In the years 1958 and 1959 during no part of  which  he  had carried on any  profession,  he  received certain moneys on account of these outstanding fees.                             297 His  accounts had always been kept on the cash  basis.   The question is. whether be is liable to pay income-tax on those receipts. We  shall first make a few general observations.  Section  6 of  the Income-tax Act, 1922 specifies six sources or  heads of  income  which  are chargeable to tax.  In  order  to  be chargeable,  an income has to be brought under one of  these six heads.  S. 6 also provides that the chargeability to tax shall be in the manner provided in ss. 7 to 12B of the  Act. Each  of  these sections lays down the rules  for  computing income for the purpose of chargeability to tax under one  or other  of  the heads mentioned in s. 6.  An  income  falling under  any  head  can only be charged to tax  if  it  is  so chargeable  under the corresponding computing section.   The fourth  head  of  income in s. 6 is "Profits  and  gains  of business, profession or vocation" and the fifth head "income from  other sources".  The fifth head is the residuary  head embracing   all   sources  of  income   other   than   those specifically mentioned in the section under the other heads. Then  we observe that the several heads of income  mentioned in s. 6 are mutually exclusive; a particular income can come only  under one of them: The United Commercial Bank  v.  The Commissioner of Income Tax(2). We  now  turn  to the present case.   The  receipts  in  the present  case are the outstanding dues of professional  work done.   They  were  clearly the  fruits  of  the  assessee’s professional activity.  They were the profits and gains of a profession.   They would fall under the fourth  head,  viz., "Profits  and  gains of business, profession  or  vocation". They  were not, however, chargeable to tax under  that  head because under the corresponding computing section, that  is, s.  10,  an  income received by an  assessee  who  kept  his accounts  on the cash basis in an accounting year  in  which the  profession  had  not  been carried on  at  all  is  not chargeable  and  the  income  in the  present  case  was  so received.  This is reasonably clear and not in dispute:  see Commissioner of Income Tax v. Express Newspapers Ltd.(1). Can the receipts then be income falling under the  residuary head of income and charged to tax as such?  The Commissioner of  Income-tax  from whose decision the present  appeal  has been  taken  by the assessee, held that  it  was  chargeable under  that  head.  He came to that conclusion  on  what  he thought  were  the  general  principles  and  also  on   the authority of a certain observation of Chagla, J. in Re.   B. M.  Kamdar(3).  The observation of Chagla, J. does not  seem to us to be of much assistance for the decision in that case was not based on it nor is it supported by reasons.  We find ourselves  unable to agree with the learned Judge.   We  may add  that  apart from the observation in  Kamdar’s  case(1), there does not appear to be any direct authority  supporting the view of the Commissioner. (1) [1958] S.C.R. 79. (2) [1964] 53 I.T.R. 250: (3) [1964] 8 S.C.R. 189.14 I.T.R. 10. 298 As  to the general principles, we first observe that as  the heads of income are mutually exclusive, if the receipts  can be  brought  under the fourth head, they cannot  be  brought under the residuary head.  It is said by the Revenue that as

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the receipts cannot be brought to tax under the fourth  head they  cannot  fall under that head and must  therefore  fall under  the  residuary head.  This argument assumes,  in  our view,  without justification, that an income  falling  under one  head  has  to be put under another head if  it  is  not chargeable under the computing section corresponding to  the former head. If the contention of the revenue is right, the position  would appear to be that professional income of  an assessee who keeps his account on the cash basis would  fall under the fourth head if it was received in a year in  which the  profession  was being carried on, but it would  take  a different  character  and fall under the residuary  head  if received  in  a year in which the profession was  not  being carried  on.  We are unable to agree that this is a  natural reading  of the provisions regarding the heads of income  in the Act.  Whether an income falls under one head or  another has  to  be  decided  according to  the  common  notions  of practical  men for the Act does not provide any guidance  in the  matter.  The question under which head an income  comes cannot depend on when it was received.  If it was the  fruit of professional activity, it has always to be brought  under the  fourth  head  irrespective  of the  time  when  it  was received.  There is neither authority nor principle for  the proposition  that an income arising from a  particular  head ceases  to arise from that head because it is received at  a certain  time.   The time of the receipt of the  income  has nothing to do with the question under which particular  head of income it should be assessed. It is then said that the receipts had to be included in  the total income stated in S. 4 and since they do not fall under the  exceptions  mentioned  in that section,  they  must  be liable  to  tax and, therefore, they must be  considered  as income under the residuary head as they could not  otherwise be  brought to tax.  This contention seems to us to be  ill- founded.  While it is true that under S. 4 the receipts  are liable  to be included in the total income and they  do  not come under any of the exceptions, the contention is based on the  assumption  that whatever is included in  total  income under  s. 4 must be liable to tax.  We find no warranty  for this  assumption.  Section 4 does not say that  whatever  is included  in total income must be brought to tax.   It  does not refer at ill to chargeability to tax.  Section 3  states that "Tax...... shall be charged ..... in accordance  with, and subject to the provisions, of this Act in respect of the total  income".   This  section does not,  in  our  opinion, provide that the entire total income shall be chargeable  to tax.  It says that the chargeability of an income to tax has to  be in accordance with, and subject to the provisions  of the Act.  The income has therefore to be brought under  one- of the heads In s. 6 and can be charged to tax only if it is so chargeable under 299 the  computing section corresponding to that  head.   Income which  comes  under the fourth head, that  is,  professional income,  can  be brought to tax only if it can  be  so  done under  the rules of computation laid down in s. 10.   If  it cannot be so brought to tax, it will escape taxation even if it be included in total income under s. 4. Furthermore,  the expression "total income" in s. 3 has to be understood as it is defined in s. 2(15).  Under that definition. total income means "total amount of income, profits and gains referred to in  sub-s. (1) of s. 4 computed in the manner laid  down  in this   Act",   that  is,  computed  for   the   purpose   of chargeability under one of the sections from s. 7 to s.  12- B.  The receipts in the present case, as we have shown,  can

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only be computed for chargeability to tax, if at all,  under s.  10 as income under the fourth head.  If they  cannot  be brought to tax by computation under that section, they would not be included in "total income" as that word is understood in  the  Act  for the purpose of  chargeability.   That  all income included in total income is not chargeable to tax may be  illustrated  by  referring to  income  from  the  source mentioned  in the third head in s. 6, namely,  "Income  from property".   The  corresponding computing section  is  s.  9 which  says that tax shall be payable on income  under  this head  in respect of bona fide annual value of property.   It is  conceivable  that  income  actually  received  from  the property  in  a year may exceed the  notional  figure.   The excess  would  certainly be liable to be included  in  total income  under s. 4. It however, cannot be brought to tax  as income  under the head "other sources", see Saliently  House Estate,  Ltd.  v. Fry(1).  It is an income which  cannot  be taxed  at  all  though it is included  in  total  income  as defined in s. 4. In Probhat Chandra Barua v. King Emperor(1) it was no  doubt said that s. 12 which is the computing section in respect of the  residuary  head of income, was clear and  emphatic  and expressly  framed so as to make the head of "Other  sources" describe  a  true residuary group embracing  within  it  all sources  of  income,  profits and gains,  provided  the  Act applies  to  them, that is, provided they are liable  to  be included in total income under s. 4 which deals with  income to  which  the Act applies.  We are in full  agreement  with that  observation  but we do not think that it  affords  any support  to  the  contention that all income  liable  to  be included within total, income under s. 4 must be brought  to tax.   The  observation  must be read keeping  in  mind  the undisputed  principle  that  a source of  income  cannot  be brought  under the residuary head if it comes under  any  of the  specific  heads, for the Judicial Committee  could  not have  overlooked that principle.  If we do that, it will  be clear that all that the Judicial Committee said was that all sources  of income which do not come under any of the  other heads  of  income can be brought under the  residuary  head. The words used are "embracing... all sources of income"  and not all income.  It did not say that an (1) 15 T.C. 266. (2) 57 I.A. 228. 300 income  liable  to  be  included  in  the  total  income  is chargeable  to tax as income under the residuary head if  it is  not  chargeable tinder a specific head  under  which  it normally  falls.   In Probhat Chandra  Barva’s  case(1)  the Judicial Committee was not concerned with that aspect of the matter;  the only question before it was, whether  zamindari and certain other income fell under the third head of income from property, as the word ’property’ was understood in  the Act. Another aspect of Probhat Chandra Barua’s case(1) requires a mention.  The question that there arose, as we have just now said,  was, whether the Income-tax Act did not impose a  tax on  the income of a zamindar derived from his zamindari  and certain  other  properties.  It was said on  behalf  of  the assessee  that  the  zamindari and the  other  income  being income from property fell under the third head and could  be brought  to  tax  only  under  the  corresponding  computing section, s. 9. It was pointed out that the income could  not be  charged to tax under that section because it dealt  only with  income from house property which the income  concerned was  not.   It was then said that the income  could  not  be

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taxed under the residuary head because it was really  income from property and could be taxed only as such.  The Judicial Committee did not accept this contention.  It took the  view that  the  word ’property’ in the third  head  "Income  from property"  had to be interpreted as restricted only to  that kind  of  property  which  is  described  in  the  computing section,  s.  9 and as that section deals  only  with  house property the income from zamindari and other properties  did not  fall  under  the  head  "Income  from  property".   It, therefore, found no difficulty in holding that the zamindari income  was  income from the residuary source.  We  find  no support  in this case for the view that an income  which  is admittedly under a specific head can be brought to tax under the  residuary  head if it cannot be so  brought  under  the cornputing  section corresponding to that head.   That  case only  held that zamindari income was not income  which  fell under  the  head "Income from property" and  that  it  could never so fall.  It provides ,no warranty for the  contention that   an   income   from  one  source   may,   in   certain circumstances, be treated as income from a different source, which is the contention of the Revenue in the present case. We  think it right also to observe that if the  receipts  in the  present  case  could  be treated  as  income  from  the residuary source, the position would be most anomalous.   We have  earlier said that if that were so, the placing  of  an income  under  this  head would depend on  the  act  of  the assessee,  it  would depend on the time  when  the  assessee chose  to receive it.  That we conceive is not it  situation which  the  Act  contemplates.  But  there  is  another  and stronger reason to show that the Act did not contemplate it. Suppose the assessee had kept his accounts on the mercantile basis. (1)  57 I.A. 228.                             301 He would then have been charged to tax on these receipts  in the year when the income accrued which must have been a year when  he was carrying on his profession as an advocate.   It could  not then have been said that the receipts  should  be taken  under the head "other sources".  If we are to  accept the  contention  of the Revenue, we have to  hold  that  the method of book-keeping followed by an assessee would  decide under which head a particular income will go. If the Revenue is  right,  the income of the assessee would  go  under  the fourth  head if the method of accounting was mercantile  and it  would go under the fifth head if the accounting was  the cash basis.  We are wholly unable to take the view that such can be the position under the Act.  The heads of income must be  decided  from  the  nature of  the  income  by  applying practical  notions  and not by reference  to  an  assessee’s treatment  of  income:  see Commissioner  of  Income-tax  v. Cocanada Radhaswami Bank Ltd.(1). It  now  remains  to  see whether s.  12  justifies  a  view contrary  to  that which we have taken.  It  lays  down  the rules  for  computation  of income  under  the  head  "Other sources".   It  says that tax under the  head  "Income  from other  sources"  shall be payable in respect  of  income  of every kind which may be included in the total income if  not included  under any of the preceding heads.  It seems to  us clear  that  the  words "if not included under  any  of  the preceding heads"-which refer to the heads considered in  ss. 7 to 10-refer to income and not to a head of income.  S. 12, therefore, deals with income which is not included under any of  the preceding heads.  If the income is so  included,  it falls  outside s. 12.  Whether an income is  included  under any  of  the preceding heads would depend on  what  kind  of

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income it was.  It follows that if the income Is profits and gains of profession, it cannot come under s. 12.  Section 12 does  not say that an income which escapes taxation under  a preceding  head will be computed under it for  chargeability to  tax.  It only says-and this is most  important-that  ’an income  shall  be chargeable to tax under  the  head  "other sources" if it does not come under any other head of  income mentioned in the Act.  Section 12 therefore does not  assist the contention of the Revenue that professional income which cannot be brought to tax under s.  10  may  be  so   brought under s. 12. For  these reasons we have come to the conclusion  that  the receipts were not chargeable to tax either under the head of professional income or under the residuary head, It was  not said  that  the receipts might be brought to tax  under  any other  head.  In our opinion, therefore, the  receipts  were not chargeable to tax at all. We accordingly allow these appeals with costs. (1) 57 I.T.R. 306:[1965] 3 S.C.R. 619. 302 Bachwat,  J.  These appeals raise the question  whether  the professional  income of an assessee whose accounts are  kept on a cash basis, received by him during his life-time  after the discontinuance of the profession and after the close  of the accounting year in which the profession is discontinued, is  assessable to income-tax either under S. 10 or under  S. 12 of the Indian Income-tax Act, 1922. The assessee was practising as an advocate in the High Court of  Bombay till March 1, 1957 when he was appointed a  Judge of  the High Court at Bombay.  His method of accounting  was cash,  and his accounting year was the Calendar  year.   The relevant  orders of the Income-tax Officer suggest that  his accounting year was the financial year ending on March 3  1, but  it is now the common case of both the assessee and  the Revenue that the accounting year was the Calendar year. In  the assessment year, 1958-59, the assessee was  assessed to  income-tax in respect of the entire professional  income received  by  him, during the Calendar  year  including  the income  received  after March 1, 1957.  It is  not  disputed that  the assessee was liable to pay tax in respect  of  the income  received by him between March 1, 1957  and  December 31, 1957. During  the Calendar years, 1958 and 1959, the assessee  re- ceived the sums of Rs. 30,570 and Rs. 15,240 respectively on account  of  professional fees for work done by  him  before March  1,  1957.  In the returns for the  assessment  years, 1959-60 and 196061, the assessee included the aforesaid  two sums as his income from profession.  By his orders dated May 30,  1960  and  October 26,  1960,  the  Income-tax  Officer subjected  the  aforesaid two sums to tax treating  them  as receipts  of fees for professional services rendered in  the earlier  years  and  as  part of the  total  income  of  the assessee.  On April 4, 1961, the assessee filed two revision petitions before the Commissioner of Income-tax, Bombay City 1, under S. 33-A contending that the aforesaid two sums were no part of his total income of the relevant accounting years and were included in his returns through an error and asking for  their  exclusion  from his assessable  income  for  the relevant assessment years.  By a common order dated  January 29,  1963, the Commissioner of Income-tax held that the  two sums  were assessable on general principles and also on  the authority  of  the  decision in Re.  B.  M.  Kamdar(1),  and rejected  the  revision  petitions.  From  this  order,  the assessee now appeals to this Court by special leave. The  first question is whether the two sums were  assessable

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to  tax  under  s. 10 of the Indian  Income-tax  Act,  1922. Section 10(1) provides:               "The tax shall be payable by an assessee under               the  head  Profits  and  gains  of   business,               profession  or  vocation’ in  respect  of  the               profits and gains of any business,  profession               or vocation carried on by him."               (1)   [1946] I.T.R. 10.                                    303 Section 10 applies to the profits and gains of any business, profession   or  vocation  carried  on  by   the   assessee. Considering  that the subject-matter of charge is income  of the  previous year, the expression "carried on by him"  must mean  "carried  on by him at any time  during  the  previous year."  To  attract s. 10(1), it is not essential  that  the assessee  should have carried on the  profession  throughout the entire previous year or at the time when be realised the outstanding  professional  fees; it is  sufficient  that  he carried on the profession at any time during the  accounting year  in which he realised his fees, see in re.   Kamdar(1). On the other hand, the section does not apply to the profits and gains of any profession which was not carried on by  the assessee at any time during the previous year. Our  attention was drawn to several decisions of this  Court dealing  with  s. 10(2)(viii) and the second proviso  to  s. 10(2)(vii).   In  Commissioner  of  Income-tax  v.   Express Newspapers  Ltd(1)  and Commissioner of Income-tax  v.  Ajax Products Ltd.(1), this Court held that one of the  essential conditions of the applicability of the second proviso to  s. 10(2)(vii) is that during the entire previous year or a part of  it  the  business  shall have been  carried  on  by  the assessee.   In the Express Newspapers Ltd. case(1), at  page 259, Subba Rao, J. said:               "Under  section  10(1),  as  we  have  already               pointed  out, the necessary condition for  the               application   of  the  section  is  that   the               assessee  should have carried on the  business               for some part of the accounting year." These  observations support the conclusion that the  profits and  gains  of a business or profession are  not  chargeable under  s.  10(1),  if  the assessee did  not  carry  on  the business or profession during any part of the previous year. In   the  instant  case,  the  assessee   discontinued   his profession  as soon as he became a Judge of the Bombay  High Court.  He could not carry on the profession after he became a  Judge.  It is not possible to hold that he  continued  to carry  on  the  profession merely because  he  continued  to realise his outstanding fees.  It follows that the  assessee did  not carry on his profession as an advocate at any  time during  the Calendar years, 1958 and 1959.  The receipts  of the outstanding professional fees during 1958 and 1959  were not  profits  and gains of a profession carried  on  by  the assessee during those years, and were not assessable to  tax under S. 10(1). Section  13 provides that except where the proviso  to  that section is applicable, the income for the purposes of s.  10 must be computed in accordance with the method of accounting regularly   employed.  by  the  assessee.   Section  13   is mandatory.  In the instant (1) [1946] I.T.R. 10. (2) [1964] 53 I.T.R. 250, [1964] 8 S.C.R. 189. (3) [1965] 55 I.T.R. 741: [1965] 1 S.C.R. 700. 304 case, as the assessee employed the cash method of accounting and as the proviso to s. 133 did not apply, his professional

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income during 1957 and the previous accounting years had  to be  computed on the cash basis.  The Revenue had no  option in  the  matter.  Had the assessee  adopted  the  mercantile method  of  accounting. the entire income  of  the  assessee arising from his profession before March 1, 1957 would  have been included in his assessable income for those years,  and no portion of it would have escaped assessment under s.  10. But  as the assessee adopted the cash method of  accounting, the outstanding fees could not be included in the assessment for  those years.  The question is whether this  income  now escapes taxation altogether.  There is no doubt that by  the method of accounting employed by the assessee, he has chosen to  treat  the  receipts  in  question  as  income  of   the accounting years, 1958 and 1959. The  Revenue  claims that the income was assessable  to  tax under  s.  12.  On behalf of the  assessee,  Mr.  Palkhiwala submitted  that  (1) the income from the defunct  source  of profession, though not assessable under s. 10, continued  to fall under the head covered by     s.  10 and the  residuary head under s. 12 was not attracted, (2) s.   12       covers residual heads and not residual receipts, and (3) that if   s. 12  were applied to this income, the assessee  would  suffer injustice because the deductions properly allowable under S. 10  in respect of the income could not be allowed.   On  the other  ban(], Mr. Sarjoo Prasad appearing on behalf  of  the Revenue submitted that the receipts in question were part of the total income of the assessee for the relevant accounting years  chargeable under s. 3 read with ss. 2(15) and 4.  and as the income was not exempt from tax and as it did not fall under  S. 10 or any other head, it must be assessed  to  tax under  s.  12.   In support of his  contention,  Mr.  Sarjoo Prasad  relied  upon  the  opinion  of  Chagla,  J.  in  re. Kamdar(1) at p. 58. By s. 3 read with ss. 2(15) and 4, income-tax is charged for every year in accordance with and subject to the  provisions of  the Act in respect of the total income of  any  previous year of the assessee computed in the manner laid down in the Act,  including all income, profits and gains from  whatever source derived. which accrue or arise or are received or are deemed to accrue, arise or to be received as provided by  S. 4(1) and which are not exempted under S. 4(3).  The  crucial words  in  s.  4 are "from whatever  source  derived".   The nature  of the source does not affect the  chargeability  of the  income.   Section  6  sets  out  the  heads  of  income chargeable  to  tax.   The  several  heads  are  dealt  with specifically  in  ss.  7,  8,  9,  10  and  12.   Income  is classified   under  different  heads  for  the  purpose   of computing  the  net  income under  each  head  after  making suitable  deductions.  Income, profits and gains from  what- ever source derived, included in the total income fall under one (1)  [1945] I.T.R. 10. 305 head or the other, If any part of the total income does  not fall  under the specific heads under ss. 7, 8, 9 and 10,  it must  fall  under the residuary head under s.  12.   Section 12(1) provides:               "The tax shall be payable by an assessee under               the head Income from other sources’ in respect               of  income,  profits and gains of  every  kind               which may be included in his total income  (if               not  included  under  any  of  the   preceding               heads)." Income,  profits and gains of every kind are covered  by  s. 12,  provided two conditions are satisfied, viz.,  (1)  they

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are  not included under any of the preceding heads  and  (2) they  may  be included in the total income of  an  assessee. Any  income chargeable under a specific head can be  charged only  under  that  head and no part of that  income  can  be charged again under s. 12.  But any part of the total income of  the  assessee not assessable under a  specific  head  is assessable  under  the  residuary head  covered  by  s.  12. Referring  to similar words in s. 12(1), as it stood  before its  amendment  in 1939, Lord Russell  observed  in  Probhat Chandra Barua v.    The King Emperor(1):-               "These  words appear to their Lordships  clear               and  emphatic, and expressly framed so  as  to               make the sixth head mentioned in s. 6 describe               a true residuary group embracing within it all               the  sources  of  income,  profits  and  gains               provided   the  Act  applies  to  them   i.e.,               provided  that  they accrue or  arise  or  are               received  in  British India or are  deemed  to               accrue  or arise or to be received in  British               India,  as provided by s. 4, sub-s.  (1),  and               are  not  exempted by virtue of s.  4,  sub-s.               (3)." Referring to the words "income, profits and gains" in s. 12, Lord Russell said in Gopal Saran Narain Shigh v.  Income-tax Commissioner(1):                "The  word  ’income’ is not  limited  by  the               words  ’profits’ and ’gains’.  Anything  which               can properly be described as income is taxable               under the Act unless specially exempted.  " And  Sarkar, J. said in Sultan Brothers v.  Commissioner  of Incometax(1):               "Section 12 is the residuary section  covering               income,  profits and gains of every  kind  not               assessable  under any of the  heads  specified               earlier." Section 6 gives the short label of each head, but the actual contents  of the several heads are to be found in ss. 7,  8, 9, 10 and 12.  Take the head "(iii) Income from property" in s.  6.  Section 9 shows that only income from  buildings  or lands  appurtenant  thereto, of which the  assessee  is  the owner, falls under this head.  Income from other properties, e.g., land not appurtenant to (1)  [1930] L.B. 57 I.A. 228,239. (2) [1915] L.R. 62 I.A. 207,213. (3) [1964] 51 I.T.R. 351, 357: [1964] 5 S.C.R. 80. 306 building  is  outside the purview of this head  and  fall  s under  s. 12.  Again. take the head "(iv) Profits and  gains of  business,  profession or vocation." Section  10  on  its proper construction applies only to the profits and gains of a  business,  profession  or  vocation  carried  on  by  the assessee during any part of the previous year.  Profits  and gains  of business, profession or vocation of  the  assessee which  was  not  carried on by him during any  part  of  the previous  year  being  outside the purview  of  s.  10  must necessarily fall under s. 1-2. Mr.  Palkhiwala conceded that the receipts in question  were the  income  of  the assessee.  He also  admitted  that  the income was not exempt from tax under sub-s. (3) of s. 4. The income   was  received  by  the  assessee  in  the   taxable territories   during  the  relevant  previous  years.    The receipts are, therefore, liable to be included in the  total income.   We have found that this income cannot be  included under  s. 10.  It is common case that it cannot be  included under any other head.  It follows that the income must  fall

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under the residuary head specified in s. 12. Section  12  dealing with the residuary head  is  framed  in general  terms and in computing the income under this  head, requires  deduction  of any expenditure (not  being  in  the nature  of  capital  expenditure) incurred  solely  for  the purpose of making or earning such income.  As the income  in the  present case falls under s. 12, the allowance  for  the necessary  expenditure must necessarily be given under  this head  and  not  under s. 10.  There is no  question  of  the assessee  suffering  an  injustice by not  being  given  the allowances  under s. 10.  He cannot be given the  allowances under s. 10, as the income does not fall under that section. Counsel  rightly submitted that s. 12 covers residual  heads and  not residual receipts.  In this connection,  he  relied upon  Salisbury  House Estates Ltd. v.  Fry(1).   That  case decided that the various Schedules of the English Income-tax Act, 1918 are mutually exclusive, Sch.  A must be applied to the  class  of income falling under it and no  pay  of  this income  is chargeable under Sch.  D. This decision  received the approval of this Court in United Commercial Bank Ltd. v. The Commissioner of Income-tax(2).  On the principle of this decision,  if a particular income is taxable as income  from property under s. 9, any residual receipt from the  property in excess of the annual value assessed under s. 9 cannot  be assessed  again  as  residual  income  under  s.  12.   This principle  has  no application to the case before  us.   The relevant professional income of the assessee is not  taxable under  s. 10 or under any other specific head, and it  must, therefore, be taxed tinder s. 12.  This is not a case  where the  revenue has taxed or can tax the incomeunder s. 10  and again seeks to tax the income under s. 12. Mr. Palkhiwala next referred us to several English decisions in  support  of  his contention that  the  receipts  of  the professional (1) 15 T.C. 266. (2) [1958] S.C.R. 79. 307  income  after the discontinuance of the profession are  not assess- a ble  to  income-tax.   Rowlatt, J. in  Bennett  v. Ogston(1) said:               "When  a trader or a follower of a  profession               or  vocation  dies or goes  out  of  business-               because  Mr. Needham is quite right in  saying               the  same  observations apply  here-and  there               remain  to be collected sums owing  for  goods               supplied during the existence of the  business               or  for services rendered by the  professional               man  during  the  course of his  life  or  his               business,  there is no question  of  assessing               those  receipts  to Income Tax; they  are  the               receipts  of:  the business while  it  lasted,               they  are  arrears  of  that  business,   they               represent  money which was earned  during  the               life  of  the  business and are  taken  to  be               covered by the assessment made during the life               of  the business, whether that assessment  was               made on the basis of bookings or on the  basis               of receipts."  These  bservations  received the approval of the  House  of Lords  in Purchase v. Stainer’s Executors(1) and  Carson  v. Cheyney’s  Executors(1).  In’ the last two cases, the  Court held that the professional earnings of a deceased individual realised  by  his  executor were not  liable  to  income-tax either under Case II or under Cases III and VI of Schedule D of  the English Income-tax Act, 1918. in Cheyney’s  case(1),

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the  professional earner had died in one of  the  assessment years  and  part of his earnings had been  realised  by  his executor during the same assessment year.  It is remarkable, however, that in Cheyney’s case(1) at p. 265 Lord Reid said:               "In my opinion, the ground of judgment in this               House  in  Stainer’s case  was  that  payments               which  are the fruit of professional  activity               are  only taxable under Case 11 and cannot  be               taxed  under  Case  III, even when  it  is  no               longer possible when they fall due to tax them               under   Case  II,  and  when  looked   at   by               themselves and without regard to their  source               they  would  fall within Case Ill.  I  am  not               sure  that I fully appreciate the reasons  for               the decision, but I have no doubt that is what               was  decided, and I am bound by that  decision               whether I agree with it or not." The  rule in Stainer’s case(1), rests on  shaky  foundations and  has been subjected to criticism even in  England.   The rule is subject to exceptions in England, and as pointed out by  Jenkins,  L. J. in Stainer’s case(1) is subject  to  the application  of  Rule 18 of the General Rules.   The  Indian Income-tax Act, 1922 is not pair material, the scheme is  in many respects different from the scheme of the English  Act, and  I  think  that the rule in  Stainer’s  case(1)  is  not applicable to the Indian Act.  In England, the tax is on the I  current  year’s  income, the Revenue has  the  option  to assess the (1) 15 T.C. 374,378. (3) [1960] 38 T.C. 240. (2) [1951] 32 T.C. 367. 308 income on the accrual basis, and even if it chooses to  make an  assessment on the cash basis, the entire accrued  income might  be considered to be covered by the  assessment.   But under  the  Indian law, the tax is on  the  previous  year’s income, the Revenue has no option to assess the income  from a  business  or  profession  on the  accrual  basis  if  the accounts  of the as are regularly kept on the,  cash  basis, and  the  assessment  on the cash  basis  cannot  cover  the receipts   in  the  subsequent  years.   Moreover,   it   is impossible to say under the Indian law that all receipts  of outstanding  professional fees after the retirement  of  the assessee from profession escape taxation.  Beyond doubt, the receipt  of  the professional fees in  the  accounting  year during  which  the  assessee carried on  the  profession  is assessable under s. 10, though at the time of the receipt he has retired from the profession. The decision in The Commissioner of Income-tax, Bombay  City 1, Bombay v. Amarchand N. Shroff(1) is entirely distinguish- able.   In that case, this Court held that the income  of  a deceased  solicitor received by his heirs subsequent to  the previous year in which he died was not liable to be assessed to income-tax under a.   24B  as his income in the hands  of his heirs, and apart from s.  24B, no assesment can be  made in  respect  of a person after his death.   In  the  instant case, the assessee is alive,. and no question of  assessment under s. 24B arises, Neither  side  relied  on  s. 25(1),  and,  in  my  opinion, rightly.  That sub-section gives an option to the Revenue to make an assessment in the year of the discontinuance of  the business  or  profession on the basis of the income  of  the period between the end of the previous year and the date  of the  discontinuance in addition to the assessment,  if  any, made  on the basis of the income of the, previous year,  The

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sub-section  does  not preclude the Revenue from  making  an assessment  on  the  professional  income  under  any  other section of the Act. Our attention was drawn to s. 176(4) of the Income-tax  Act, 1961, which provides:               "Where  any profession is discontinued in  any               year  on  account  of  the  cessation  of  the               profession by, or the retirement or death  of,               the person carrying on the profession, any sum               received  after  the discontinuance  shall  be               deemed  to be the income of the recipient  and               charged  to  tax accordingly "in the  year  of               receipt, if such sum would have been  included               in  the total income of the  aforesaid  person               had    it    been   received    before    such               discontinuance." (2) [1963] Supp.  I S.C.R. 690. 309 The  note on cl. 178 of the Income-tax Bill,  1961  suggests that this sub-section was passed with a view to give  effect to  the  following  recommendations  of  the  Direct   Taxes Administration  Enquiry Committee in paragraph 7.81 (11)  of its Report:               "There  is no provision in the law at  present               to  assess  the  income,  received  after  the               cessation  of practice or retirement or  death               of  the  assessees carrying on  a  profession,               like,    Solicitors.    Advocates,    Doctors,               Consulting Surveyors.  Engineers etc.  The law               should  be amended in such a way that even  on               the  assessee’s cessation of his  vocation  or               retirement from the profession or death income               received  after such cessation, retirement  or               death would be taxed." The  Report  does not purport to base, its  opinion  on  any judicial decision.  The assumption in this Report that there is  no provision in the Indian Income-tax Act to assess  the entire  income  received after the retirement  or  death  of professional  men cannot be wholly correct, because,  beyond doubt,  the  income  received after  the  retirement  in  an accounting  year  during  any part  of  which  the  assessee practiced  his profession is assessable under s. 10 and  the income received after his death by his legal  representative during   the  previous  year  in  which  he  practised   his profession   is  assessable  in  the  hands  of  the   legal representative under s. 24B.  Moreover, the Report is silent on the question of the assessment of the outstanding profits of business realised by a trader after the discontinuance of his  business.   In  this case, we are  concerned  with  the interpretation  of the Indian Income-tax Act, 1922, and  the question  is whether we can take into account the  provision of the later Act in interpreting the earlier Act.  In Craies on Statute Law, 6th Edn, p. 146, the law is stated thus:               "Except   as   a   parliamentary   exposition,               subsequent Acts are not to be relied on as  an               aid  to the construction of prior  unambiguous               Acts.  A later statute may not be referred  to               interpret  the clear terms of an  earlier  Act               which  the  later  act does  not  amend,  even               although both Acts are to be construed as one,               unless the later Act expressly interprets  the               earlier  Act;  but  if  the  earlier  Act   is               ambiguous,  the later Act may throw  light  on               it, as where a particular construction of  the               earlier Act will render the later incorporated

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             Act in. effectual." This passage is fully supported by the decision of the House of Lords in Kirkness v. John Hudson & Co.(1). In  Hariprasad Shivshankar  Shukla  v. A. D. Divikar(2),  this  Court  gave effect to the (1) [1955] A.C. 696: [1955] 2 All.  R.R. 845. (2) [1957] S.C.R. 121,140. 310 plain   meaning   of  an  unamended  Act,  though   on   the interpretation  given by it a later amendment  would  become largely unnecessary, and quoted with approval the  following passage in the opinion of Lord Atkinson in Ormond Investment Co.  Limited  v. Betts(1): "An Act of  Parliament  does  not alter  the law by merely betraying an erroneous  opinion  of it."  I do not find any ambiguity in the clear terms of  ss. 2(15),  3,4,6,10,  12 and 13 of the Indian  Income-tax  Act, 1922  and  the later Act cannot be used as an aid  to  their construction.  On the construction of the Indian  Income-tax Act, 1922, 1 hold that the profession income of an  assessee whose  accounts  were kept on a cash basis received  by  him during   his  lifetime  after  the  discontinuance  of   the profession  and  after the close of the accounting  year  in which  the  profession was discontinued,  is  assessable  to income-tax under s. 12 of the Act. In the result, the appeals are dismissed.  There will be  no order as to costs.                            ORDER In accordance with the Judgment of the majority the  appeals are allowed with costs. (1) [1928] A.C. 143,164. 311