COMMISSIONER OF INCOME-TAX, BOMBAY vs. M/S. SHREE GOVERDHAN LTD. BOMBAY

CIVIL APPEAL No. 17/1967Supreme Court[1968] 2 S.C.R. 73109 January 1968Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, VISHISHTHA BHARGAVA B9 pages
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What were the facts?

The assessee, M/s. Shree Goverdhan Ltd. (a public limited company), had two sources of income: its own business and a share in a partnership. The company's accounting year ended on September 30th annually. The partnership's accounting periods for the assessment year 1951-52 ended on November 30, 1950, and March 31, 1951. The Income-Tax Officer included the assessee's share of profits from the partnership for these periods in the assessment year 1951-52. The assessee objected, arguing this income accrued after its own accounting year ended on September 30, 1950. The High Court had previously ruled in favor of the assessee for the assessment year 1951-52. The Revenue appealed this decision.

What did the Supreme Court hold?

The Supreme Court held that the assessee's share of profits from the partnership for the period ending March 31, 1951, should be included in the assessable profits of the company for the assessment year 1951-52 and treated as part of the distributable profits for the purpose of Section 23A(1) of the Act. The Court reasoned that under Section 2(11) of the Act, an assessee can have different previous years for different sources of income, and these varying previous years should be aggregated. The income from the partnership, though its exact amount was ascertained later, had accrued to the assessee by March 31, 1951, as the liability was certain and only quantification remained. This principle was supported by the decision in Commissioners of Inland Revenue v. Gardner Mountain & D'Ambrumenil Ltd. The Court set aside the High Court's judgment for the assessment year 1951-52 and allowed the appeal.

What were the issues?

1. Whether the share of profits from the partnership, which accrued during accounting periods ending after the assessee company's own accounting year (September 30, 1950), should be included in the assessee's income for the assessment year 1951-52 for the purpose of Section 23A of the Indian Income-tax Act, 1922. Assessee's Contention: The income from the partnership accrued after the assessee's accounting year ended on September 30, 1950. Therefore, it could not be considered for the assessment year 1951-52, which related to the accounting year ending September 30, 1950. The assessee also contended that the public were substantially interested, making Section 23A inapplicable. Revenue's Contention: The Revenue maintained that the income from the partnership should be included in the assessee's income for the assessment year 1951-52. The judgment does not explicitly detail the Revenue's arguments regarding the 'public interest' contention, but it is implied they contested it.

Which sections of the Income-tax Act were involved?

Section 2(11),Section 23A,Section 23A(1),Section 26-A,Section 66(1)

AI-generated summary — verify with the full judgment below

A B c D E F G H COMMISSIONER OF INCOME-TAX, BOMBAY v. M/S. SHREE GOVERDHAN LTD. BOMBAY January 9, 1968. (J. C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.] 731 Indian Income-tax Act, ,1922, ss. 2(11) ood 23A-Accounting ,vear of company ending on September 30, every year-Colnpany a partner in a firm-Accounting periods of firm for 1951-52 A.Y. ending on November 30, 1950 and March 31, 1951-Company's annual general meeting held on May 17, 1951-Company's shore of income from partnership whether to be Included in its income for 1951-52 A.Y. for purpose of s. 23A.

The assessee-a public limited company, entered into a partnership on April 20, 1950 with another firm, and thus had 1wo sources of income, (i) from its own business and (2) from the shares of the partnership business.

The Income-tax Officer included the shares of profit of the assessee from the partnership business up to November 30, 1950 and up to March 31, 1951 in the assessment of the assessment year 1951-52. The assessee objected, contending that this income accrued after the ~ccounting year of the assessee which ended on September 30, 1950, and at i~ general m<:eting held on May 17, 1951, the asses

The order continues below.

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