COMMISSIONER OF INCOME-TAX, UTTAR PRADESH vs. MANMOHAN DAS

CIVIL APPEAL No. 512/1964Supreme Court[1966] 2 S.C.R. 53105 November 1965Bench: 3 JudgesAuthor: K. SUBBA RAO, J.C. SHAH, S.M. SIKRI13 pages
AI SummaryDismissed

What were the facts?

The assessee, Manmohan Das, was appointed Treasurer of Allahabad Bank Ltd. for certain branches. In the previous year corresponding to assessment year 1950-51, he incurred a loss of Rs. 38,027 in performing his duties. For the assessment year 1951-52, the Income-tax Officer (ITO) refused to allow this loss to be set off against the net profit of Rs. 34,445, treating the profit as remuneration. The Appellate Assistant Commissioner confirmed the ITO's order. The Income-tax Appellate Tribunal, however, held that the remuneration was income from a profession or vocation under Section 10 of the Income-tax Act, 1922, and the loss could be set off. The High Court agreed with the Tribunal. The Commissioner of Income-tax (Revenue) appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the remuneration received by the assessee as Treasurer was not 'salaries' under Section 7 of the Act because the agreement did not establish a master-servant relationship. The Court distinguished this case from precedents like Shivnandan Sharma and Piyare Lal Adishwal Lal, noting the absence of control and supervision by the Bank over the Treasurer's work and the lack of summary determination powers for the Bank. However, the Court also found that the occupation of Treasurer could not be strictly classified as a profession or business. Nevertheless, considering the nature of duties, obligations undertaken, and the guarantee against loss, the assessee could be regarded as following a 'vocation'. Therefore, the remuneration was to be computed under Section 10, and the loss suffered in that vocation could be carried forward and set off against profits in the subsequent year. The Court also clarified that the ITO's decision in the previous year regarding carry-forward of loss was not binding on the ITO for the subsequent year's assessment under Section 24(2). The appeal was dismissed.

What were the issues?

1. Whether the income earned by the assessee as Treasurer of Allahabad Bank Ltd. fell to be computed under Section 10, Section 7, or Section 12 of the Income-tax Act, 1922, based on the interpretation of the appointment agreement? - Assessee's contention: The remuneration was income from a profession or vocation, thus taxable under Section 10, allowing for set-off of prior year losses. - Revenue's contention: The remuneration was 'salaries' under Section 7, not business income, and therefore losses could not be carried forward and set off under Section 24(2). 2. Whether the assessee could claim a set-off of the loss suffered in the preceding year (1950-51) against his profits in the subsequent year (1951-52), given he did not appeal the ITO's refusal to allow carry-forward of the loss for the 1950-51 assessment year? - Assessee's contention: The decision of the ITO in the previous year regarding carry-forward was not binding on the ITO for the subsequent year, as per Section 24(2). - Revenue's contention: The failure to appeal the 1950-51 assessment order precluded the assessee from claiming the set-off in 1951-52.

Which sections of the Income-tax Act were involved?

Section 10,Section 24(2),Section 7,Section 12,Section 66(1),Section 24(3)

AI-generated summary — verify with the full judgment below

• ' I .. ' 531 A COMMISSIONER OF INCOME-TAX, UITAR PRADESH B c D E F G H v • MANMOHAN DAS November 5, 1965 [K. SUBBA RAo, J. C. SHAH ANDS. M. S!KRI, JJ.] Income-tax Act (11 of 1922), ss. 10 and 24-Treasurer of Bank-If "vocarion"-Right of assessee to carry forward loss of one year to subse- qllent year and set off against profit-Scope of.

The respondent was appointed Treasurer of a Bank in respect of certain of its branches, sub-agencies and pay offices.

In the pre,·ious year corresponding to the assessment year 19)0-51, he suffered a loss in performing his duties as Treasurer. But the Income-tax Officer, in assess- ing the respondent to income-tax, declared that the loss could not be carried forward to the next year under s. 24(4) of the Income-tax Act, 1922, on the ground that it was not a business loss. For the assessment year 1951-52, the Income-tax Officer refused lO allow the loss to be set off against the net profit for the year and brought that amount of profit to tax as remuneration received by the respondent as Treasurer of the Bank. The order was confirmed by the Appellate Assistant Commissioner.. but. the Appellate Tribunal held that the r

The order continues below.

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