THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY I, BOMBAY vs. AMARCHAND N. SHROFF, BY HIS HEIRS AND LEGAL REPRESENTATIVES

CIVIL APPEAL No. 15/1962Supreme Court1962 INSC 29923 October 1962Bench: 3 JudgesAuthor: J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH S.C.R. SUPREME COURT REPORTS12 pages
AI SummaryDismissed

What were the facts?

The assessee, Amarchand N. Shroff, a partner in a firm of solicitors, died on July 7, 1949. His heirs and legal representatives received certain amounts out of the firm's outstanding realisations for work done up to his death. These realisations were made in the assessment years 1950-51 to 1954-55. The Income-tax Officer initiated proceedings under Section 34 of the Indian Income-tax Act, 1922, to assess these amounts in the hands of the legal representatives under Section 24B of the Act. The Appellate Assistant Commissioner quashed assessments for years subsequent to 1950-51 due to invalid notices. The Appellate Tribunal held that Section 24B was not applicable to income received after the death of Amarchand, and that such receipts were capital in nature. The High Court answered the reference in favour of the assessee.

What did the Supreme Court hold?

The Supreme Court held that the words "or any tax which would have been payable by him under this Act if he had not died" in Section 24B(1) of the Indian Income-tax Act, 1922, are restricted to income received by the deceased person before his death and income received after his death by his heirs and legal representatives in the "previous year" which would have been assessed as income of the deceased if he had not died. The provisions of Section 24B do not extend to tax liability of the estate of a deceased person beyond the previous year or account year in which that person dies. Apart from Section 24B, no assessment can be made in respect of the income of a person after his death. Since the income in question was received after the expiry of the previous year in which Amarchand died, it was not liable to be taxed as the income of Amarchand in the hands of his legal representatives in the several years of assessment. The Court affirmed the High Court's decision, dismissing the appeals. The operative direction was the dismissal of the appeals.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, sums received by the heirs and legal representatives of the deceased Amarchand N. Shroff out of the firm's outstanding realisations after his death were assessable to income-tax in their hands for the assessment years 1950-51 to 1954-55, under Section 34(1)(b) read with Section 24B of the Indian Income-tax Act, 1922. Assessee's contentions: The amounts received after the death of Amarchand were not income of the deceased that could be taxed in the hands of the legal representatives under Section 24B. Section 24B does not extend to tax liability beyond the previous year in which the person dies. The receipts were capital in nature and not revenue receipts. The assessee relied on the High Court's decision which held that Section 24B had no application to the case and the amounts were not taxable. The assessee also referred to Ellis C. Reid v. Commissioner of Income-tax, Bombay and Wallace Brothers & Co. Ltd. v. Commissioner of Income-tax, Bombay City. Revenue's contentions: The Revenue argued that under Section 24B(1), the amounts received by the heirs and legal representatives after the death of Amarchand should be deemed, by a fiction of law, to be income received by Amarchand and thus liable to tax. The Revenue relied on the interpretation of Section 24B(1) and cited re Breenati Usharani Shoudhurani.

Which sections of the Income-tax Act were involved?

Section 24B,Section 34,Section 22(2),Section 23(4)

AI-generated summary — verify with the full judgment below

i S.C.R. SUPREME COURT REPORTS 699 .Penal Code and, therefore, the courts have rightly held .that the appellant had committed the offence of theft. No other point was pressed before us. In the result the appeal fails and is dismissed. Appeal dismissed. THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY I, BOMBAY v. AMARCHAND N. SHROFF, BY HIS HEIRS AND LEGAL REPRESENTATIVES (]. L. KAPUR, M. HIDAYATULLAH and J. C. SHAH, JJ.) Income ]'ax-Liability to tax of income of deceased person- S'Uch income in hands of the legal representatives-Income of the previo'Us year-Indian income-tax Act, 1922 (11 of 1922), s. 24.B. Sub-section (~) of s. 24B of the Indian Income-tax Act, 1922, provided that where a person dies his heirs and legal representatives ate liable to pay out of the estate of the deceased the tax assessed as payable by the deceased or any tax which would have been payable under the Act by the deceased if he had not died. A who was one of the three partners in a firm of solicitors died on July 7, 1949, and thereafter the partnership was carried on by the other two partners till December 1, 1949, when R, son of A, joined the firm as the third partner. After t

The order continues below.

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