SHETH AMBALAL HIMATLAL vs. COMMISSIONER OF INCOME-TAX

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ITR/135/1984HC GujaratGJHC24011809198424 December 1998Author: HONOURABLE MR. JUSTICE R.BALIA,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court declined to answer the question referred to it. The assessee's counsel informed the court that the decree, in satisfaction of which the amounts were received, ultimately became final in 1981 through a Supreme Court decision. The assessee conceded that he was liable to include the said amount in his income for the relevant previous year of the Supreme Court's judgment. However, due to other pending Supreme Court proceedings, the amount could not be included in the relevant assessment year. Given that there was no dispute about the ultimate liability to include the amount in income, the assessee did not press for an answer to the referred question, allowing it to be included in the income of AY 1967-68 and 1968-69 respectively. The court returned the reference without answering the question.

What were the facts?

The assessee, Sheth Ambalal Himatlal, is challenging an order of the Income Tax Appellate Tribunal (Ahmedabad Bench 'C') for Assessment Years (AY) 1967-68 and 1968-69. The dispute concerns the taxability of amounts totaling Rs. 1,18,000 (received on 16.02.1966) and Rs. 57,630 and Rs. 14,542 (received on 05.05.1967). These sums were recovered towards a civil court decree for a debt previously claimed as bad and allowed as a deduction. The Income Tax Officer (ITO) sought to add these receipts as income under Section 41(4) of the Income-tax Act, 1961. The assessee contended that since appeals against the decree were pending and the amounts were under a receiver's control, the benefit had not been finally received. The assessee was unsuccessful before the Tribunal.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the money recovered from the debtor was income of the assessee under Section 41(4) of the Income-tax Act, 1961? Assessee's Contention: The assessee argued that the amounts received were not finally his income as appeals against the civil court decree were pending, and the money was under a receiver's control. He contended that until the title vested finally, Section 41(4) could not be invoked for a sum already allowed as a deduction. Revenue's Contention: The judgment does not record specific arguments made by the revenue. However, the ITO sought to add the receipts as income under Section 41(4), implying the revenue's position was that the conditions for the section were met.

Which sections of the Income-tax Act were involved?

Section 41(4)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 135 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE R.BALIA. and MR.JUSTICE A.R.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? 1 to 5: No -------------------------------------------------------------- SHETH AMBALAL HIMATLAL Versus COMMISSIONER OF INCOME-TAX -------------------------------------------------------------- Appearance: MR MANISH J. SHAH for MR JP SHAH for Petitioner MR MANISH R BHATT for Respondent No. 1

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CORAM : MR.JUSTICE R.BALIA. and MR.JUSTICE A.R.DAVE Date of decision: 24/12/98

ORAL JUDGEMENT (per R. Balia, J.)

On two separate reference applications for A.Y. 1967-68 and 1968-69 one consolidated statement of case has been submitted by the Income Tax Appellate Tribunal Ahmedabad Bench 'C' at the instance of the assessee and following question of law has been referred to us for opinion arising out of tribunal's order in I.T.A. Nos. 2267 & 2268/Ahd/72-73. "Whether, on the facts and in the circumstances of the case, the tribunal was right in law in holding that the money recovered from the debtor was income of the assessee u/s 41(4) of the Income-tax Act, 1961?"

2.

The facts in brief are that on 16.2.66 the assessee had received a sum of Rs. 1,18,000 and on 5.5.67 the assessee had received two sums, Rs. 57,630 and 14,542. The first payment relates to A.Y. 1967-68 and the other two payments have been received during the previous year relevant to A.Y. 1968-69. These amounts were received towards satisfaction of a decree of the civil court passed in favour of the assessee and in respect of debt which has already been claimed by the assessee as bad in earlier previous year and the same has been allowed. The ITO sought to add these receipts byway of the income of the years in question u/s 41(4) of the Income-tax Act as it stood at the relevant time. The assessee contested the addition, inter alia, on the ground that appeal against the decree was pending in higher courts and the amount which has been received by the assessee had been placed in control of a receiver. Therefore, according to him, until appeals are decided and the title does not vest finally in the assessee, no such amount or benefit has been received by him finally relating to a sum already allowed as deduction in earlier assessment year, so as to invite operation of sec. 41(4). The assessee has been unsuccessful until tribunal in his contention.

3.

At the time of hearing it has been pointed out by learned counsel for the assessee that ultimately the decree in satisfaction of which the aforesaid amounts had been received became final in 1981 by a decision of the Supreme Court and the assessee was, on his own contention, liable to include the said amount in the income of the previous year relevant to the year of the judgment of the Supreme Court. However, because of some other pending proceedings in the Supreme Court, the same could not be included in the relevant assessment year and as there is no dispute about ultimate liability of the said amount to be included in the income of the assessee, he, in the circumstances, does not press for answer to the question referred by allowing it to be included in the income of A.Y. 1967-68 and 1968-69 respectively.

In view of aforesaid discussion, we decline to answer the question referred to us and return the reference. There shall be no order as to costs.

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