SAIFUDDIN ALIMOHAMED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question raised on this reference is of some difficulty and complexity and the difficulty and complexity is by no means resolved by the Taxing Department taking a particular view of the law at one stage and taking a different view at another.

(2.) THE facts are few and simple. One Hydarali Hasanally died in January 1944 leaving behind him two minor daughters. He left some immoveable property and he also left behind him a business which was the business of a restaurant called the New Coronation Durbar Hotel. Mr. Justice Blagden on May 18, 1944, appointed two guardians of the two minors and he authorised the guardians to continue the business of the New Coronation Durbar Hotel and he also ordered that the guardians should collect and recover the income, rents and profits of the hotel and the immoveable properties and to pay out of the income all necessary expenses of the management of the hotel and all the collection and other outgoings in respect of the business and immoveable properties and pay certain maintenance every month for the education and benefit of the minors, and he finally ordered that after defraying all the expenses aforesaid the guardians were to deposit twice every year, viz. at the end of April and October, with the Accountant General the share of the minors in the balance of income, rents and profits from the business and the immoveable properties, and the Accountant General was to open an account in the name of the two minors and invest the moneys and keep the amount received to the credit of the two minors.

(3.) THEREFORE, we have to give proper effect to the language used by the Legislature in Section 10 and the emphasis placed by the Legislature on the fact of a business carried on by the assessee. We agree with Sir Nusserwanji on behalf of the Department that it is necessary under Section 10 that an assessee should physically or with his own hands carry on a business before he becomes liable to pay tax. He may employ an agent, he may not even be present in the place where the business is curried on, he may take a rather casual interest in his business, but that would not permit him to contend that he is not carrying on the business and he is not liable to pay tax in respect of the profits derived from that business. But an assessee must have the right to carry on a particular business before he can be called upon to pay the tax under Section 10 and the business must be carried on in the exercise of that right. If the owner of a business is incapacitated from carrying on the business and he has no right to car/y on the business, then although he may be the owner of the business he would still not be liable to pay tax under Section 10 because he is not carrying on the business. The incapacity may be caused by natural reasons or by intervention of the Court. A person may be a minor, he may be a lunatic, and as such although he may own a business or inherit a business he would be incapable in law of carrying on that business. On the other hand, the Court may intervene and deprive the owner of the right of carrying his own business and authorise someone else to carry on the business for him, in which case the person who would be carrying on the business would not be the owner but the person appointed or authorised by the Court.