B M KAMDAR Vs. STATE

JUDGEMENT

(1.) THIS is a reference under Section 66 (1) of the Indian Income-tax Act, 1922, and comes to us direct from the Commissioner under the option given to the assessee by the 1940 Act. The reference arises out of an assessment to income-tax upon the assessee for the assessment year 1939-40 in respect of the accounting year previous, which in this case is the calendar year 1938.

(2.) THE assessee was assessed to income-tax by an assessment order dated March 23, 1939, in a total sum of Rs. 34,731, made up as the assessment order shows of income from four sources, namely salary (director's remuneration), profession, interest and a one-third share from the estate of a Mr. Kamdar. THE item in dispute is Rs. 12,302, which, in the assessment order, is described as : "profession-Recoveries from outstandings during calendar year 1938 as per bill book.

(3.) THE industry of counsel, to whose clear and able arguments we are much indebted, has not discovered any decision under the Indian Income-tax Act as to the outstanding fees which come in after the discontinuance of the practice by retirement of a professional man who keeps his books on a cash basis. In spite of Section 25 of the Act, to which I will refer later, it appears to have been assumed by the Income-tax authorities that such fees are liable to be brought to tax in the subsequent year. To quote from the opinion of the Commissioner of Income-tax in this case : "a sum which clearly represents income from a profession would escape assessment merely because he has chosen to maintain his accounts on the cash basis.