KIRTIKAR M K Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this application, M. K. Kirtikar, the assessee, requires the Appellate Tribunal to refer to the High Court some four questions of law, which are said to arise out of the Tribunal's order in I. T. A. No. 5713 of 1951 -52. Inasmuch as, in our opinion, a question of law does arise out of the aforesaid order we hereby draw up a statement of the case agreed to by the parties and refer it to the High Court of Judicature at Bombay under section 66(1) of the Indian Income -tax Act. The assessee's representative wants us to make the reference application and the Commissioner's reply thereto a part of the case which we see no reason to do. Total

(2.) THE assessee was an employee of Dadajee Dhackjee and Co., Bombay, at the relevant time, In S. Y. 2000 (30th October, 1943, 17th October, 1944) he was paid by Dadajee Dhackjee and Co., (hereinafter referred to as the firm) commission at the rate of 1 per cent of its turnover in its colour department. As a matter of fact, three employees were paid commission at the rate of 3 per cent of the turnover. The total commission paid to these three employees amount to Rs. 84,540. The Income -tax Officer assessing the firm in respect of its profits of S. Y. 2000 disallowed a sum including Kirtikar. The business of the firm was taken over as a going concern with its assets and liabilities by a private limited company called Dadajee Dhackjee and Co. Ltd. with effect from the first day of S. Y. 2001. Under section 25(4) of the Act after computing the income of the firm the Income -tax Officer held that tax was not payable. A copy of the Income -tax Officer's order dated 30th August, 1948, in respect of the assessment of the firm for the year 1945 -46 is annexure 'A' and forms part of the case.

(3.) THE question of law that, therefore, arises is; 'Whether the assessee is entitled to the relief granted by the notification referred to above' ? when we turn to the assessment order, there is no doubt that there has been an assessment of the total income at Rs. 4,11,084, and in this assessment Rs. 56,360 is included as income which should bear tax. Once the assessment is made, the income becomes liable to pay income -tax under section 3, according to the provisions of the Income -tax Act. As to what the actual amount of tax is is a mere matter of arithmetical computation. The rate is laid down in the Finance Act and the rate is to be applied to the total income. It is difficult to understand how this position is altered by the fact that the assessee got exemption under section 25(4). In its very nature an exemption can only be claimed provided there is a liability to pay tax. It is only when an income is charged to tax under the provisions of the Act that the question arises whether under any other provisions of the Act the income is liable to be exempted from payment of the tax, and therefore the mere fact that exemption was granted to the assessee does not mean that the income is respect of which exemption was granted was not assessed or charged to tax.