SOHANLAL G SANGHI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under S. 66(1) of the Indian INCOME TAX ACT, 1922, at the instance of the assessee. The assessee has been assessed in the status of an individual. We are here concerned with the asst. yr. 1956 -57, the relevant previous year being the financial year ending 31st March, 1956. The assessee derived income from various sources including salary for the services rendered by him to the Sanghi Brothers, Indore, a private limited company, and business. The first question relates to certain special allowance received by the assessee from the Sanghi Bros. in the year of account, in accordance with the resolution dt. 10th Oct., 1951, of the board of directors of Sanghi Bros. Limited, and the second question relates to a sum of Rs. 29,500 received by the assessee under an agreement of 21st April, 1956, from Shri Jagannath Dhand. It would be convenient to state the facts relating to each question separately.

(2.) NOW , the resolution of the board of directors of Sanghi Bros. Limited of 10th Oct., 1951, is in the following terms :

(3.) MR . Mehta, learned counsel for the assessee, has reiterated the same contention of the assessee before us. In support of his contention, he has referred us to certain observations of the Madhya Pradesh High Court in dealing with the reference arising out of the assessment of Sanghi Bros. for the said assessment year. According to Mr. Mehta, the Tribunal was in error in including the said amount of Rs. 8,400 in the total income of the assessee. We find it difficult to accept the contention of Mr. Mehta. Total income has been defined in Sub -S. (15) of S. 2 of the IT Act as "total amount of income, profits and gains referred to in Sub -S. (1) of S. 4 computed in the manner laid down in this Act." The preamble to S. 4(1) provides : "Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived." The sources are enumerated in S. 6 and salary is one of the heads of income. Sub - S. (3) of S. 4 provides for exclusion of income, profits or gains falling within the clauses enumerated in its sub -cls. (i) to (xxii). Sub -cl. (vi) relates to a special allowance received by an employee. Material part of Sub -S. (3) is in the following terms :