COMMISSIONER OF INCOME TAX Vs. KAMESHWAR SINGH

JUDGEMENT

(1.) This reference is made at the instance of the assessee by the Income-tax Appellate Tribunal under Section 66(1) of the Indian Income-tax Act.

(2.) The first objection relates to a sum off Rs. 10,497 which the Income-tax authorities included as taxable income for the assessment year 1947-48. The assessee owned textile mills known as Navsarj Mills which had closed down several years past Babu Gokhulchand who was the proprietor of the firm Sital Prasad Kharag Prasad managed the textile mills on behalf of the assessee. Gokhulchand. sold away the machinery of the mills and a sum of Rs. 13,363 was due from Gokulchand to the Maharaja on this account. During the accounting year the Maharaja realised as a result of litigation between him and Gokulchand. a sum of Rs. 25,530 which included the principal, law charges expenses as also interest. Out of the amount of Rs. 25,530 realised by the assessee the Income-tax Officer calculated the interest to be Rs. 10,497. The assessee claimed that this amount should be treated as accretion to capital because the mill business having been closed : the sale proceeds of the machinery could not be profits arising from that business. The contention was rejected by the Income-tax Appellate Tribunal who held that the price of the machinery was only Rs. 13,000 and odd, which was deducted from the amount decreed to the Maharaja. After making other deductions, the interest was computed to be Rs. 10,497 which the Income-tax Appellate Tribunal held, was taxable in the hands of the assesses

(3.) A second objection was also preferred by the Maharaja with respect to the 1947-48 assessment. It appears that the Maharaja had made advance payment of tax under Section 18A of the Indian Income-tax Act. Under the provisions of this section, the Maharaja was entitled to interest at the rate of 2 per cent on the amount deposited. A sum of Rs. 41,813/6/- was thus due to the Maharaja as statutory interest on the amount of tax he had paid in advance. It was claimed by the Maharaja that this amount was not taxable but the objection was overruled by the Income-tax Appellate Tribunal.