MAHARAJADHIRAJ OF DARBHANGA Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) The late Maharajadhiraj of Darbhanga died on 3 July 1929, and was succeeded by the present Maharajadhiraj. The deceased at the time of his death was the owner of a very extensive money-lending business and of other business undertakings and on the death of his father the present Maharajadhiraj immediately came into ownership of these concerns, A notice had been served by the Income-tax Officer under Section 22(2), Income-tax Act, on the late Maharajadhiraj in respect of the income for the year ending on 30 September 1928, It was served upon a person who had no authority to receive it and it was accordingly cancelled and a fresh notice was served on the person who admittedly was in a position to deal with it. Time was requested of the Income-tax Officer for the purpose of making a return which time was granted. Before the extended time for making the return had expired the late Maharajadhiraj died.

(2.) Later on the Income-tax Officer purported to apply Section 26(2), Income-tax Act, and decided that under that section the present Maharajadhiraj had become liable for the tax which the Income-tax Officer assessed after a return by the present Maharajadhiraj of the income of the late Maharajadhiraj for the year ending 30 September, 1928. The return made by the present Maharajadhiraj was made together with a statement of his contention that he was not liable to be assessed in respect of this particular period of his father's ownership of the estate but he very properly supplied the necessary figures and the principal matter of the liability remained over for subsequent decision. It is that matter of liability which is raised for our decision in the form of the questions ultimately stated by the Commissioner of Income-tax. The questions which have been stated for this Court are thus formulated: (a) Does the law contemplate taxation of a dead man's income in the hands of an heir? (b) Does Section 26(2) apply to the petitioner in the circumstances of the case? And if it does apply, was there a succession in law to justify an assessment on the petitioner?

(3.) The broad matter raised in question (a) does not really arise at all and it is not necessary for us to answer it whatever the right answer may be. The really material question is involved in question (b). The main contentions are raised on behalf of the assessee upon the question as to whether Section 26(2) is applicable to the circumstances of the case.