Case: Commissioner of Income Tax, Bombay City I, Bombay Vs. Amarchand N. Shroff, By His Heirs &amp; Legal Representatives

s. 24B do not extend to tax liability of the estate of a deceased person beyond the previous or the account year in which that person dies. In support if his contention counsel for the Commissioner of Income-tax relied upon the scheme of the Act as given in Additional Income-tax Officer v. E. Alfred [[1962] 44 I.T.R. 442, 445.]. There is nothing said in that case which supports the contention raised by the Commissioner of Income-tax. Reliance was next placed on certain observations in a judgment of the Bombay High Court in re B. M. Kamdar [[1946] 14 I.T.R. 10.]. Those observations also are of no assistance to the Commissioner of Income tax. Kania J. (as he then was) there observed that the question whether a particular amount was income or not had nothing to do with the time of its receipt and the question of receipt was material only for the purpose of determining whether on that amount tax was to be levied under the Act in the year of assessment. That was a case where a consulting engineer discontinued his practice as such from February 15, 1938, and he received a sum of money representing the outstanding professional fees earned by him prior to the discontinuance of his practice but realised by him during the Calendar year which was the previous year. The assessee was keeping his accounts on cash basis and he contended that as he had discontinued his profession in the previous year the source had come to an end and the amounts received by him were not liable to income-tax. It was held that the income was assessable. The assessee in that case was still alive when the income was received by him and s. 24B had no application to the facts of the case.also relied on the observations of Derbyshire, C.J., in re Sreemati Usharani Shoudhurani [[1942] 10 I.T.R. 199.]. In that case the managing agent of a limited company died on May 12, 1938. At the time of his death there was a credit with the company of a sum of money on account of commission earned by him and due to him prior to the date of his death. This sum was paid after his death in the previous year 1938-39 and was sought to be taxed under s. 24B of the Income-tax Act. It was held that this income was taxable. Derbyshire C.J., said at p. 205 that the assessee who was the widow had received the salary due to her husband; that the Income-tax Officer was entitled to assess the total income of the deceased person as if the legal representatives were the assessees and the amount was liable to tax under s. 24B(1), but in that case also the amount was received by the widow in the previous year and it was earned by the deceased during the previous year.5. The correct position is that apart from s. 24B no assessment can be made in respect of the income of a person after his death. See Ellis C. Reid v. Commissioner of Income-tax, Bombay [5 I.T.C. 100.]. In that case, and that was a case before s. 24B was enacted, a person was served with a notice under s. 22(2) of the Income-tax Act but no return was made within the period specified and he died. It was held that no assessment could be made under s. 23(4) of the Act after his death. At p. 106 it was observed :-"It is to be noticed that there is throughout the Act no reference to the decease of a person on whom the tax has been originally charged, and it is very difficult to suppose the omission to have been unintentional. It must have been present in the mind of the legislature that whatever privileges the payment of income-tax may confer, the privilege of immortality is not amongst them. Every person liable to pay tax must necessarily die and, in practically every case, before the last instalment has been collected, and the Legislature has not chosen to make any provisions expressly dealing with assessment of, or recovering payment from, the estate of a deceased person".The individual assessee has ordinarily to be a living person and there can be no assessment on a dead person and the assessment is a charge in respect of the income of the previous year and not a charge in respect of the income of the year of assessment as measured by the income of the previous year. Wallace Brothers & Co. Ltd. v. Commissioner of Income-tax, Bombay City [[1948] 16 I.T.R. 240, 244.]. By s. 24B the legal representatives have, by fiction of law, become assessees as provided in that section but that fiction cannot be extended beyond the object for which it was enacted. As was observed by this Court in Bengal Immunity Co. Ltd. v. The State of Bihar [[1955] 2 S.C.R. 603, 664.] legal fictions are only for a definite purpose and they are limited to the purpose for which they are created and should not be extended beyond that legitimate field. In the present case the fiction is limited to the cases provided in the three sub-sections of s. 24B and cannot be extended further than the liability for the income received in the previous year.6. In the present case the amounts which are sought to be taxed and which have been held not be liable to tax are those which were not received in the previous year and are therefore not liable to tax in the several years of assessment. It cannot be said that they were income which may be deemed by fiction to have been received by the dead person and therefore they are not liable to be taxed as income of the deceased Amarchand and are not liable to be taxed in the hands of the heirs and legal representatives who cannot be deemed to be assessees for the purpose of assessment in regard to those years.7.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In the present case the accounts were kept on cash basis. The assessee under the Act has ordinarily to be a living person and cannot be a dead person because his legal personality ceases on his death. By s. 24B the legal personality of a deceased assessee is extended for the duration of the entire previous year in the course of which he died and therefore the income received by him before his death and that received by his heirs and legal representatives after his death but in that previous year becomes assessable to income-tax in the relevant assessmentis nothing said in that case which supports the contention raised by the Commissioner ofobservations also are of no assistance to the Commissioner of Incomethe present case the fiction is limited to the cases provided in the three sub-sections of s. 24B and cannot be extended further than the liability for the income received in the previousthe present case the amounts which are sought to be taxed and which have been held not be liable to tax are those which were not received in the previous year and are therefore not liable to tax in the several years of assessment. It cannot be said that they were income which may be deemed by fiction to have been received by the dead person and therefore they are not liable to be taxed as income of the deceased Amarchand and are not liable to be taxed in the hands of the heirs and legal representatives who cannot be deemed to be assessees for the purpose of assessment in regard to those years.