Law: Income Tax Act, 1922

Section: 46,46(5A)

[Income Tax Act, 1922 (Xl of 1922)]........Section 46(5A)-Recovery of tax-Provisions of sub-section (5A) of Section 46-Whether analogous to attachment of debts in execution of decree by grarnishee notices under Order XXI, Rule 46 of the C.P.C,, 1908-Held yes-Expressions "money in due or may become due to the assessee" in sub-section (5A) of Section 46-Whether mean an existing debt either presently payable or payable at a future date Held yes-Letter of Credit opened with a bank for specified amount in favour of beneficiary-Whether creates vested right to immediate or future payment to the beneficiary upon tender of the document -Held no-Whether creates relationship of debtor and creditor between the issuing banker and the beneficiary-Held no- Whether debt due the beneficiary from the issuing banker-Held no-Notice under Section 46(5A) issued to such banker-Whether illegal and without lawful authority-Held yes-Civil Procedure Code, 1908, Order XXI, r. 46 The short legal question which arises for consideration in this case is whether by opening the L/C at the request of a customer for a specified amount in favour of a beneficiary, money is due or becomes due from the bank opening the credit to the beneficiary. The submission o Mr. Nomani, learned counsel for the petitioner is that the Income Tax Officer, the respondent No. 1 completely misconceived the meaning of a commercial L/C and particularly, the legal relationship which is created when and L/C is opened, between the opening or issuing bankers and the beneficiary of the credit, and that the impugned notices issued to the petitioner under Section 46(5-A) of Income Tax Act, 1922, treating the petitioner as a debtor from whom money became due to Towell & Co. are without lawful authority and of no legal effect. The aforesaid obligation is purely contractual and is contingent upon tender of the documents by the beneficiary in accordance with the terms of the credit. But no right to immediate payment vests in the beneficiary by the mere issue of the credit in his favour. Nor does the issue of the credit create a vested right to payment at a future date upon tender of the documents. If the paying banker or the…

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