Law: Income Tax Act, 1961

Section: 57

(a) Income-tax----Other sources---Deductions---Interest received by Administrator --­General---Expenditure incurred to file suit to recover amount with interest--­Expenditure was deductible---Indian Income Tax Act, 1961, S. 57. (b) Income-tax---Income---Assessability---Estate taken -over by Administrator-General under order of Court---Administrator-General under statutory duty to follow cash system of accounting---Interest, which had accrued but was not received by Administrator-General could not be assessed in his hands. IC died in August, 1968. After her death, the estate was taken over by the Administrator-General of Madras under an order made by the High Court. The High Court ordered that possession be taken on August 28, 1968. Probate was granted on March 26, 1970. The Administrator-General filed a nil return on the ground that the entire income of the estate was held for charitable purposes. The Income-tax Officer found that the income arose between the period August 14, 1968, 'and March 31. 1969. where the letters of administration were obtained only on May 5, 1970. Under the will the disbursements to charities and other legacies could take place only after taking charge of the assets and completely disposing of them. Since this process was still going on even on the date of the assessment, the entire income of the estate was assessable in the hands of the Administrator­ General. IC had advanced amounts to N and C. Suits were filed by the Administrator-General against N and C. A sum of Rs.28,082 was spent for that purpose. The Income-tax Officer assessed him on interest receipts of Rs.47,539 and Rs.18,915 on the basis of receipt from C and Rs.26,538 on the basis of accrual. The claim for expenses of Rs.23,850 on account of stamp duties and Rs.2,384 being other expenses was disallowed by the Income-tax Officer. The Tribunal held that the Administrator-General had to maintain accounts on receipt basis and he could not follow the mercantile system of accounting, which was followed by the deceased and since the assessee had not received interest of Rs.26,538 actually during the year in question, the amount could not be assessed; and that he was entitled to…

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