Law: Income Tax Act, 1922

Section: 3

Law: Income Tax Act, 1922

Section: 3

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Income - Chargeable as - Assessment year 1958-59 - Assessees were partners in a firm which was engaged in money lending business and in purchasing and selling of real estate properties - On dissolution of said firm, assessees were allotted certain shares in money lending business as well as in real estates - During relevant assessment year assessees started their own money lending business and sold real estates and received sale proceed - In account of money lending business of assessee certain sums had been credited in profit and loss account as interest on moneys sent to their branches - ITO in computing income of assessees for assessment year in question treated sale proceeds as well as interest credited as revenue receipts - Whether since assessee did not sell properties in course of their trade or business of purchasing or selling of real estates which they had done as partners of erstwhile firm and had not invested those moneys either in money lending business or treated sale proceeds of their assets as stock-in-trade of their money lending business, profits realised were not revenue receipts assessable to tax - Held, yes - Whether, a mere credit entry of interest on money sent or lent to their branches pending actual receipt of interest earned on branches was not sufficient to charge unrealized interest amount so credited as income, profit or gain derived or accrued or received and, therefore, interest so credited could not be said to be interest receipt and as such part of 'income of assessees' headquarters' business - Held, yes FACTS The assessees were partners of firm which was carrying on money-lending business and purchasing and selling real estate properties. The partnership was dissolved two years prior to the assessment in question. At the time of the dissolution of the partnership, one-sixth share both in money-lending business as well as lands, house properties and rubber gardens were allotted to each of the assessees. After the dissolution of the firm, the assessees started their own money-lending business. Subsequently, the assessees sold…

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