Law: Income Tax Act, 1922

Section: 15

Income-tax Act (XI of 1922)----S. 15-BB---Where an assessee was engaged in taxable and non-taxable activities and the transaction of transfer of goods from one unit to another was made then it would be deemed that the different departments were separate entities for the purpose of taxation and doctrine of mutuality would not apply-- Assessee, in such circumstances, should have credited to its account to taxable unit the average market price of goods which it had transferred to its tax-free unit and not its cost price---Complexities and intricacies involved in taxation laws high-lighted. Where a person is engaged in taxable anal non-taxable activities and the transaction of transfer of goods from one unit to another is made then it would be deemed that the different departments are separate entities for the purpose of taxation. Thus the doctrine of mutuality shall not apply in such circumstances. The assessee should have credited to its account of taxable unit the average market price of goods, which it had transferred to its tax-free unit and not its cost price. The taxation laws are special laws in their nature and purport, therefore the general concepts of law are to be applied in taxation matters with reference to the particular provisions of the taxation laws for the time being in force. The taxation laws have been aptly remarked as the most turbulent laws on the statute book. Some very simple concepts and propositions assume very complex and complicated position when examined in particular and special circumstances obtaining in the background of various tax provisions. Similarly, the proposition that no man can make profit out of himself and that no person can be buyer and seller at the same time, is generally accepted principle of trading and commerce but when the point is examined in the facts of the case where the assessee is engaged in two different activities, one taxable and other non-taxable and the income profits and gain of both the activities are to be determined separately, as income from taxable activity is to be subjected to the levy of tax, while income from non-taxable activity has to be allowed exemption, the proposition becomes very…

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