HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Nalnikant Ambalal Mody v. Commissioner of Income-tax, Bombay
Civil Appeals Nos. 731-732 of 1964
[1966] Supp. SCR 295 ·
Indian Income-tax Act, 1922: sections 3, 4, 6, 10 and 12 · Income-tax Act, 1961: section 176(4) (later provision discussed in the dissent)
Sources & disclosures includedDownload original judgment / order
3-judge bench; majority judgment delivered by A. K. Sarkar, C.J. for himself and J. R. Mudholkar, J.; R. S. Bachawat, J. dissented. · A. K. Sarkar, C.J. · J. R. Mudholkar, J. · R. S. Bachawat, J.
Assessment years: 1959-60, 1960-61
01 · Facts of the case
The assessee practised as an advocate in Bombay until his elevation to the High Court on 1 March 1957, when he ceased practice. He kept cash-basis accounts. Fees for earlier professional work remained outstanding, and he received Rs.30,570 in calendar year 1958 and Rs.15,240 in 1959, relevant to assessment years 1959-60 and 1960-61. He included the receipts in his returns, but later sought revision under section 33A on the ground that they were not taxable. The Commissioner rejected the revisions, and the assessee appealed by special leave (SCR pp.295-297, 302-303; PDF pp.1-3, 8-9).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
The majority treated the receipts as fruits of professional activity falling exclusively under the profession head in section 6. Because the assessee maintained cash accounts and carried on no profession during either receipt year, section 10 did not charge them. The mutually exclusive heads did not permit the same receipts to migrate to section 12 merely because they escaped charge under the computing provision corresponding to their true head. Their character did not change with the time of receipt or method of accounting. Bachawat, J. dissented: in his view income not assessable under a specific head could fall within the true residuary scope of section 12, and the later section 176(4) supported rather than displaced that construction of the old Act (SCR pp.297-301, 303-309; PDF pp.3-7, 9-15).
Source: Primary judgment: discussion
03 · Judicial decision
By majority, the Court allowed the appeals and held that the outstanding professional receipts were not taxable under section 12; no order as to costs was made. Bachawat, J. would have dismissed the appeals (SCR pp.301, 309-310; PDF pp.7, 15-16).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of the assessee by a 2:1 majority under the 1922 Act. The post-cessation professional fees could not be taxed under either section 10 or the residuary section 12 on the facts and accounting method before the Court (SCR pp.301, 309-310; PDF pp.7, 15-16).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: classify a receipt by its substantive source before asking whether the corresponding historical computation provision charges it. Under the majority's 1922 Act analysis, failure of that computation did not authorise reassignment to the residuary head. The dissent and later section 176(4) make this a statute-specific historical decision, not a present-law proposition (based on SCR pp.297-301, 303-310; PDF pp.3-7, 9-16).
Source: Primary judgment: reviewPoint
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Statutory scope
The majority applies the repealed Indian Income-tax Act, 1922 to cash-basis receipts for assessment years 1959-60 and 1960-61. The dissent noted that section 176(4) of the 1961 Act later expressly addressed receipts after discontinuance. This note does not state the current treatment of post-cessation professional receipts, and no comprehensive later-treatment clearance was undertaken.
Later treatment
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