| Case ID |
2c66a612-5762-41ba-9399-e61b09422106 |
| Body |
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| Case Number |
IT REFERENCE No. 73 OF 1965 |
| Decision Date |
Aug 16, 1974 |
| Hearing Date |
|
| Decision |
The court ruled in favor of the assessee, determining that the share of managing agency commission for the assessment years 1957-58 to 1960-61 was not liable to be assessed as income in the hands of the assessee. This was due to the execution of a deed of gift that transferred the right to receive the commission to the assessee's married daughters, effectively diverting the source of income before it could accrue to the assessee. The court clarified that the income had been vested in the donees absolutely, thus excluding any benefit to the donor. The ruling emphasized the principle of diversion of income by an overriding title and established that the income never reached the assessee, and therefore, could not be considered taxable income. |
| Summary |
The case revolves around the interpretation of the Income-Tax Act, specifically Section 4, concerning the diversion of income by an overriding title. Surajratan Damani, the assessee, transferred his right to receive managing agency commission to his married daughters through a deed of gift. The Bombay High Court determined that this transfer effectively diverted the income before it could accrue to the assessee, thereby excluding it from his taxable income for the relevant assessment years. This landmark ruling highlights the legal implications of income transfer and the critical distinction between the application of income versus diversion by title. The case sets a precedent for similar income tax assessments in future cases, emphasizing the legal principles surrounding the timing of income accrual and the rights of beneficiaries under a deed of gift. |
| Court |
Bombay High Court
|
| Entities Involved |
Not available
|
| Judges |
Kantawala, C.J.,
Tulzapurkar, J.
|
| Lawyers |
R.J. Kolah,
F.N. Kaka,
R.J. Joshi,
R.M. Hajarnavis
|
| Petitioners |
Surajratan Damani
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1977 SLD 985,
(1977) 106 ITR 576
|
| Other Citations |
Raja Bejoy Singh Dudhuria v. CIT [1933] 1 ITR 135 (PC),
Bell v. Gribble [1903] 4 TC 522 (CA),
CIT v. Harivallabhadas Kalidas & Co. [1960] 39 ITR 1; [1960] 3 SCR 50 (SC),
CIT v. Imperial Chemical Industries (India) (P.) Ltd. [1969] 74 ITR 17 (SC),
CIT v. Manager of Katras Encumbered Estate [1934] 2 ITR 100 (Pat.) (FB),
CIT v. Manilal Dhanji [1962] 44 ITR 876 (SC),
CIT v. D.R. Naik [1939] 7 ITR 362 (Bom.),
CIT v. Shoorji Vallbhdas & Co. [1962] 46 ITR 144 (SC),
CIT v. Sitaldas Tirathdas [1961] 41 ITR 367 (SC),
CIT v. Paterson [1924] 9 TC 163 (KB),
M.K. Brothers Private Ltd. v. CIT [1967] 63 ITR 28 (All.),
P.C. Mullick v. CIT [1938] 6 ITR 206 (PC),
Murlidhar Himatsingka v. CIT [1966] 62 ITR 323 (SC),
Nizam's Guaranteed State Railway Co. v. Wyatt [1890] 2 TC 584 (QB),
Poona Electric Supply Co. Ltd. v. CIT [1965] 57 ITR 521 (SC),
Provat Kumar Mitter v. CIT [1961] 41 ITR 624 ; [1961] 3 SCR 37 (SC),
K.A. Ramachar v. CIT [1961] 42 ITR 25 (SC),
Ratilal B. Daftari v. CIT [1959] 36 ITR 18 (Bom.),
Smyth v. Stretton [1904] 5 TC 36 (KB)
|
| Laws Involved |
Income-Tax Act, 1961
|
| Sections |
4
|