| Case ID |
2de1e4a3-3731-410f-a740-1dbe2ed5bde3 |
| Body |
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| Case Number |
CIVIL APPEAL No. 1395 OF 1966 |
| Decision Date |
Apr 06, 1967 |
| Hearing Date |
|
| Decision |
The Supreme Court held that the receipt of Encumbered Estate Bonds by the assessee during the previous year amounted to receipt of cash in that year, not in the subsequent year when the bonds were sold. The Court affirmed that the difference between the face value of the bonds and the principal amount due represented taxable income. The ruling emphasized that for an assessee maintaining cash basis accounts, the receipt of assets in satisfaction of a debt constitutes income. The decision underscored that income is deemed to be received when the bonds were received, not deferred until their realization in cash. |
| Summary |
In the landmark case of Raja Mohan Raja Bahadur v. Commissioner of Income Tax, the Supreme Court of India addressed critical issues surrounding the accrual of income under the Income-tax Act. The case involved a Hindu undivided family (HUF) engaged in money lending, which received Encumbered Estate Bonds as part payment for a debt. The Court ruled that the receipt of these bonds constituted income for tax purposes, emphasizing that income is recognized upon receipt of the bonds, not upon their sale. This decision clarified the principles governing income recognition for tax purposes, particularly for entities maintaining cash basis accounts. The case is significant in understanding how tax laws apply to the recognition of income from non-cash assets, establishing a precedent for similar cases in the future. Key takeaways from this case include the importance of recognizing income upon receipt of assets, the relevance of the method of accounting used by the taxpayer, and the implications of substituting a debtor's liability with a government-issued bond. The ruling affirms that tax authorities must consider the actual receipt of assets in determining taxable income, marking a pivotal moment in tax law jurisprudence. |
| Court |
Supreme Court of India
|
| Entities Involved |
Not available
|
| Judges |
J.C. SHAH,
S.M. SIKRI,
V. RAMASWAMI
|
| Lawyers |
Bishan Narain,
Govind Saran Singh,
T.V. Viswanatha Iyer,
R. Ganapathy Iyer,
S.P. Nayyar,
R.N. Sachthey
|
| Petitioners |
Raja Mohan Raja Bahadur
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1967 SLD 516,
(1967) 66 ITR 378
|
| Other Citations |
Raja Mohan Raja Bahadur v. CIT [1963] 49 ITR 801,
Cross v. London & Provincial Trust Ltd. [1938] 21 Tax Cas 705 (CA.)
|
| Laws Involved |
Income-tax Act, 1961,
Income-tax Act, 1922
|
| Sections |
5,
4,
13
|