COMMISSIONER OF INCOME TAX Vs. JAMES ANDERSON
LAWS(BOM)-1954-8-9
HIGH COURT OF BOMBAY
Decided on August 25,1954

COMMISSIONER OF INCOME TAX Appellant
VERSUS
JAMES ANDERSON Respondents


Referred Judgements :-

J N DUGGAN VS. COMMISSIONER OF INCOME TAX BOMBAY CITY [REFERRED TO]



Cited Judgements :-

GOWRI TILE WORKS VS. COMMISSIONER OF INCOME TAX [LAWS(MAD)-1956-9-6] [REFERRED TO]
SHAHDARA DELHI SAHARANPUR LIGHT RAILWAY CO LTD VS. INCOME TAX OFFICER [LAWS(CAL)-1986-11-14] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. WALJI DAMJI [LAWS(BOM)-1955-9-91] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. AMARCHAND N SHROFF [LAWS(BOM)-1958-10-1] [REFERRED TO]
COMMISSIONER OF INCOME TAX BOMBAY CITY VS. AMARCHAND N SHROFF [LAWS(BOM)-1959-10-2] [REFERRED TO]


JUDGEMENT

- (1.)ONE Henry Ganon, who used to be assessed as a resident in British India, left India in 1944 and died in the United Kingdom on 13 -5 -1945, leaving a will dated 18 -11 -1942. The National Bank of India in England, who were the executors named in the will, were granted probate of the will by a competent Court in the United Kingdom. The executors granted a power -of -attorney to one James Anderson (the assessee) to obtain letters of administration in respect of the estate of the deceased in British India. The assessee applied to the High Court, Bombay, under Section 241 of the Indian Succession Act, for letters of administration with the will annexed, and the same were granted to the assessee.
(2.)IN the course of the winding up of the estate of Henry Ganon in British India, the assessee sold shares and securities belonging to the deceased for the purpose of distributing the assets amongst the legatees. The sales realised more than the cost price and the excess of the sale price over the cost price was treated by the Income -tax officer as a capital gain. For the assessment year 1947 -48 the capital gain was computed under Section 12B of the Indian Income -tax Act, 1922, at Rs. 20,13,738 and for the assessment year 1948 -49 it was computed at Rs. 1,51,963.
The assessee appealed to the Appellate Assistant Commissioner of Income -tax, contending 'inter alia' that the Capital Gains Tax Act was 'ultra vires' the Indian Legislature and that the assessee was not liable to tax under Section 12B read with Section 24B of the Act, as the assets were not sold by the deceased Ganon but by the executors who were not beneficially interested in the sale. The appeal was dismissed and the assessee appealed to the Income -tax Appellate Tribunal, contending (1) that the law imposing the tax on capital gains was 'ultra vires', (2) that Section 24B of the Act did not apply and (3) that the capital gain was saved by the third proviso to Section 12B(1) of the Act. The Tribunal did not accept the first two contentions of the assessee but accepted the third contention and directed the Income -tax officer to delete from the incomes the capital gains made on the sale of shares and securities.

(3.)THE Tribunal referred the following questions of law to the High Court:
(i) Whether the sale of the shares and securities by the administrator of the estate of the late Mr. Ganon is not a sale for the purposes of Section 12B(1) in view of the third proviso to Section 12B(1) of the Indian Income -tax Act? (ii) If the answer to question No.1 is against the administrator, (a) whether the law imposing a tax on capital gains is 'ultra vires' and (b) whether the excess realised by the administrator on the sale of shares and securities is liable to tax on the footing that it is a capital gain in the hands of the administrator of the estate of the late Mr. Ganon? Chagla, C.J.: - A very short question arises on this reference as to the proper interpretation of the third proviso to Section 12B(1) of the Indian Income -tax Act. The assessment years are 1947 -48 and 1948 -49, and the assessee is the administrator of the estate of one Henry Ganon. Henry Ganon died on 13 -5 -1945, having left a will dated 18 -11 -1942, and probate was issued of this will to the National Bank of India in England as the executors. The National Bank gave a power -of -attorney to the assessee and the assessee applied to the Court under Section 241 of the Indian Succession Act and obtained letters of administration with the will annexed.



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