COMMISSIONER OF INCOME TAX Vs. S V M AHMED JALALUDEEN

JUDGEMENT

(1.) THE four assesses in this case were partners in a firm called, S. V. M. Mohamed Jamaludeen and Brothers, Ceylon. But the partners were residing at Kilakarai in Ramnad district. On December 12, 1946, a company in the name and style of S. V. M. Mohamed Jamaludeen and Brothers (Ceylon) Ltd. was incorporated and this company took over the assets and liabilities of the firm as on January 19, 1947. THE assessees were allotted shares in that company in proportion to their interest in the partnership. THE assessees were in receipt of salary and dividends from the company. For the assessment years 1947-48 to 1953-54 the assessees submitted their returns as individuals disclosing the receipt of salary and dividends form the company. But the Income-tax Officer did not accept the changed state of affairs and invoking the provisions of section 44D of in existence. In this view, the assessment was made on the firm as if it had continued to exist for the assessment years 1947-48 and 1953-54.

(2.) THERE were appeals by the firm. The Tribunal took the view that section 44D was not applicable by its order dated March 9, 1957, reversing the order of the Appellate Assistant Commissioner who had confirmed the order of assessment. At the instance of the revenue a reference in Tax Case No. 38 of 1958 was made to this court on the question of applicability of section 44D. When this reference was pending, the assessments for the assessment year 1960-61 were completed by the Income-tax Officer by the his order dated December 30, 1960. In this order the Income-tax Officer proceeded on the basis that section 44D was applicable. The decision of the Tribunal holding that section 44D was not applicable was upheld by this court by judgment dated 26th September, 1961. The Income-tax Officer was then informed in the year 1962 by the Commissioner of Income-tax that no further appeal would be filed to the Supreme Court against the decision of the High Court and that the judgment of the High Court had been accepted. Consequent on the decision that section 44D had no application, the Income-tax Officer felt that there was no share income to be adopted as arising out of the firm and that the amount of salary, bonus and dividends as returned by the assessee required to be assessed. He accordingly issued a notice under section 147(b). The assessee filed returns as required under the notice and in section D of the return the amounts received as salary, bonus and dividend were shown.