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Writ Petition No. 1024 of 1965, decided on 30th October 1968.

Capital gains‑Not taken for determining advance tax payable‑Advance tax paid whether can be adjusted towards tax due on capital gains ‑ Indian Income‑tax Act, 1922, S. 18‑A(11), (12).

Though advance tax contemplated by section 13‑A is calculated on the income exclusive of capital gains, it can be adjusted towards income‑tax levied on the total income including capital gains which constitutes but a head of income and just like any other head of income goes into the total income of the previous year which is brought to tax by sections 3 and 4 after applying the process of assessment as to allowances and deduc tions. All that is contemplated by section 18‑A(12) is that because capital gains are not recurring in nature, they are not to be taken into account in assessing the advance tax to be paid and it is in the nature of a concession.

M. Ranganatha Sastri for Petitioner:

V. Balasubrahmanyan and J. Jayaraman for Respondent.

The short point raised by the petitioner Is whether advance Income‑tar, paid can properly be adjusted towards the tax, so it is said, referable to capital gains. The capital gains were made by the transferor of the petitioner. Originally, the assessment on the petitioner included capital gains, but, on appeal, they were eliminated on the view that the petitioner only succeeded to the business of the transferor, and not to its capital gains. This was on a construction of section 26(2), in the light of a judgment of the Supreme Court. Subsequent to the appellate order, the Income‑tax Officer adjusted the advance tax paid by the transferor towards the tax due on its capital gains.

Reference is made to section 18‑A and it is contended that, particularly in view of subsections (11) and (12), the advance tax paid can only be adjusted towards tax levied on income, and not capital gains. The advance tax contemplated by section 18‑A is no doubt calculated on the income of the previous year exclusive of capital gains. But it does not follow from it that once the advance tax is paid, it cannot be adjusted towards income‑tax levied on the total income, including capital gains. Capital gains constitute but a head of income and just like any other head of income go into the total income of the previous year, which is what is brought to tax by sections 3 and 4, after applying the process of assessment as to allowances and deduc tions. Capital gains being a species or a head of income and the tax levied being on the total income including such income, we see no objection at all to the advance tax paid being adjusted towards income‑tax levied on such total income. The whole argument for the petitioner seems to proceed on the footing that the tax levied on capital gains is a kind of tax totally different from income‑tax. That assumption is entirely incorrect.

Mr. Ranganatha Sastri argues that, if for purposes of payment of advance tax capital gains are not taken into account as directed by section 18‑A(12), it should be taken that the advance tax is meant for appropriation towards Income‑tax levied on total income exclusive of capital gains. We do not think that this result follows. All that is implied by section 18‑A(12) is that because capital gains are not a recurring income, so they are not to be taken into account in assessing the advance tax to be paid. That is in the nature of a concession and from it the proposition cannot be evolved and it does not follow that the tax on capital gains is anything other than income‑tax. The Income‑tax Officer was, therefore, well within his right in adjusting the advance tax as he did.

The petition is dismissed with costs. Counsel's fee Rs. 250.

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