Section 4(1)

Section 4(1) — the law in short

What the courts have decided on section 4(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• ITO v Ch. Atchaiah Supreme CourtHelps department
  The Department assessed my share of a gain in my own hands years ago and has now issued a notice seeking to assess the same gain in the hands of the association. Has it not already exercised its option?
  There is no such option under the Income-tax Act, 1961. The Supreme Court held that unlike section 3 of the Indian Income-tax Act, 1922 — which expressly allowed the officer to charge either the association of persons or the members individually — section 4 read with section 2(31) of the 1961 Act contains no words giving any such choice, and that the officer 'can, and he must, tax the right person and the right person alone'. It follows that the fact that a wrong person has been taxed on an income does not preclude the Assessing Officer from taxing the right person on it, whichever course is more beneficial to the Revenue; the person wrongly taxed has his own remedies. Where Parliament intended to give a discretion under the 1961 Act it said so expressly — the Court pointed to section 183 as the example.
• Statutory position — partial integration: agricultural income is exempt under the Income-tax Act but is aggregated for RATE purposes, and that aggregation is enacted by the annual Finance Act, not by the Income-tax Act CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  My client's agricultural income is exempt, so why has the system charged tax at a higher rate on his non-agricultural income, and where in the Act is that written?
  It is not written in the Income-tax Act at all, and that is the point. Section 10(1) excludes agricultural income from total income and the Income-tax Act contains no provision aggregating it; the aggregation is enacted afresh every year by section 2 of the annual Finance Act, which is the Central Act contemplated by section 4(1) of the Income-tax Act as fixing the rate. Sub-section (2) of that section applies where Paragraph A of Part I of the First Schedule applies and the assessee has, in the previous year, net agricultural income exceeding FIVE THOUSAND RUPEES in addition to total income, and the total income exceeds the basic exemption amount named in that sub-section. Where it applies, the net agricultural income is taken into account only for the purpose of charging income-tax on the total income, and the computation is: aggregate the total income and the net agricultural income and work out the tax on the aggregate at the Paragraph A rates; then increase the net agricultural income by the basic exemption sum and work out the tax on that figure at the same rates; the second amount is deducted from the first, and what is left is the tax on the total income.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.