Judgment

GROVER, J.: This is an appeal by certificate from a judgment of the Madhya Pradesh High Court in an Income-tax Reference. The Reference related to the assessment made on the assessee for the year 1962-63 for which the accounting period was the year ending March 31, 1962. The assessee carried on business as sole selling agent of M/s Mohanlal Hargovindas, Jabalpur. The assessee succeeded to this business on the death of her husband on or about February 17,1960. It would appear that M/s Mohanlal Hargovindas had recovered a certain amount towards sales-tax from the assessee s husband. relating to the period January 26, 1950 to March 31, 1951. In an appeal filed by the said firm, however, the Assistant Commissioner of Sales Tax remitted the sum of Rs. 24,341/- so recovered by the firm by an order dated November 31, 1960. consequently M/s. Mohanlal Hargovindas refunded that amount to the assessee by means of a draft dated October 31, 1961. This draft was received by the assessee on November 9, 1961 which fell in the accounting period. The Income-tax Officer sought to tax this amount under the provisions of S. 41 (1) of the Income-tax Act 1961, hereinafter called the Act . He did not accede to the contention of the assessee that the income, if at all, was the income of the assessee s deceased husband and not her income. The Appellate Assistant Commissioner dismissed the appeal filed by the assessee. The Tribunal acceded to the contention of the assessee that since the allowance or deduction in question had been obtained by a different assessee, namely, her husband she was not liable to pay tax on that amount under S. 41 (1) of the Act. The Tribunal was moved by the Commissioner of Income-tax for stating a case and referring the following question to the High Court:

"Whether the sum of Rs. 24,341 was liable to tax under S. 41 (1) of the Income-tax Act, 1961?"

The High Court answered the question in favour of the assessee.

Section 41 (1) is in the following terms:

"41 (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not".

As pointed out by the High Court under the general law if a trading liability has been allowed as a business expenditure and if this liability is remitted in any subsequent year the amount remitted cannot be taxed as income of the year of the remission nor can the account for the year in which the liability was allowed be reopened or adjusted. Section 41 (1) was enacted to supersede this principle but this section can apply only to the assessee. In the present case if the husband of the assessee had been alive and had received the amount which had been remitted during his lifetime he would certainly have been liable to pay tax under the provisions of S. 41 (1). But Kanhaiyalal having died and his widow being the assessee she cannot possibly be brought within the section. Section 2 (7) of the Act defines the word "assessee". The definition is very general and assessee is stated to mean a person by whom income tax or super tax or any other sum of money is payable under the Act and includes every person as mentioned in Clauses (a), (b) and (c). The assessee, in the present case, does not fall within any of those clauses. There is no specific provision in the Act under which it can be said that the assessee is a pe