AJIT K. SENGUPTA, J.

( 1 ) THIS reference has been made at the instance of the Commissioner of Income-tax. The question referred to this court is :"whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee's professional receipts were not assessable under Section 176 (4) of the Income-tax Act, 1961, for the assessment years 1968-69 and 1969-70 ?"

( 2 ) THE assessee, in the present reference, is Justice Ramendra Mohan Datta who has since retired as a judge of this court. The assessee received sums of Rs. 14,000 and Rs. 10,000 in the accounting years relevant to the assessment years 1968-69 and 1969-70, respectively, as arrears of professional fees from solicitors and clients for services rendered by him as a lawyer before he was elevated to the Bench in the year 1967.

( 3 ) THE Income-tax Officer found that the assessee had maintained his accounts on receipt basis, i. e. , on cash basis, and not on accrual basis. He, however, held that the sums received by the assessee as arrears of professional fees were not received before his discontinuance of the profession, although it could have been included in the total income of the assessee had it been received before such discontinuance. Hence, he was of the view that the said amount would be chargeable to income-tax in view of Section 176 (4) of the Income-tax Act, 1961 (hereinafter referred to as "the Act" ). Accordingly, he charged the same to tax in both the years.

( 4 ) ON an appeal having been preferred by the assessee, the Appellate Assistant Commissioner, by his order dated June 7, 1973, held in favour of the assessee. The Appellate Assistant Commissioner, following the decision of the Appellate Tribunal in Income-tax Appeals Nos. 2319, 2320 and 2321 (Cal) of 1969-70, held that the said amount received by the assessee is not taxable as Section 176 (4) of the Act is not applicable to the case of the assessee.

( 5 ) ON an appeal preferred before the Appellate Tribunal, the Tribunal followed its earlier decision in the case of Hon'ble Mr. Justice C. N. Laik delivered on January 22, 1972, in Income-tax Appeals Nos. 2319, 2320 and 2321 (Cal) of 1969-70, held in favour of the assessee. According to the Tribunal, Section 176 (4) of the Act creates a fiction by which the sum received after the discontinuance of the profession is deemed to be of income nature. Unless the Legislature introduces a further fiction that such income is deemed to be income from profession, it is not open to the Department to bring such receipts to charge under the head "profits and gains of business or profession". According to the Tribunal, the said income also cannot be brought under the head "income from other sources", in view of the decision of the Supreme Court in the case of Nalinikant Ambalal Mody v. S. A. L. Narayan Row, CIT [1966] 61 ITR 428.

( 6 ) THE Tribunal, on an application being made by the Commissioner of Income-tax, has made this reference on the question referred to hereinbefore.

( 7 ) LEARNED counsel for the Department contended that in view of the introduction of Section 176 (4) in the Act, the said receipts are liable to be taxed as the income of the assessee. The contention of the Revenue is that if one considers the scheme of the Act and the setting in which Section 176 (4) of the Act has been placed, it will be evident that when receipts from a discontinued profession are deemed to be income by law, the natural corollary is that they should be deemed also to be income from business or profession. Accordingly, it was contended that the receipts in question are deemed to be the income of the assessee in view of Section 176 (4) of the Act and are chargeable to tax in the relevant year.

( 8 ) ON behalf of the assessee, Dr. Debi Pal, learned counsel, relied upon the decision of the Supreme Court in Nalinikant Ambalal Mody [1966] 61 ITR 428 and submitted that the receipts of the assessee were the outstanding dues of professiona

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