Deeming fictions and deemed income detailed analysis
Legal fiction cannot be extended any further and has to be limited to the area for which it is created. Hon’ble Andhra Pradesh High Court in the case of Addl. CIT v. Durgamma P. (1987) 167 1TR 776 (AP) held that it is not possible to extend the fiction beyond the field legitimately intended by the statute. The Hon’ble court was dealing with the provisions of sec. 171(1) of the I.T .Act in the context of which it was held that joint family shall be deemed to continue for the limited purpose of assessing cases of joint families which have been hitherto assessed as such. It Is not possible to extend that fiction to other cases.
Similar view was taken by the Hon’ble Kerala High Court in the case of CIT v. Kar Valves Ltd. (1987) 168 ITR 416 (Ker.) wherein it is held that legal fiction is limited to the purpose for which they are created and could not be extended beyond that legitimate frame, Hon’ble Kerala High Court was dealing with the case where assessee sought to take advantage of sec.41(2) by submitting that if liabilities are not liquidated and outstanding are not collected, then business could be deemed to continue.
The Hon’ble Allahabad High Court in the case of Controller of estate Duty v. Krishna Kumar Devi (1988) 173 ITR 561 (All) held that in interpreting the legal fiction the court should ascertain the purpose for which it was created 2nd after doing so assume all facts which are logical to give effect to the fiction,
Hon’ble Supreme Court in CIT v. Mother India Refrigeration Pvt. Ltd. (1985) 155 ITGR 711 (SC) held that legal fictions are created only for some definite purpose and they must be limited to that purpose and should not be extended beyond that legitimate field.
In CIT v, Bharani Pictures (1981) 129 ITR 244 (Mad,) it is held that legal fictions are for a definite purpose and are limited to the purpose for which they are created and should not be extended beyond its legitimate field. The statutory fiction introduced in one enactment cannot be incorporated in another enactment.
You May Also Refer:
- Webinar on Deeming Fiction in Income Tax Act by CA. Adv. Kapil Goel
- Gujarat High Court Grants Bail in matter of wrongful ITC Availment
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