9911796707
TMI Blog1948 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ested certain finding of fact of the Tribunal at this stage. We cannot review the Tribunal's order. The case is cased on the findings of fact arrived at by the Tribunal. 2. The assessee is a businessman. He has many activities. he has a rice mill, a lime kiln and brick kiln. He also deals in timber. There was one set of books for all these activities. He has been having dealings with a person called Yeshwant Vinayak Dharkar. He used to borrow from Dharkar. In 1932 the assessee mortgaged certain properties with Dharkar for the balance due to him for a sum of ₹ 17,500. The interest payable to Dharkar was allowed as an admissible item of expenditure under Section 10(2)(iii) of the Indian Income-tax Act in computing the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pay income-tax . On appeal by the Income-tax Officer before the Tribunal it held that the amount of ₹ 14,059-6-6 was a revenue receipt and not exempt under Section 4(3)(vii) of the Indian Income-tax Act. The total interest allowed to the assessee on the mortgage under Section 10(2)(iii) was in excess of the sum of ₹ 14,059-6-6. 3. The question of law that arises, therefore, is:― Whether the amount of ₹ 14,059-6-6 is income within the meaning of Section 2(6C) of the Indian Income-tax Act and liable to tax notwithstanding Section 4(3)(vii) of the Act? R. J. Kolah with Sunkersett, for the assessee The Advocate-General, for the Commissioner JUDGMENT CHAGLA, C.J.― The assessee is a busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in respect of a certain amount, for which there was a liability on the assessee, that liability is discharged and the amount is not claimed from the assessee, then to that extent the discharge of the liability must be looked upon as a revenue receipt and income on which the assessee must be taxed. In our opinion that is a wholly fallacious argument. Once the Income-tax department accepts the mercantile system of accounts keeping and taxes an assessee on the accrual and not on the payment basis the department is not concerned as to how the liability incurred by the assessee is in fact discharged. He may discharge that liability by actual payment or he may discharge it by getting a remission from his creditor. But that is a question entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21, that account being re-opened for that purpose. Both those contentions were rejected by the Court. The House of Lords took the view that the account having been once settled as on the 30th of June, 1921, and the liability of the appellant company fixed, that could not be re-opened merely because a creditor had remitted a part of the debt. With regard to the other contention that the remission should be looked upon as a trading receipt Lord Thankerton at p. 592 stated as follows:― The appellant's alternative contention which was not seriously pressed by the Attorney-General, is equally unsound, in my opinion. I am unable to see how a release from a liability, which liability has been finally dealt with in the preceding accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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