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TMI Blog1966 (4) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... their accounting year from the 1st February of a year to the 31st January of the following year. In the course of the previous year of the assessee, with which we are concerned, they were informed by the managing agents that they would forgo the office allowance due to them from the assessee for the period from 1st February, 1948, to the 31st January, 1950. The amount thus remitted amounted to Rs. 1,80,000. The last three months of the period indicated by the managing agents were covered by the previous year of the assessee. The preceding twenty-one months of the period for which also the remission was granted by the managing agents appertained to two previous accounting years of the assessee during which the balance-sheets included as a tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the sum of Rs. 1,57,500 being the amount forgone by the managing agents was chargeable as the assessee's income for the assessment year 1951-52 ? We have not referred to the facts relating to the first question as, during hearing of the case, learned counsel for the revenue conceded that the loss on capital was rightly calculated at Rs. 42,150 by the Tribunal. The first question is, therefore, answered accordingly. The real controversy between the parties is in regard to the second question. It was contended for the revenue that the sum of Rs. 1,57,500 shall have to be treated as a refund made by the managing agents who had received the entire office allowance due to them at the rate of Rs. 7,500 per month during the two previous accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount would have been paid already as office allowance due to the managing agents and then a part of it or the whole was returned by way of a refund to the assessee-company during the current accounting year, that would have been a trading receipt or a revenue receipt, and would have been included in the total income ; but, the accounting system being mercantile and the amount shown thus under the head " miscellaneous receipt ", being only a remission of a previous liability, the Tribunal was right, in our view, not to include it as a revenue receipt for the purpose of total assessable income. Learned counsel for the revenue contended that there is no difference in principle between an account maintained on cash system and another on mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile system and received remissions of their liability (which they had already shown in their previous trading accounts) from their creditors. One of those cases, which will be very apt for our reference, is Mohsin Rehman Penkar v. Commissioner of Income-tax. There, the mortgagor assessee maintained his account on accrual basis. Every year, he debited to his profit and loss account the amount of interest due to the mortgagee for the mortgage loan. At a time when the total dues of the mortgagee by way of interest came to over Rs. 29,000, he paid only Rs. 15,000 in full discharge of instalment due to that time. The question arose whether the balance of Rs. 14,000 and odd, which was remitted by the mortgagee creditor, should be included in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in the previous accounting year. In our view, the facts of the Bombay case are very much similar to the facts in the instant case. There, it was a trading liability on account of mortgage. Here, it was a trading liability on account of the office allowance payable to the managing agents. There, a part of the liability was remitted ; in our case, the whole of it was forgone. In that view, that decision will apply on all fours to the present case. The result, therefore, is that the second question will be answered in the negative and in favour of the assessee. In other words, the sum of Rs. 1,57,500, which had been forgone by the managing agents, was not chargeable as the assessee's income for the assessment year 1951-52. The reference is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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