1967 (7) TMI 24

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..... e Commissioner of Income-tax, U.P., Lucknow, by the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad (hereinafter referred to as "the Tribunal"). The question referred to this court for its opinion reads: "Whether, on the facts and in the circumstances of the case, the Tribunal acted rightly in holding that the sum of Rs. 64,020 was not assessable as income of the assessee in the assessment year 1956-57?" The assessee is a Hindu undivided family and the reference relates to the year 1956-57 for which the previous year is the year ending on March 31, 1956. It is clear from the statement of the case submitted by the Tribunal that the assessee was maintaining its accounts on cash basis. For the assessment year 1956-57 the only .....

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..... hat, inasmuch as the effect of the compromise decree was to terminate the relationship of debtor and creditor between the assessee and Messrs. M.K.M.O. Sugar Mills (Private) Ltd., the debt inclusive of the interest was satisfied and there was thus a constructive payment of the interest. Mr. Raja Ram Agrawal's contention on the other hand is that the debt was not actually wiped out and it continued to exist though in the name of the sons. He contended that it was clearly a case of substituted security. Mr. Raja Ram has placed reliance on the following cases : (1) Commissioner of Income-tax v. Maharajadhiraja Kameshwar Singh, (2) Raja Raghunandan Prasad Singh v. Commissioner of Income-tax, (3) Commissioner of Income-tax v. Raja Bahadu .....

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..... 64,020 could not be assessed in the hands of the assessee. We do not agree with the learned counsel. The law does not require that there should be an actual physical transaction and inasmuch as the debt liability of Messrs. M.K.M.O. Sugar Mills (Private) Ltd. came to an end and the debt of the assessee stood fully satisfied, it must be held that there was constructive payment of Rs. 64,020. We, therefore, find no substance in the contention of the learned counsel. For the reasons mentioned above we would answer the question referred to us in the negative in favour of the department and against the assessee. We assess a sum of Rs. 200 by way of costs of these proceedings in favour of the department and we fix the fee of the learned counsel .....

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