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TMI Blog1971 (5) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... style of Messrs. Hira Lal & Sons, Meerut. It instituted a suit against the Government claiming damages for breach of contract. The trial court decreed the suit for Rs. 68,454. In 1950, the deacretal amount was realised by the assessee. It was credited by it in its account books in a separate account called the amanat khata. The interest earned on the amount in that account was also credited in the same account. The assessee offered the interest in its return of income for the purposes of income-tax, and was in fact taxed on that income until the assessment year 1960-61. The total interest so taxed for the period ending with that assessment exceeded Rs. 1,00,000. Meanwhile, against the decree of the trial court, the Government had preferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amounts to the Government and, moreover, the assessee had not made any entry in its account books regarding any such liability. The assessee then filed a second appeal before the Appellate Tribunal. The appeals have been allowed on the finding that the assessee had become liable to refund the decretal amount along with the interest under section 144 of the Code of Civil Procedure and that the liability for the refund accrued during the relevant previous years and further that the accrual of the liability was not dependent upon the assessee making any entry in its account books. The case is now in reference before us. The first question is whether the liability of the assessee to repay the amount recovered by it from the Government toget ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trial court. In Bhagwant Singh v. Sri Kishen Das, the Supreme Court explained the content of the doctrine of restitution embodied in section 144 of the Code, and in Binayak Swam v. Ramnesh Chandra Panigrahi elaborated : "At the time of the application for restitution, therefore, the appellant was entitled to restitution, because on that date the decree in execution of which the properties were sold had been set aside. We are of opinion that the appellant is entitled to restitution notwithstanding anything which happened subsequently as the right to claim restitution is based upon the existence or otherwise of a decree in favour of the plaintiff at the time when the application for restitution was made. The principle of the doctrine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee conceded in the execution proceedings that he was liable to pay to the Government interest at the rate of 6% on the amount received by it from the Government under the trial court decree. The assessee followed the mercantile system of accounting, and it is now settled law that that system "brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed". (Keshav Mills Ltd. v. Income-tax Officer and Commissioner of Income-tax v. Gajapathy Naidu). It was not a contingent liability. It was a liability which had accrued. It was a liability which was admitted by the assessee, at least in the amount quantified at the rate of 6%. And it is in that measure that the Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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