9911796707
TMI Blog2001 (4) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee's income. Counsel for the Revenue relied on the decision of the Supreme Court in the case of CIT v. T. V. Sundaram Iyengar and Sons Ltd. [1996] 222 ITR 344, and submitted that the decision of the Tribunal runs counter to the law laid down by the Supreme Court in that decision. That decision was rendered by the apex court in the background of the facts as observed by the court: "There is no dispute that the deposits in the case before us were received from trade parties who had not made any claim for repayment of the balance. The Income-tax Officer has pointed out that the amount had arisen as a result of trading transaction and had a character of income.... The Commissioner of Income-tax (Appeals) found that the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit and loss account. The moneys had arisen out of ordinary trading transactions. Although the amounts received originally were not of income nature, the amounts remained with the assessee for a long period unclaimed by the trade parties. By lapse of time, the claim of the deposit became time-barred and the amount attained a totally different quality. It became a definite trade surplus. Atkinson J. pointed out that in Tattersall's case [1939] 7 ITR 316 (CA) no trading asset was created. Mere change of method of bookkeeping had taken place. But, where a new asset came into being automatically by operation of law, commonsense demanded that the amount should be entered in the profit and loss account for the year and be treated as taxable inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y credit balances written back to the profit and loss account by the assessee during the previous year relevant for the assessment year under consideration", in favour of the Revenue. The question referred to us in this case is almost on identical terms. The first question reads thus: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the sundry credit balances of the customers written back in the profit and loss account were not taxable as income?" The similarity in the questions framed is not a matter of surprise, as the assessee here is an associate company of the company which was a party to the decision of the Supreme Court in the case of CIT v. T. V. Sundaram Iy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 41 (1) of the Act would apply, as the sine qua non for the application of section 41 of the Act was that the assessee should have obtained a benefit by virtue of remission or cessation of the trading liability. We are now confronted with two rulings of the apex court which are apparently contradictory. In this situation, we must prefer the one rendered by a larger Bench. It has been held by the Supreme Court that decisions of larger Benches bind even Benches of smaller strength within the Supreme Court. Moreover, the decision rendered in the earlier case by the three-judge Bench was with reference to a question which is almost identical to the one we are required to consider. The court held therein that when the assessee itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HH of the Act in respect of miscellaneous income and interest on deposits treating them as receipts derived from industrial undertaking. This court in the case of Fenner (India) Ltd. v. CIT (No. 2) [2000] 241 ITR 803, has held that scrap materials which had a saleable value, and which were a by-product of the manufacture of other rubber articles, when sold and resulted in an income to the assessee had a direct nexus with the industrial undertaking, and that the profit from the sale of scrap materials was eligible for deduction under section 80HH of the Act. In the light of that judgment, we must hold that in respect of the miscellaneous income earned from the sale of scrap, the assessee was entitled to the benefit of section 80HH of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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