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TMI Blog1988 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case, the Appellate Tribunal was justified in holding that the amount of interest of Rs. 55,000 received on February 23, 1970, is taxable in the financial year when the assessee returned his income for the year ending December 31, 1970 ?". The assessee is the managing director of "Sunder Shila (P.) Ltd.". He filed a return on August 22, 1973, for the assessment year 1971-72 disclosing an income of Rs. 14,614, comprising of Rs. 12,000 being the salary received from the said company, and Rs. 5,614 being the interest received from bank less Rs. 3,000 deductible therefrom under section 80L. This return was filed in his individual capacity. At about the same time, he filed a return in respect of the Hindu undivided family of which he was the karta. In Part III of this return, he stated that he had received a sum of Rs. 2,00,000 from the Nizam of Hyderabad in pursuance of and agreement dated November 3, 1969, towards liquidated damages but that the said sum belongs to him in his individual capacity, The Income-tax Officer, alerted by the said entry in Part III of the return filed by the Hindu undivided family, sought to include the said sum of Rs. 2 lakhs in the individual ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the questions referred, it is necessary to notice a few more facts. The A. P. Industrial Development Corporation Ltd., an agency of the State, had entered into a collaboration agreement with Koyo Seiko Company Ltd., and Marubeni Lida Company Ltd., Japan, for setting up a manufacturing and bearing plant. On July 23, 1964, an agreement was entered into between APIDC on the one hand, and Sri Gevarchand Jain on the other, whereunder it was agreed that a public limited company should be set up before September 1, 1964, with an authorised capital of Rs. 5 crores. The initial capital was to be in a sum of Rs. 2 crores, made up of 15,00,000 equity shares of Rs. 10 each and 50,000 preference shares of Rs. 100 each. The Andhra Pradesh Industrial Development Corporation was to subscribe 25% of shares, G. Jain and his associates, including the then Nizam of Hyderabad, were to subscribe 24% of the shares, the Japanese company was to subscribe 12% of the shares, and the balance 39% was to be offered for public subscription. Both APIDC and Jain's group were to subscribe certain amounts at certain intervals, which it is not necessary to be stated here. On the same day, an agreement was entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere held between them, which ultimately resulted in the agreement dated November 3, 1969. Under this agreement, the successor Nizam agreed to pay a sum of Rs. 2 lakhs by way of liquidated damages in full and final settlement of all the demands and claims of the assessee against the Nizam, arising from the non-implementation of the aforesaid agreement, etc. The amount was to be paid to the assessee in the manner specified in the agreement. Besides the above, a further sum of Rs. 55,000 was also to be paid by the successor Nizam towards interest on the said sum of Rs. 2 lakhs. In accordance with this arrangement, the assessee received a sum of Rs. 2,55,000 on February 23, 1970, in the form of a cheque issued by the APIDC, as contemplated by the agreement dated November 3, 1969. We shall first consider questions Nos. (3) and (4), viz., whether the sum of Rs. 2,55,000 received by the assessee on February 23, 1970, can be brought to tax for the assessment year 1971-72. The Appellate Tribunal held that it cannot be so brought to tax, on two grounds, viz., (i) the said amount must be deemed to have accrued to the assessee on the date of the agreement, i.e., November 3, 1969, which fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll outside the said accounting year/financial year. Mr. M. Suryanarayana Murthy, learned standing counsel for the Revenue, contended that, according to column 6 in the preamble to the assessment order (pertaining to the individual assessment of the assessee herein), the accounting period is shown as the period ending on December 31, 1970, which means, according to learned counsel, that the calendar year 1970 was the accounting year for the assessment year 1971-72. Learned counsel further submits that once the calendar year was adopted as the assessment year by the assessee, the same accounting year would also be taken as the previous year for other heads of income, if any, unless the assessee indicates otherwise and the Income-tax Officer accepts the same. In this case, the assessee never indicated that he wishes to have any other previous year for income arising from other heads, nor did the Income-tax Officer agree to the same. If so, learned counsel argues, the receipt of the said sum of Rs. 2,55,000 on February 23, 1970, would fall within the said accounting year adopted by the assessee. We find it difficult to agree with this submission. While it is true that in the preambl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that damages for wrongful termination of the managing directorship is not one of the grounds stated in lieu of which the said amount was paid. But, as we have said earlier, the said circumstance must necessarily have been in the contemplation of the parties. We do not, however, think that at this distance of time and when no effort has been made by the authorities under the Act to apportion the said amount it is a proper course for this court to remand the matter to apportion the said amount and to determine what part of it is relatable to the termination of the managing directorship of the assessee. In the circumstances, question No. (2) also is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. In view of our answer on questions Nos. (3) and (4) and on question No. (2) we are not inclined to go into and examine questions Nos. (1) and (5) referred to us, inasmuch as they are merely academic, in our opinion. We, therefore, decline to answer questions Nos. (1) and (5). For the above reasons, questions Nos. (2), (3) and (4) are answered in favour of the assessee and against the Revenue. There shall be no order as to costs. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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