9911796707
TMI Blog1982 (4) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... . These amounts were written off and allowed in the assessment years 1948-49 and 1949-50 (wrongly noticed as 1945 in the Tribunal's order). Later, in 1950, these amounts were transferred to the Lahore branch of the bank as they were considered to be realisable there. A corresponding credit entry was made in the sundry creditors' account. The Bharat Bank Ltd. sold some of its assets to the Punjab National Bank on 10th March, 1951. The present assessee was formed out of a part of the assets of Bharat Bank Ltd. Its name was changed as above mentioned. In the year of account, i.e., year ending 31st December, 1966 (assessment year 1967-68), the assessee transferred the credit amount of Rs. 58,175 from the sundry creditors' account to the profit and loss account. It appears that the reason for the transfer was that the assets of the Lahore branch had vested in the liquidator and, as such, credit could be taken for this amount. Though the assessee contended that this amount was not taxable, the ITO taxed it under s. 41 (1) of the I.T. Act, 1961 (in short, " the Act "). Being aggrieved the assessee appealed to the AAC, who confirmed the order of the ITO. On further appeal to the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er debiting the sundry creditors' account in the year under consideration indicated that the assessee treated this amount as its income. This was at a time when the Lahore branch went into liquidation. He, therefore, submitted that the amount of Rs. 58,175 was taxable as the assessee's income under s. 41(1) of the Act. Mr. Bishamber Lal, appearing for the assessee, first urged that the finding of the Tribunal, that the income cannot be the income of the year under consideration and at best can be the income of the year 1950-51, when the amount was credited to the sundry creditors' account., is final. Therefore, no question really arose for consideration. However, in the alternative, he submitted that the conditions of s. 41(1) of the Act were not attracted. He urged that s. 41 is not a charging section but a deeming provision and should not be read as charging-fictional income. In the circumstances, he contended that a mere book entry did not constitute income; nor did the making of entries of credit in the account by themselves constitute a remission or cessation of liability. Since, admittedly, no amount had been actually received in the year of account under consideration, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt debited; it was in that year that income arose in terms of s. 10(2A) of the Indian I.T. Act, 1922 (similar to s. 41(1) of the 1961 Act). The finding of fact is final especially in view of the fact that it was sought to be challenged by the reference to questions Nos. 2 and 3 above noticed. This was refused. It was specifically noted by the Tribunal that these findings were based on sufficient material. Therefore, the only aspect which remains to be examined is, what is the effect of crediting the profit and loss account and debiting the sundry creditors' account in the year under consideration. In Gannon Dunkerley Co. Ltd. v. CIT [1976] 102 ITR 428, the Bombay High Court has opined that merely because money has been transferred from the " unclaimed balances account " to the " reserve for taxation account " it will not become taxable. In arriving at this conclusion, two earlier decisions of the Bombay High Court have been followed These are: Kohinoor Mills Co. Ltd. v. CIT [1963] 49 ITR 578 and J. K. Chemicals Ltd. v. CIT [1966] 62 ITR 34. In J. K. Chemicals Ltd. certain amounts towards wages, salary and/or bonus of employees were debited in the accounts when incurred tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on its own earlier decisions in Pioneer Consolidated Co. of India Ltd. v. CIT [1972] 85 ITR 410 (All) and in Bhagwat Prasad Co. v. CIT [1975] 99 ITR 111 (All), it has held (in [1978] 114 ITR 677) that the conduct of the assessee in transferring the amounts from the creditors' account to the profit and loss account after debiting the creditors' account is material. It shows that the assessee treated these amounts as income. The inference of fact to be drawn from this conduct is that the assessee treated its liability with regard to the unclaimed wages and amounts due to persons with whom it had business dealings had ceased to exist on the date of transfer. Further, it was observed that an entry in the account is a prima facie evidence of income. Distinguishing the case of Gannon Dunkerley Co. Ltd. [1976] 102 ITR 428 (Bom) in Indian Motor Transport Co. v. CIT [1978] 114 ITR 677 (All) it observed (p. 679 "There the amounts in question were transferred from the unclaimed balances account to the assessee's reserve for taxation account. It was found that the assessee made payments from the reserve for taxation account as and when the creditors made claims. It is clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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