TMI Blog2011 (2) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... d not extinguish the liability but only the remedy - Decided against the assessee - ITR 458/1984, ITA 15/1999, ITA 16/1999 - - - Dated:- 18-2-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE M.L. MEHTA,JJ. For Appellant: Mr. O.S. Bajpai, Sr. Advocate with Mr. V.N.Jha Mr. B.K. Singh Advocates. For Respondent: Ms. Rashmi Chopra, Advocate A.K. SIKRI, J. 1. There is one question which is common in all these appeals. However, in ITR 458/1984 there are some additional questions which are referred for opinion. We would like to deal with these questions first and then approach the common question of law centre to all these cases. This ITR pertains to assessment year 1978-79 wherein the assessee had claimed certain medical expenses which were reimbursed to its employees. The Tribunal accepted the claim of the assessee that such reimbursement could not be regarded as perks. Following question has been referred by the Tribunal for our opinion in this behalf:- Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that reimbursement of medical expenses by the assessee company to its employees could not be treated as perquisites with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary responsibility to insure the vehicle lies with the hirer, frequently the assessee collects the insurance amount in round figures and this is also added to the total amount financed by the assessee for the purchase of the vehicle and the installments are also determined accordingly. However, the amounts collected by way of insurance are kept in separate account as deposits. Out of these deposits, the insurance premium is paid by the assessee on behalf of the hirer. Since the amount is collected in round sum which may be a little more than what is required to be paid towards insurance premium, there is small balance left in the account of each of the hirers. The amount so remaining in each of the hirers towards the excess insurance premium is returned to the hirer at the time of final adjustment of the account. At the same time, it is also a matter of record that many such hirers do not come at all to claim the balance amount. This balance remained with the assessee and over years, such amounts are accumulated. Since the amount remains as unclaimed balance, in the accounts relating to insurance premium after certain years, the assessee writes off this amount and the same is cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the previous year ended on 30-6-1977 as unclaimed balance, was not a trading receipt of the assessee and hence it could not be brought to tax for assessment year 1978-79? 8. We would like to point out here that the dispute which arose for the first in the year 1977-78 has been the subject matter of the agitation in all successive assessment years till 2003-04 which are before us. However, at the same time, in respect of five assessment years, where reference was made by the Tribunal, those references were returned unanswered for non-filing of the paper book by the Revenue. 9. We may also point out at this stage itself that in the assessment years 1986-87 when the Tribunal had taken the contrary view and against that order of the Tribunal, ITA 15/1999 is filed, one of the submissions of Mr. Bajpai, learned Sr. Counsel appearing for the assessee was that it was not permissible for the Tribunal to disregard the decision of the Coordinate Bench on the same issue in respect of the same assessee. He submitted that even if the Bench which took the contrary view was of the opinion that decision of earlier Benches were not correct, the only course of action open for this Bench wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage, subsequent events would not change the original character of this receipt. Further, for this reason even if the amount was written off and taken to the profit and loss account, in the year (s) in question it could not be treated as income of that year. He also relied upon the reasoning of the Tribunal wherein it was held that the insurance amount collected by the assessee was not part of the purchase price. It was only on account of insurance of vehicle. Though the primary duty to get the vehicle insured was of the hirer, the assessee had taken up this job for the purpose of safety and security of hirer and to secure its interest in case vehicle is damaged or destroyed as the same was handed over to the hirer on hire purchase basis and during the currency of the agreement assessee remains the owner of the vehicle. Further, it was also an admitted case that assessee was not doing any insurance business and collecting of insurance premium was not the part of the assessee's business. This amount was in the nature of deposit with the assessee which had to be accounted for by the assessee ultimately. It is for this reason, insurance amount was taken to separate account from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch on the basis of which it was credited to the profit and loss account, it had certainly become income of the assessee in that year as the assessee got enriched itself by this amount. She also argued that pertinently, it is an admitted position as recorded by the ITAT that the assessee has led no evidence to show that the assessee has held the said money in trust for the hirers. Her further submission was that even when insurance amount at the time of receipt was not on account of trading activities but after a lapse of time owing to the transfer to the profit and loss account, it became a part of circulating capital of the assessee and thus income taxable. According to her, there was no such principle of law laid down by the Courts in India that the character of initial receipt would remain fixed and would be determinative of the issue. On the contrary, Courts in India had opined that even if a particular receipt is not income on the date when the amount is received by turn and subsequent years it can become an income in the hands of the assessee. She relied upon the judgment of the Apex Court in the case of CIT Vs. T.V. Sundram Iyengar Sons Ltd.[ (1996) 222 ITR 344 ] wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of T.V. Sundaram (supra) has held that the amounts received during the ordinary trading transaction even though not in the nature of income would change the character and become assessee‟s income if they remained unclaimed with the assessee for a longtime and the claim of such money becomes barred by limitation. The Court has held that the ratio of CIT Vs. Kesaria Tea Co. Ltd. [(2002) 254 ITR 434 ] and of the decision in CIT Vs. Sugali Sugar Works (P) Ltd. [ 236 ITR 518] related to statutory liabilities. Further, in the following cases, the amounts transferred to the profit and loss account were held to be chargeable receipts of the assessee from trade:- (a) CIT Vs. AVM, 146 ITR 355. (b) Punjab Steel Scrap Merchants Ass. Vs. CIT, 43 ITR 164. (c) CIT Vs. Batlibol, 149 ITR 664. (d) Punjab Distilling Industries Vs. CIT, 35 ITR 519. 14. Ms. Chopra, thus concluded her arguments by submitting that since the amount collected by the assessee remained unclaimed,and was never given back to any of the hirer after its transfer to the profit and loss account, as a part of the circulating capital income it assumed the character of income chargeable to tax. 15. We may first d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hirer agreed, to sub-serve its own interest as the assessee wanted the vehicle to remain insured. It is also correct that the money was received in lump sum in round figure to take care of the entire period during which hire agreement was to operate and after expending the capital amount balance was to be refunded to the hirer. It is also true that many such hirers came forward to claim this refund which was duly handed over by the assessee to those persons. 18. Facts up to this stage give an indication that the money collected by the assessee on account of insurance did not belong to the assessee. The assessee was incurring the expenditure towards insurance premium on hirers account and was also supposed to refund the balance. The poser, however, is as to whether this amount would be treated as income and converted into the income of the assessees. 19. Before answering this question, we may recapitulate that though the primary responsibility of in securing the vehicle lies with the higher. It is the assessee who frequently collected insurance amount in round figures for obtaining this insurance on the vehicles. The assessee does so for its own benefit as it wants to assure th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me forward to claim the refund after it was written off and still it was refunded. It would result only in two possibilities namely either no person came forward to claim the amount after such a long delay or even if somebody wanted to refund, it was not given. Furthermore, another material aspect which needs to be emphasized is that the assessee has not come forward with any explanation as to why surplus money was taken to its profits and loss account even if it was someone's else money. In such circumstances, we are of the view that in the year in question in which the assessee had written off the aforesaid amount and credited to the profit and loss account, the character of this money changed and became income of the assessee in that year. For coming to this conclusion, we are supported by the judgment of this Court in the case of Jay Engineering Works Ltd. (supra). 21. Mr. Bajpai, learned Senior Counsel for the assessee had argued that even if the limitation had expired, that would not extinguish the liability but only the remedy. However, what is forgotten in relying this principle is that as per this argument itself the remedy of the hirers to claim the unexpired insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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