TMI Blog2014 (10) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee sustained loss in the business - They framed a scheme of compromise/arrangement - During the course of such a claim before the High Court, the assessee entered into an arrangement with the depositors who were willing to receive a portion of the amount deposited by them towards settlement of their claim - Therefore, those depositors were paid a portion of the money which they had deposited - With such payment, the entire liability to pay the amount received stood extinguished. By extinguishment of the liability, the assessee did not receive any amount either by forfeiture or by discount and it is a case of sheer inability to pay the amount received by way of deposits - though such rebate or remission has benefitted the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the second Appellate Tribunal was right in holding that a sum of ₹ 2,75,76,000/- received by the assessee as fixed deposit during the earlier assessment year was written off by forfeiture during the current assessment year under a settlement resulted in cessation of a liability in the ordinary course of the business of the assessee resulting in income liable to tax in view of decision of Apex Court in the case of Commissioner of Income Tax - vs - Lakshmi Vilas Bank LTd., (1996 ITR Vol.220 Page 205)? . 3. The assesses is a non-banking financial company which was carrying on the business of accepting deposits from the public and carried on the activity of hire purchase, leasing of machinery, vehicles etc. with effect from 01.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will remain as liability and once part of the deposit only is repaid in full settlement, the balance amount which is forfeited by the assessee is nothing but a revenue receipt as it is accepted by the assessee during the regular course of banking business which is no longer required to be repaid. Therefore, the said amount was treated as income and tax was levied. Aggrieved by the said order, the assesse preferred an appeal to the Commissioner of Income Tax (Appeals), Mangalore-Goa. The appeal came to be dismissed. 4. Aggrieved by the said order, the assessee preferred an appeal to the tribunal. The tribunal relying on the Judgment of the Bombay High Court in the case of MAHINDRA MAHINDRA LIMITED vs CIT (2003) 261 ITR 501 (Bom) hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, a settlement was arrived at wherein the depositors agreed to receive reduced amount in discharge of the liability and therefore, what was not paid to him is not the amount which is either forfeited by the assessee or is available at his hands to be charged as income under the Act. He relies on the Judgment of this Court and various other High Courts in support of his contention and submits the order passed by the tribunal is valid and do not call for interference. 7. This Court had an occasion to consider Section 2(24) of the Income Tax Act which defines what an income is as well also Section 41(1) of the Act in the case of COMMISSIONER OF INCOME-TAX vs INDUSTRIAL CREDIT AND DEVELOPMENT SYNDICATE LTD. ((2006) 285 ITR 310 (Karn)). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the purchaser or debtor. As in those instances the assessee does not receive any income to his nets though by such rebate or remission he is benefited to the extent of the rebate or remission. 8. Similar view has been taken by the Madras High Court in the case of ISKRAEMECO REGENT LTD. Vs COMMISSIONER OF INCOME TAX ((2011) 331 ITR 317), Bombay High Court in the case of COMMISSIONER OF INCOME TAX vs XYLON HOLDINGS PVT. LTD. ((2013) 90 DTR (Bom) 205). 9. As against this, the revenue relied on the Judgment of the Apex Court in the case of COMMISSIONER OF INCOME TAX vs LAKSHMI VILAS BANK LTD. ((1996) 220 ITR 305). That was a case where the bank had purchased the securities at face value. This cost cannot be anything less than the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as its own money and taken the amount to its profit and loss account. There was no explanation from the assessee while the surplus money was taken to its Profit and Loss Account even if it was somebody else s money. In that context, it was held when the claim of the customer became time barred and when the assessee treated it as its money and taken it to the Profit and Loss Account, it is an income earned by the assessee in the course of its business and therefore, it was taxable. Therefore, the aforesaid two judgments of the Apex Court has no application to the facts of this case. 11. In the instant case, no-doubt the assessee received the deposits. The deposits were repayable with interest. The assessee sustained loss in the business. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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