TMI Blog1949 (3) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... <![endif]--><!--[if gte mso 10]> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-marg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due by the assessee firm to Messrs. Shivnarain Nemani, of which ₹ 200 were paid during the financial year 1940-41. In August, 1941, Messrs. Shivnarain Nemani agreed to receive ₹ 1,000 in cash and ₹ 4,000 by cheques in full settlement of their claims against the assessee firm. This agreement does not appear to have been brought to the notice of the Income-tax Officer in the assessment year 1942-43. The settlement was however recorded by the assessee in its books in the financial year 1943-44. The remission of ₹ 16,544 by Messrs. Shivnarain Nemani was not credited to the assessee's trading account but credited to the capital accounts of the partners. 3. The question before the Tribunal was whether this remission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He observed that the question before the House of Lords was whether certain receipts amounted to profits or gains within the meaning of these words in Schedule D of the Income Tax Act, 1918. He in the end said as follows:- The assessee was liable to pay a certain sum of money of the share-broker. As he was keeping his accounts on the mercantile basis the liability was treated as a revenue expenditure. When it was discovered that the liability of the assessee to the share-broker was reduced it does not matter in what circumstances the liability was reduced the amount by which the liability was reduced must necessarily be the revenue receipt, i.e., must be income in the hands of the assessee. I am not prepared to say that the amount is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity by the creditor, then the remission of liability can never be considered as an income which would be liable to tax. The facts here are almost identical. The assessee who dealt in shares incurred a loss of ₹ 22,027 in forward share dealings. This loss was duly adjusted against the business receipts in the assessment for the year 1943-44 which meant that the department accepted the sum of ₹ 22,027 as a permissible deduction. In the subsequent year this liability was settled by the assessee paying a sum of ₹ 5,301 and the creditor agreeing to forego his claim, namely ₹ 16,544. The department now claims that this sum of ₹ 16,544 must be looked upon as an income of the assessee liable to tax. The Tribunal was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived part of the money embezzled. His contention was that it was a capital ascertion and not income. But as what was embezzled was part of the income and some of that part came back to the assessee, it could not possibly change its complexion and become capital accretion. The case therefore before Sir John Beaumont is clearly distinguishable and all that the learned Chief Justice laid down there was that if a part of the income is lost, and subsequently it comes back to the assessee, it is liable to be taxed. In the case before us it cannot be said that the sum of ₹ 16,544 which is remitted by the creditor has been received by the assessee as income which is liable to tax. Our attention has also been drawn by Mr. Pandit to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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