TMI Blog2016 (7) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... iduciary of his client. There was no “cessation of trading liability” within the meaning of section 10(2A) (erstwhile), and the amount of such wages could not be added to income. Thus, even though the remedy of some of the clients may have become barred by limitation, even then the barred debt did not become income of the assessee and could not be taxed under the Income-tax Act. See KOHINOOR MILLS CO. LTD. Versus COMMISSIONER OF INCOME-TAX, BOMBAY CITY I. [1962 (10) TMI 58 - BOMBAY HIGH COURT] - Decided in favour of assessee. - ITAT NO. 110 OF 2011, GA NO. 1185 OF 2011 - - - Dated:- 10-6-2016 - GIRISH CHANDRA GUPTA AND ASHA ARORA, JJ. FOR THE APPELLANT : MR.M.P.AGARWAL, MR.S.B.SARAF, ADVOCATE FOR THE RESPONDENT : MR.P.BAG,AD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the proposition of law laid down by the Hon ble Supreme Court in the case of ED Sassoon Company Ltd. Vs.-CIT reported in 26 ITR 27(SC) that income received or deemed to be received in the previous year is eligible to tax and there is absolutely nothing in the Income Tax Act, 1961 to permit the assessee to treat a part of his income as deferred income ? iv) WHETHER the Learned Tribunal was justified in relying on the following decisions where neither in the Tribunal in the case of R.N.Jhunjhunwala- Vs- ACIT, Circle 54, Kolkata nor before the High Court at Calcutta in CIT Vs- R.N. Jhunjhunwala passed in G.A. No.588 of 2008, arising out of I.T.A No. 6.124 of 2008, considered the question of assessibility and moreover the said or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of E.D.Sassoon Company Ltd. V. Commissioner of Income-tax reported in (1954) 26 ITR 27 has no manner of application to the facts and circumstances of the case. What had happened in that case was that S company was the managing agent of U company. S company was entitled to receive by way of their remuneration commission of certain percentage of the annual income of U company on 31st March of every calendar year. On 1st December, 1943, S company transferred its right of managing agency to company A . The question arose whether the remuneration received by company A on 31st March, 1944 was the income of company A or company A was liable to share the same with the company S . This question was answered by Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessment in the manner provided in section 144.] All that section 145 provides is that an assessee has the choice to compute his income arising out of profits and gains of business or profession or income form other sources either in accordance with the cash system or in accordance with the mercantile system. Either of the methods has to be followed. The assessee in this case has been following cash method. Section 145 does not even remotely influence answer to the question as to whether deposit received by the solicitor is taxable or not. Section 145 is a mere mandate that the assessee has to follow either of the two systems of accounting. Therefore, section 145 neither militates against the deposit being treated as a capital r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no justification on the part of the Ld. CIT to invoke the provisions of section 263. Therefore, we set aside the orders of the Ld. CIT on this issue and allow the appeal of the assessee. Therefore, on facts there is no iota of doubt that the deposits were treated by the assessee as a capital receipt and the deposits were adjusted in the subsequent years against the expenditure incurred for or on behalf of the client from whom the deposit was received. Such expenditure also included the fees of the assessee himself. It is at that stage that the money was earned by him. Before that, he was holding the money as an agent or as a fiduciary of his client. There is a judgment of this Court where this point was lucidly explained which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to recover the sum of the balances may have become barred by limitation. We do not think that this consideration in any way alters the legal position. In the case of Kohinoor Mills Co. Ltd. v. Commissioner of Income-tax, [1963]49 ITR 578, a question similar to that which we have to consider came up for consideration. There certain wages were payable but they were unclaimed and their recovery became barred by limitation. Nevertheless, the Bombay High Court held that the debt subsisted, notwithstanding that the recovery had become barred by limitation. There was no cessation of trading liability within the meaning of section 10(2A), and the amount of such wages could not be added to income. Thus, even though the remedy of some of the cli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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