TMI Blog1996 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under section 256(1) of the Income-tax Act, 1961, was : "Whether, on the facts and circumstances of the case, the Tribunal was right in law in adding Rs. 1,13,092 to the total income of the assessee in the accounting year ending March 31, 1961 ?" The relevant assessment year is 1961-62. The appellant-assessee was an exporter of hides and skins. During the accounting year relevant to the assessment year 1957-58, he had pledged a certain quantity of goat skins with the National and Grindlays Bank. The value of the goat skins was Rs. 2,14,808. He had taken an overdraft against the said pledge in a sum of more than rupees two lakhs. The bank officers gave inspection of the said goods to a third party but thereafter did not store them prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that time, for permission to withdraw the prosecution. A learned single judge of the Punjab High Court sitting at Delhi allowed the prosecution to be withdrawn and formally acquitted the accused vide his order dated January 5, 1961. Pursuant to the said compromise, the bank waived the sum of Rs. 1,93,159 which was the balance due to the bank on the date of the High Court's order. The assessee transferred the credit balance due to the bank to the trading account deeming it to be towards the loss sustained by him earlier as a result of the stocks which were in Bombay in the custody of the bank and offered this amount for taxation spread over the three assessment years 1957-58 [Rs. 39,940], 1958-59 [Rs. 73,152] and 1959-60 [Rs. 80,067]. The In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the real character of the goods which were nothing but the stock of goods of the assessee. We find that a sum of Rs. 1,13,092 out of the amount received by the assessee from the bank has not been brought to tax. Hence, we are of the opinion that in view of the provisions of section 41(1) of the Act, this amount could be brought to tax during the accounting year". Accordingly, the Revenue's appeal, was allowed. Thereupon, the assessee applied for and obtained reference of the aforesaid question for the opinion of the High Court under section 256(1) of the Act. When the matter came up before the High Court, the High Court agreed with the assessee, in the first instance, that section 41(1) was not attracted to the facts of the case. Then it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 41(1) later to justify the inclusion of the said amount [Rs. 1,13,052]. Counsel submitted that the said amount cannot be treated as the income of the assessee under any provision of the Act. We have set out hereinbefore the relevant portions from the judgment of the High Court. We are of the opinion that the decision of the High Court is not really based upon section 41(1). The High Court has clearly held that even apart from section 41(1), the said amount is liable to be included in the assessment relating to the assessment year 1961-62 for the reason that the amount so received represented compensation in respect of his stock-in-trade and, therefore, it constitutes a trading receipt and is accordingly assessable to tax irrespectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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