TMI Blog1966 (4) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod from the 1st November, 1949, to the 31st October, 1950. Messrs. Dalmia Jain Co. Ltd. are the managing agents of the assessee-company, and, according to the agreement between the two, they were entitled to Rs. 7,500 per month as office allowance from the assessee-company. The managing agents observe their accounting year from the 1st February of a year to the 31st January of the following year. In the course of the previous year of the assessee, with which we are concerned, they were informed by the managing agents that they would forgo the office allowance due to them from the assessee for the period from 1st February, 1948, to the 31st January, 1950. The amount thus remitted amounted to Rs. 1,80,000. The last three months of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows : " 1. Whether, on the facts and circumstances of the case, the Tribunal was correct in holding that the actual amount of damages payable to Messrs. Urquhat Lindsey and liable to be treated as loss on capital account was Rs. 42,150, and not Rs. 61,535 ? and 2. Whether, in the circumstances of the case, the sum of Rs. 1,57,500 being the amount forgone by the managing agents was chargeable as the assessee's income for the assessment year 1951-52 ? We have not referred to the facts relating to the first question as, during hearing of the case, learned counsel for the revenue conceded that the loss on capital was rightly calculated at Rs. 42,150 by the Tribunal. The first question is, therefore, answered accordingly. The real con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars' accounts in respect of the period from 1st February, 1947, to 31st October, 1949. Though the word " refund " has been used in this item, actually it was not a cash refund ; it was only a remission of a liability charged to the profit and loss account. If the accounting was maintained on cash system and if the amount would have been paid already as office allowance due to the managing agents and then a part of it or the whole was returned by way of a refund to the assessee-company during the current accounting year, that would have been a trading receipt or a revenue receipt, and would have been included in the total income ; but, the accounting system being mercantile and the amount shown thus under the head " miscellaneous receipt " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee. The assessee, however, in that case urged that that amount should not be treated as a receipt for the purpose of assessable income, and relied upon several decisions. The learned judges distinguished them on the ground that, in those cases, the assessees maintained their accounts in the mercantile system and received remissions of their liability (which they had already shown in their previous trading accounts) from their creditors. One of those cases, which will be very apt for our reference, is Mohsin Rehman Penkar v. Commissioner of Income-tax. There, the mortgagor assessee maintained his account on accrual basis. Every year, he debited to his profit and loss account the amount of interest due to the mortgagee fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account was on mercantile system, whereas, in the case before their Lordships, it was on cash basis, and the amount that was in question was actually refunded by the Government to the assessee out of the money which he had paid as an instalment of his excise licence and which he had shown on the debit side as an outgoing in the previous accounting year. In our view, the facts of the Bombay case are very much similar to the facts in the instant case. There, it was a trading liability on account of mortgage. Here, it was a trading liability on account of the office allowance payable to the managing agents. There, a part of the liability was remitted ; in our case, the whole of it was forgone. In that view, that decision will apply on all four ..... X X X X Extracts X X X X X X X X Extracts X X X X
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