TMI Blog1972 (9) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1959-60 was liable to inclusion in the assessee's total income having regard to the provisions of sections 10 and 13 of the Indian Income-tax Act ? and Whether, having regard to the admitted fact that the assessee's method of accounting was mercantile, the interest of Rs. 13,033 for the assessment year 1960-61 was liable to inclusion in the assessee's total income having regard to the provisions of sections 10 and 13 of the Indian Income-tax Act? " " The questions that arise for determination for these two years are identical. The assessee is a limited company which is mainly carrying on money-lending and banking business. Its method of accounting is mercantile. For the accounting year ending March 31, 1959, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1959-60, took the view that in respect of the loans and advances amounting to Rs. 2,80,095.62 the interest at the rate of 6 per cent. per annum will come to Rs. 16,806 and, after taking into account the interest charged to New Prahlad Mills, the balance of Rs. 9,275 was brought to tax as balance of interest in respect of the amount due by the remaining debtors. On the same footing for the assessment year 1960-61, after taking into account the interest charged to New Prahlad Mills, the balance of the amount of Rs. 13,033 was brought to tax in respect of the interest payable by the other debtors of the company. The order passed by the Income-tax Officer was confirmed by the Appellate Assistant Commissioner. It was reversed by the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x even in cases where accounts are maintained on mercantile system. Section 13 of the Act provides that income, profits and gains shall be computed, for the purposes of sections 10 and 12 in accordance with the method of accounting regularly employed by the assessee. Relying upon the Full Bench decision of the Allahabad High Court in Commissioner of Income-tax v. Shrimati Singari Bai, it was urged that where an assessee, who carries on a money-lending business and keeps the accounts according to the mercantile accountancy system, the Income-tax Officer for the purpose of section 10 of the Act is entitled and bound under section 13 to compute the profits and gains of the assessee in accordance with the method of accounting notwithstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are taxable, subject always to the provisions of the Act, from whatever source they are derived, whether as a matter of origin or of geography, provided they accrue or arise to or are received by the assessee in British India, or are deemed to accrue or arise or to be received. Receipt, either actual or deemed, as such is not made by income-tax law a condition precedent to taxability. Under the head of source " business ", what are charged are the profits and gains of the business ; and that profit and those gains do not escape tax by reason only of the fact that they are not received in the accounting year in money or the equivalent of money, or are not deemed to be so received. They are taxable, if they have arisen or accrued, or are unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult of resolutions passed by the managed company and the assessee-company the assessee gave up a sum of Rs. 97,000 in December, 1950. The Appellate Tribunal held that the maximum amount the assessee was bound to forgo was only Rs. 39,215 and included the balance of the amount forgone, viz., Rs. 57,785, in the taxable income. The Tribunal, however, found that the sum of Rs. 57,785 was also given up for reasons of commercial expediency. Upon a reference to this court, this court took the view that it was the real income of the assessee-company for the accounting year that was liable to tax and that the real income could not be arrived at without taking into account the amount forgone by the assessee. In ascertaining the real income the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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