TMI Blog1943 (7) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... plus capital and profits in the firm. The award is not available to us nor any proceedings of the said Panchayat. The Income-tax Officer however examined Mr. M.S.S. Chidambaram Chettiar one of the Panchayatdars in this award and found from him that a sum of $ 1,55,900 was awarded to be paid to the appellant and his brother. This sum thus arrived at in favour of the appellant and his brother was not paid to them on account of their minority till the year 1938, when all of them became majors. Another Panchayat again went into the question and in addition to the original sum a further sum of $ 27,294 was awarded by way of interest. It is not agreed between the parties that this sum was awarded as interest and we shall have to consider this question a little later. 3. The partner thereafter gave a hundi on the 2nd April 1938 on his Ipoh shop for a sum of $ 1,82,900 and a deed of release was executed by the appellant, his brother, and their adoptive mother in favour of M.S.M.M. Firm. The hundi was sent to Ipoh for collection and it was cashed on the 9th May, 1938, and a further sum of $ 294 in interest from the date of the hundi to the, date of encashment was also realised. The total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in no sense be said to pay his creditor but merely gives him a voucher or voucher of debt possessing certain legal attributes. In this case merely a hundi was given payable outside British India on demand. The hundi will not mature into a payable debt until a demand was made and was in fact an inchoate liability maturing only on demand being made from the person on whom the hundi was drawn and is only discharged when the amount is paid. It cannot, therefore, be said that on the day the appellant received the hundi he received a right to make a demand on the person on whom the hundi was drawn and who was liable to pay the amount. We think therefore that the date of payment is the actual date on which the money can be said to have been received by the appellant and was rightly treated as received on the date of the amount in cash. 7. The representative appearing for the appellant also argued that the amount received was by way of damages but he was not able to support his case with any authority. The mere argument that the sum is of capital nature does not find favour with us. The appellant should not suffer for want of presentation of his case or for the erroneous view he takes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to be an income and was not assessable to tax. In the case before us it cannot be said that this interest was income made in the course of business. It was not contractual interest but merely damages the measure of which was the amount awarded and though it may be called interest, as damages it is not liable to assessment. 10 We, therefore, allow this appeal and set aside the assessment of the sum of ₹ 21,153 . On the application of the Commissioner under Section 66 (1) of the Income-tax Act, the Income-tax Appellate Tribunal referred the case to the Madras High Court. STATEMENT OF CASE This is an application of the Commissioner of Income-tax, Madras, asking reference of the following question of law to the High Court of Judicature at Madras:- Whether having regard to the circumstances of the case, the conclusion of the Bench, viz., that the amount of ₹ 21,153 received by the appellant was in the nature of damages for wrongful detention of the money in the hands of the partner of the appellant's father and, therefore not assessable, is correct in law? 2. The respondent, in his reply, has denied that any question of law arises. The respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d need not be repeated here. 4. We therefore refer the following question of law for the opinion of the High Court of Judicature at Madras:- Question of Law referred-Whether, having regard to the circumstances of the case, the conclusion of the Bench, viz., that the amount of ₹ 21,153 received by the appellant was in the nature of damages for wrongful detention of the money in the hands of the partner of the appellant's father and therefore, not assessable, is correct in law? 5. The papers mentioned in the index attached will form the paper book in this case . JUDGMENT (Judgment of the Court was delivered by the Hon'ble the Chief Justice.) This is a reference by the Income-tax Appellate Tribunal, Calcutta Bench, under Section 66 (1) of the Income-tax Act, and has been made at the instance of the Commissioner of Income-tax, Madras. The assessee's father, who died in 1921, was a partner in a money-lending firm carried on in the Federated Malay States. Notwithstanding the death of the assessee's father, the business of the firm was carried on until 1928 when a panchayat met to decide what was payable to the assessee and his brother on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not, but with great respect we find ourselves unable to follow the reasoning. Certainly we are not prepared to accept the judgment as a guide to the decision in the present case. There are two cases which we consider have bearing here, namely, Schulze v. S.W. Bensted [1915] 7 Tax Cas. 30 and Commissioners of Inland Revenue v. Barnato [1936] 20 Tax Cas. 455. In Schulze v. S.W. Bensted 7 the appellant, who was the trustee of an estate, sued the representatives of a deceased trustee for damages to the estate caused by his negligence, and a decree was passed directing the defendants to pay a sum of money with interest thereon at the rate of 31 per cent. per annum from the date on which the sum should have belonged to the estate. The Surveyor of Taxes claimed that the interest represented income, but this claim was resisted. The Court of Session held that the Surveyor of Taxes was right. In Barnato' s case (supra) the decision in Schulze' s case (supra ) was approved by the Court of Appeal in England. In that case, the respondent inherited certain sums in a business which vested in him on attaining majority. After he had attained majority, he became a partner in the firm, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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