TMI Blog1993 (10) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... remittance to the non-residents in the foreign countries, i.e., U.S.S.R., and during such period, the funds remained idle with the assessee in the current account in the banks. A sum of Rs. 83,62,000 was due to the various non-resident ship-owners at the end of the previous year. During the above previous year, the assessee deposited a sum of Rs. 16,50,000 as call deposits in the banks in its own name out of which it earned an interest of Rs. 38,102.73. This income was credited by the assessee to an account named as "interest on freight payable account". This income was not disclosed by the assessee in its return of income. The Income-tax Officer, in the course of assessment, noticed the call deposit of Rs. 16,50,000 on the assets side of the balance-sheet of the assessee. However, in the details of income furnished, no interest received thereon had been furnished. The assessee was asked by the Income-tax Officer to explain the reasons for such non-disclosure of interest amount. In reply to the enquiry made by the Income-tax Officer, it was explained by the representative of the assessee that though a sum of Rs. 38,102.73 was received by the assessee as interest on call deposit, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to invest the earnings in interest-bearing deposits so as to earn income for the principals. 4. The Commissioner of Income-tax also took note of the conduct of the assessee in regard to the amount of interest and observed the fact that while seeking the Reserve Bank's permission to remit the freight earnings, it did not even report the earning of any interest on such freight earnings, not to speak of seeking permission for remittance of the amount of interest to the principals. It, therefore, held that legally and factually, the interest earning was the income of the assessee. The Commissioner of Income-tax (Appeals), therefore, upheld the order of the Income-tax Officer bringing the same to tax in the hands of the assessee. The findings of the Income-tax Officer and the Commissioner of Income-tax (Appeals) were confirmed by the Tribunal on further appeal by the assessee. The Tribunal noted the fact that the deposits in question were made by the assessee in its own name and the interest earned thereon was described under the account as "interest on freight payable account". The Tribunal also noted the fact that the amount credited was not shown in the freight payable account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken into computation in his personal assessment. The ratio of the above judgment cannot be applied to a shipping agent, whose relationship with the shipping companies is totally different. In Tanubai D. Desai [1972] 84 ITR 713, this court took into consideration the relevant rules of the Bombay High Court on the original side which govern to control the profession of solicitors in holding that the position of a solicitor vis-a-vis the moneys received by him from or on behalf of his clients was that of a quasi-trust and he held such moneys in a fiduciary capacity and observed (at page 715) : "A mere reading of these rules shows that a solicitor of this court is obliged to keep a separate banking account in respect of all the moneys received by him from or on behalf of his clients. He can appropriate moneys out of the said account to himself personally only in the limited class of cases provided for by these rules. These moneys are to be segregated and kept by a solicitor in a separate bank account in the title of which the word 'client' must appear and lie can withdraw and appropriate it to himself only in so far as the rules permit him to do so. In this connection it must also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was deposited in the banks was claimed to be a part of the above money and the interest thereon belonging to the principals. There is nothing to show what happened to the balance money which was due as on that date. It is apparent that freight, as and when received, automatically got mixed with the funds of the assessee and what remained was only the obligation to remit the amount so collected in due course after obtaining the permission of the Reserve Bank for such remittance. The assessee was not obliged to keep a separate banking account in respect of the moneys received by him by way of freight on account of the shipping companies nor in fact was any such account ever maintained. On the other hand, all such moneys were appropriated by the assessee to itself. A part of the money that was deposited with the bank was also in an account in the assessee's own name. There is nothing to show that these deposits were on the "shipping companies" account. In such a situation, the ratio of the decision of this court in Tanubai D. Desai [1972] 84 ITR 713, cannot apply. Reference may be made in this connection to a decision of the King's Bench Division in Henry v. Hammond [1913] 2 KB 515 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts of the assessee as due to the ship-owners. There is no dispute about the fact that the amount of interest was never remitted to the ship owners. Not to speak of remittance, the assessee never informed the Reserve Bank of India about the amount of interest nor sought for any permission to remit the same. In fact what was remitted was only the actual amount of freight. There is a clear finding that the amount of interest was still lying with the assessee. All these factors taken together clearly go to show that the amount deposited in the bank belonged to the assessee and, therefore, the interest thereon also accrued to the assessee. The assessee had full dominion over the same. There is nothing to show that this amount belonged to someone other than the assessee except the statement of the assessee before the Income-tax Officer that this interest was earned on money belonging to the ship-owners. The controversy can be looked into from one more angle. There were 13 shipping companies. The relationship between the assessee and each shipping company was separate and distinct. The accounts of different shipping companies were maintained separately showing the amount due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the trustee are two separate and unconnected things. Reliance was also placed by counsel for the assessee on the decisions of this court in CIT v. M. L. Bhapkar [1994] 207 ITR 464 and in CIT v. Smt. Lilavati F. Shah in Income-tax Reference No. 469 of 1976-[1990] Tax LR 946, the Calcutta High Court in Bengal and Assam Investors Ltd. v. CIT [1983] 142 ITR 156 and CIT v. A. Tosh and Sons (P.) Ltd. [1987] 166 ITR 867, the House of Lords in Barclays Bank Ltd. v. Quistclose Investments Ltd. [1970] AC 567 and Regal (Hastings) Ltd. v. Gulliver [1942] 1 All ER 378, the Court of Appeal in Phipps v. Boardman [1965] 1 All ER 849 and the Chancery Division in English v. Dedham Vale Properties Ltd. [1978] 1 All ER 382. In our opinion, the above decisions are also clearly distinguishable and are not applicable to the facts and circumstances of the case before us. We may, in this connection, refer to the decision of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542. In that case, the assessee, a private limited company dealing in furniture, also acted as an auctioneer. In respect of the sales effected as auctioneer it realised during the relevant previ ..... 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