TMI Blog1976 (4) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... al, Madras Bench, under section 256(1) of the Income-tax Act, 1961, is : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the sum of Rs. 1,69,996 and Rs. 62,563 in the assessment years 1964-65 and 1965-66, respectively, received as deposits in the first instance and forfeited at a later stage, was not the income of the assessee liable to tax but that the assessee was entitled to take them into account in arriving at the cost of securities acquired by the assessee when these sums were forfeited?" In the latter reference, the question referred for the opinion of this court is : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as the first reference is concerned, the face value of the bonds purchased, the purchase price, margin money in deposit which was ultimately forfeited and the cost of the bonds shown in the balance-sheet as reduced by the margin money are as follows : --------------------------------------------------------------------------------------------------------------------------------------------------- Assessment Face value Purchase Margin money Cost of the bonds year of the price in deposit shown in the balance bonds forfeited sheet as reduced by margin money --------------------------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the appeals preferred by the banks. It is, thereafter, at the instance of the department, these references were asked for and the questions mentioned above have been referred to this court for its opinion. In our opinion, the conclusion of the Tribunal is correct. It is not in dispute that the letters which were executed by the constituents in favour of the banks expressly stated that they undertook to pay the balance of the amount within a stipulated date and if they failed to do so, the bonds shall belong to the banks absolutely and the margin money deposited by the constituents also would belong to the banks. Though the language of the letters written by the constituents is not identical in all the cases, having gone through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank in adjusting the margin amount forfeited by it, of which it became the owner just then against the amount which it paid on behalf of its constituents for purchasing the securities, for the purpose of arriving at its cost of the securities. As a matter of fact, the learned counsel for the department was not able to bring to our notice any principle or provision of law or even any principle of accountancy which prevented the banks from adopting such a procedure. In fact, the profits or gains of the bank will arise only when the bank sold the securities or redeemed them at the time of maturity after it had become the owner of the securities. Since the bank becomes the owner of the securities at the same time when it becomes the owner of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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