COMMISSIONER OF INCOME TAX Vs. PARTABMULL RAMESHWAR

JUDGEMENT

(1.) In this reference under Section 66(1) of the Indian Income-tax Act, 1922, we are concerned with the following question of law :

(2.) This reference relates to the assessment year 1955-56. The relevant previous year is 2011 R. N. ending on March 31, 1955. The assessee is a registered firm and follows the mercantile system of accounting. In R. N. years 2004 and 2005, relevant for the assessment years 1948-49 and 1949-50, the assessee purchased jute in Pakistan and sold them to the merchants in India and abroad. On November 14, 1947, a duty on raw jute exported from Pakistan was imposed by the Government of Pakistan: Accordingly, in those years, the assessee in terms of Section 61-A of the Indian Sale of Goods Act, realised and also paid the prices as increased by such duty on such goods and entered those sums in a separate account named "Pakistan Duty Account" in which there was a credit balance of Rs. 2,68,543-6-3 at the end of 2005 R. N. year, but the assessee did not bring those sums in its profit and loss account in those years. Some time after 2005 R. N. year the assessee closed its business in Pakistan and thereafter in 2011 R.N. year distributed the said amount among the partners due to the retirement of one of its partners.

(3.) The Income-tax Officer included the said amount as the income of the assessee in 2011 R.N. year by rejecting the plea of the assessee, namely, that those sums were not its income of that year in the following terms :