COMMISSIONER OF INCOME TAX Vs. KEDIA AND CO

JUDGEMENT

(1.) The facts leading to the filing of the present Income-Tax appeal may be noticed.

(2.) The respondent, M/s. Kedia & Co., Raha, district Nagaon, Assam, is a registered firm and an income-tax assessee. The relevant assessment year in the present case is 1979- 80. The respondent firm got an import licence to import 500.905 M.T. of palm oil from Malaysia. The Malaysia party duly despatched the goods and presented the bill of leading for collection of the value of goods to the United Asian Bank in Malaysia. That Bank in Malaysia on its turn sent the bill of leading to the United Bank of India, Foreign Branch, Bombay, for realisation of the amount of U.S. Dollars 3,64,658.84, equivalent to Rs.32,38,133/-. The United Bank of India asked the respondent firm to clear the bill of leading by making payment of the above amount and the date of maturity was mentioned by the Bank as 24.11.77. The respondent firm, however, paid Rs. 17,87,859/- in instalments and could not pay the balance of Rs. 14,26,116/-. In the meantime, the respondent firm approached the shipping agent, M/s. J.N. Baxi & Co., Bombay, and manage to get release of the goods by giving an indemnity bond, dated 28.9.77, without releasing the bill of leading from the Bank. Thereafter, the Foreign Branch of the United Bank of India having failed to realise the aforesaid balance amount of Rs. 14,26,116/- from the respondent firm, returned the bill of lading to the Malaysian Bank. The aforesaid Malaysian Bank on receipt of the bill of lading from the United Bank of India, got an order of arrest from Admiralty Suit on the ship S.S. Texotis, owned by Texotis Shipping Co., Necosia, Cyprus, which had chartered the vessel, S.S. Texotis, which carried the palm oil from Malaysia to Bombay Port. The aforesaid Shipping Co., however, got release the ship by making the payment of the aforesaid sum to the Malaysian Bank and took over the liability of realisation of the amount from the respondent from After taking over the liability for respodent from having failed to realise the amount from the respondent firm in the normal course, the shipping company filed a summary suit No. 1994 of 1981 before the High Court of Bombay or realising the aforesaid amount of Rs. 14,26,116/- from the respondent firm. The assessee in its return for the year 1979- 80 did not include the aforesaid amount, as it was shown to be the liability which had neither been remitted, nor the respondent considered the liability to the tune of the aforesaid amount as having been remitted by the creditors. The original creditors, i.e., the Malaysian Bank, or the firm which had supplied the material, stood substituted by the shipping agent, because the shipping agent had paid the amount to the Malaysian Bank by taking over the liability to realise that amount from the respondent firm. It was the case of the respondent mat the very fact that the shipping company had filed a suit for realisation against the respondent firm, would go to show that the liability was kept alive and the same had not been remitted. According to the respondent, even if the suit is time barred, even then the liability would not stand remitted.

(3.) The assessing officer, however, did not agree with the respondent firm and ordered the addition of the aforesaid amount in the total income of the respondent under Section 41(1) of the Income-Tax Act, 1961 (hereinafter referred to as the Act).