SURANGMALI PUNAMCHAND SURANA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under section 66(1) of the Income-tax Act at the instance of the assessee. The facts stated are that the assessee a joint family concern carried on business in potato, oil cakes etc. and commission agency business. It had borrowed large amounts from the Shillong Banking corporation Ltd., (hereinafter referred to as the bank for the purpose of shortness) on an overdraft account. The amount outstanding and payable on this account in the books maintained by the assessee for the aforesaid activities was Rs. 35,912-11-6 in the Sambat year 2005 Ram Navami when the bank suspended operation in May, 1948, and applied for the scheme.

(2.) WHEN the assessee was pressed by the bank for payment of the amount due on the overdraft, in 1950 the assessee approached the board of directors of the aforesaid bank and obtained a concession to adjust such fixed and other deposits of the bank as the assessee could tender in settlement of the aforesaid outstanding at their face value, provided of that arrangement the assessed paid Rs. 5,000 to the bank in three instalments by February 19, 1952. The balance left thereafter in the overdraft account was thus reduced to Rs. 30,912-11-6. Due to some adjustment the debt due from the assessee was shown in the pass book of the bank as Rs. 29,94-8-6. With a view to wipe out the above indebtedness to the bank, the assessee purchased from several persons their fixed and other deposits in the aforesaid bank as also the interest accrued thereon on different dates ranging from January 23, 1952, to March 11, 1952, and tendered the full payment receipts to the bank on two different dates and got an adjustment of payment for a sum of Rs. 23,866-15-6. It is found that the assessee had bought the full payment receipts in regard to the accounts of fixed and other deposits as mentioned above for a sum of Rs. 5,677 and had made in all a clear profit of Rs. 16,995 in the matter of these transactions.

(3.) IN this case, it is clear from the facts as stated that the assessee purchased these full payment receipts from the depositors with a view to derive the full benefits for the sums which the depositors held in the bank and they were actually so derived at a later stage. IN our opinion, therefore, the income could be considered to be income from business within the word "profit or gains of business" as contained in section 10 of the INcome-tax Act. Mr. Sharmas argument as to exemption of assessment on this amount is based on two grounds : firstly, that it is not an income from business, and secondly, that this income was of a casual and non-recurring nature as described in section 4(3)(vii) of the Act. Clause (vii) itself makes it clear than once it is considered to be a receipt from business, whether it is of a casual nature or not is of no importance. This point also had been dealt with in the judgment of the INcome-tax Tribunal.