COMMISSIONER OF INCOME TAX Vs. SADUL TEXTILES LIMITED

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue to answer the following question of law:

(2.) THE relevant assessment year is 1972-73. THE assessee was allowed deduction of the sums of Rs. 16,366 and Rs. 98,091 towards wages and bonus in earlier years but the same remained unclaimed by the workmen. For this reason, the question arose during the relevant assessment year 1972-73 whether these amounts of unclaimed wages and unclaimed bonus were taxable in that year under Section 41(1) of the Act. THE Income-tax Officer included these amounts in the assessee's income treating the same as profits and gains of business during the relevant assessment year and the assessee's appeal to the Commissioner of Income-tax (Appeals) also failed. However, the Tribunal accepted the assessee's contention that these amounts could not be deemed to be profits and gains of business in order to be taxable under Section 41(1) of the Act. This view was taken on the basis that these amounts representing the unclaimed wages and bonus, though time-barred, had not resulted in either remission or cessation of the trading liability of the assessee without which the same could not be taxed under Section 41(1) of the Act. Aggrieved by the view taken by the Tribunal, the Revenue applied for a reference under Section 256(1) of the Act which was made by the Tribunal to answer the above-quoted question of law.

(3.) THE parties shall bear their own costs.