Case: Hindustan Foods Limited Dempo House, Goa Vs. The Deputy Commissioner of Income-Tax

issued in the year 1988 was due in 1995 and after 1995, the money was lying with the Assessee as unclaimed, which was not even subsequently transferred to the Investor Education and Protection Fund. Considering the aforesaid aspect of the matter, in our view, the Tribunal was justified in holding that the amount, in question has rightly been treated as Trade Receipt by the AO. In the case of Commissioner of Income-Tax vs. T.V. Sundaram Iyengar and Sons Ltd. (supra), the Supreme Court while considering the question about unclaim balances in the matter of business income has held that if an amount is received in the course of a trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character when the amount becomes the assessees own money because of limitation or by any other statutory or contractual right and when such a thing happens, common sense demands that the amount should be treated as income of the assessee. The relevant observation which is at page 353 of the said Judgment, reads as under : The principle laid down by Atkinson J., applies in full force to the facts of this case. If a commonsense view of the matter is taken, the assessee, because of the trading operation, had become richer by the amount which is transferred to its profit and loss account. The moneys had arisen out of ordinary trading transactions. Although the amounts received originally were not of income nature, the amounts remained with the assessee for a long period unclaimed by the trade parties. By lapse of time, the claim of the deposit became time-barred and the amount attained a totally different quality. It became a definite trade surplus. Atkinson J. pointed out that in Tattersalls case [1939] 7 ITR 316 (CA) no trading asset was created. Mere change of method of book-keeping had taken place. But, where a new asset came into being automatically by operation of law, commonsense demanded that the amount should be entered in the profit and loss account for the year and be treated as taxable income. In other words, the principle appears to be that if an amount is received in the course of trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character when the amount becomes the assessees own money because of limitation or by any other statutory or contractual right. When such a thing happens, commonsense demands that the amount should be treated as income of the assessee.In the present case, the money was received by the assessee in the course of carrying on his business. Although it was treated as deposit and was of capital nature at the point of time it was received, by efflux of time the money has become the assessees own money. What remains after adjustment of the deposit has not been claimed by the customers. The claims of the customers have become barred by limitation. The assessee itself has treated the money as its own money and taken the amount to its profit and loss account. There is no explanation from the assessee why the surplus money was taken to its profit and loss account even if it was somebody elses money. In fact, as Atkinson J. pointed out that what the assessee did was the commonsense way of dealing with the amounts.In the instant case, since it is not in dispute that the amount, in question, has already been utilized by the Assessee for the purpose of its business from time to time and by Board Resolution the Assessee has transferred the amount to the Reserve Fund Account, and considering the Judgment of the Supreme Court in the case of Commissioner of Income-Tax vs. T.V. Sundaram Iyengar and Sons Ltd. (supra), the amount utilized for the purpose of business of the Assessee was required to be treated as business income.10. Considering the aforesaid aspect of the matter and considering the fact that the Assessee has already utilized the money from time to time for its business purpose and having been taken benefit of utilizing the money for its business, now cannot say that the debt, in question, has not become time barred and, therefore, the said unclaimed amount should not have been treated as income of the assessee by way of trade receipt. The Tribunal has given in paras 9 and 10 of its order, cogent reasons for coming to the conclusion that the amount, in question, is required to be considered as income of the assessee. The Tribunal has also rightly held that in the subsequent assessment years, if some amount is paid to the debenture holders, the AO should deduct such amount in the relevant assessment years. The Tribunal has, accordingly, while setting aside the orders of the AO, as well as the Appellate Authority, given such benefit to the Assessee in the relevant assessment years.11. We, accordingly, do not find that any substantial question of law arises, as framed, for determination of this Court and considering the facts of the case, it cannot be said that the Tribunal has erred in coming to the conclusion that the amount, in question, is to be treated as income of the Assessee for the relevant assessment year and by treating the same as Trade Receipt as, admittedly, the amount in question was utilized by the Assessee for its business purpose and, in fact, was transferred to the Reserve Fund Account, treating it as not income of the Assessee and even Shri Usgaonkar, learned Counsel for the appellant-company has admitted that the Assessee-company has treated the amount as its income and utilized it for its business. We, therefore, do not see any infirmity in the decision of the Tribunal in partly allowing the appeal filed by the Revenue and directing the AO to give benefit of the amount repaid to the debenture-holders in the relevant assessment years.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Considering the aforesaid aspect of the matter, in our view, the Tribunal was justified in holding that the amount, in question has rightly been treated as Trade Receipt by the AO. In the case of Commissioner ofvs. T.V. Sundaram Iyengar and Sons Ltd. (supra), the Supreme Court while considering the question about unclaim balances in the matter of business income has held that if an amount is received in the course of a trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character when the amount becomes the assessees own money because of limitation or by any other statutory or contractual right and when such a thing happens, common sense demands that the amount should be treated as income of the assessee.Considering the aforesaid aspect of the matter and considering the fact that the Assessee has already utilized the money from time to time for its business purpose and having been taken benefit of utilizing the money for its business, now cannot say that the debt, in question, has not become time barred and, therefore, the said unclaimed amount should not have been treated as income of the assessee by way of trade receipt. The Tribunal has given in paras 9 and 10 of its order, cogent reasons for coming to the conclusion that the amount, in question, is required to be considered as income of the assessee. The Tribunal has also rightly held that in the subsequent assessment years, if some amount is paid to the debenture holders, the AO should deduct such amount in the relevant assessment years. The Tribunal has, accordingly, while setting aside the orders of the AO, as well as the Appellate Authority, given such benefit to the Assessee in the relevant assessment years.11. We, accordingly, do not find that any substantial question of law arises, as framed, for determination of this Court and considering the facts of the case, it cannot be said that the Tribunal has erred in coming to the conclusion that the amount, in question, is to be treated as income of the Assessee for the relevant assessment year and by treating the same as Trade Receipt as, admittedly, the amount in question was utilized by the Assessee for its business purpose and, in fact, was transferred to the Reserve Fund Account, treating it as not income of the Assessee and even Shri Usgaonkar, learned Counsel for thehas admitted that thehas treated the amount as its income and utilized it for its business. We, therefore, do not see any infirmity in the decision of the Tribunal in partly allowing the appeal filed by the Revenue and directing the AO to give benefit of the amount repaid to thein the relevant assessment years.