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

ee borrowed money from the public by way of secured loan through the instruments 14% redeemable debentures and as per the terms of the issue, the redemption was due in the year 1995. The relevant assessment year in the present proceedings isOn due date, theredeemed the debentures for which it received the redemption notice from the public. However, certain repayments were not claimed by the public by way of redemption and an amount of Rs.49.06 lakhs remained to be paid and was lying with the Assessee as unclaimed debentures. Theas per Board Resolution, transferred unilaterally this amount to the General Reserve Account and utilized the amount for the purpose of its business. The Assessing Officer (AO) found that this money became the assessees own money.4. The Assessee is a company manufacturing food products. The Assessee filed their returns in connection with the Assessment Yeardeclaring Nil income. The case was processed under Section 143(3) of the Income Tax Act, 1961 and refund order of Rs. 4,06,415/was issued to the Assessee. Ultimately, on verification of details, the AO found that the Assessee has credited an amount of Rs.47,06,000/into General Reserve Account on account ofunclaimed debentures. The case was reopened under Section 148 of the Income Tax Act and a notice to that effect was also served on the Assessee on 31.1.2003. The AO came to the conclusion that the amount, in question, should be treated as an income of the Assessee and accordingly, the AO treated the said amount as Trade Receipts and brought the same to tax. The appellant challenged the said order by way of an appeal before the Commissioner of Income Tax (Appeals), (CIT(A)) Panaji, Goa. CIT(A) allowed the said appeal. The CIT(A) found that the amount of unclaimed matured debentures cannot be treated as an income of the Assessee in view of Section 205C of the Companies Act and as per the said provision, the said matured debentures shall not form part of the fund unless such amount has remained unclaimed and unpaid for a period of 7 years from the date they became due for payment. The Revenue being dissatisfied with the said decision of the CIT(A), preferred an appeal before the Income Tax Appellate Tribunal, Panaji Bench, Panaji. The Tribunal came to the conclusion that since 1995 the money was lying with the Assessee and the said amount was an unclaimed amount. The Tribunal found that the Assessee has failed to deposit the same into Investor Education and Protection Fund. That money was utilized by the Assessee for its business. The Tribunal also found that the Assessee not only failed to trace the debenture holders to pay back the money, but also did not transfer the said money to the Investor Education and Protection Fund. The Tribunal, accordingly, found that the AO has rightly treated the amount as an income of the Assessee and has rightly treated it as Trade Receipt and brought to tax. The aforesaid order of the Tribunal has been impugned in this tax appeal at the instance of the

Court's reasoning:
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.