TaxTMI 
TaxTMI 
2011 (2) TMI 210
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....ment of medical expenses by the assessee company to its employees could not be treated as perquisites within the meaning of Section 40C/40A (5) of the Income-Tax Act, 1961?" 2. This question stands answered in favour of the assessee and against the Revenue in the case of Commissioner of Income Tax Vs. Mafatlal Gangabhai and Co. (P) Ltd., 219 ITR 644. 3. Another question which is referred by the Tribunal on the application of the assessee relates to assessees claim that its sur-tax liability of Rs.42,850/- for this year should be deducted in the computation of its total income. The Tribunal did not accept the contention of the assessee in the impugned order but on the application of the assessee, has referred the following question for opinion:- "Whether, on the facts and in the circumstances of the case, the sur-tax liability claim of Rs. 42,850/- was allowable as deduction in computing the total income of the assessee company for the assttt. Year 1978-79?" 4. It is also decided in favour of the assessee in 219 ITR 589. We thus answer the question in the affirmative i.e. in favour of the assessee and against the Revenue. 5. Coming to the pivotal issu....
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....lance, in the accounts relating to insurance premium after certain years, the assessee writes off this amount and the same is credited to the profit and loss account in that year in which it is written off. The insurance premium standing in the accounts was treated as liability in the balance sheets of the assessee company but after it is written off the amount was taken to the profit and loss account and it is no longer in the balance sheet. It is in this backdrop when in the successive assessment years a particular amount on account of unclaimed insurance premium was written off and credited to the profit and loss account, the question of treatment which is to be given to this amount came up before the Assessing Officer. As mentioned above, for the first time, this issue arose in the assessment year 1997-98 when a sum of Rs.47,0461/- was written off in that year. The Assessing Officer treated this as assessee's income and the order of the Assessing Officer was confirmed by the CIT (A) in appeal. However, the Tribunal reversed the orders of these two authorities below holding that it would not be treated as income of the assessee as the amounts were not the revenue receip....
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....k the contrary view was of the opinion that decision of earlier Benches were not correct, the only course of action open for this Bench was to refer the matter to Larger Bench. No doubt, this grievance of Mr. Bajpai, learned Sr. Counsel is perfectly justified. Ordinarily, Bench of the Tribunal is bound by the orders passed by the Coordinate Bench and even if it is of the opinion that the view of the earlier Bench is not correct, it has no power to disregard that. The only course open in such a situation is to refer the matter to a Larger Bench and it is the prerogative of the Larger Bench to over- rule the judgment of the earlier Bench if it takes contrary view. However, at the same time, it would serve no purpose to set aside these orders of the Tribunal on this ground and refer the matter back to the Tribunal for constituting Special Bench. Reason is simple and more than obvious. The Revenue is before us against the earlier orders of the Coordinate Bench and in those References and appeals filed by the Revenue some question of law has to be necessarily decided by us. Once we are called upon to answer the reference/question of law and our answer on that issue would be binding on t....
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....he assessee which had to be accounted for by the assessee ultimately. It is for this reason, insurance amount was taken to separate account from where the amounts were to be paid after due dates. It is for the same reason that the assessee was under obligation to return the excess amount to the hirer and with this understanding the amount was deposited by the hirer with the assessee. On these facts, claimed the learned counsel, the assessee was in a position of "Trustee" and could not appropriate the said amount. He thus argued that this initial character at the time of receipt of this amount was the decisive and subsequent event could not alter the same. To support this submission, aide of judgment of English Court in Morley (Inspector of taxes) Vs. Tattershall [1939] 7 ITR 317 (CA) at page 329:- "The learned Judge took a different view, as I have said; he took the view that the balances when distributed to the partners were trading receipts. The distribution to which I imagine he is referring is the allocation of sums to the partner's account in the balance shset: but what was distributed to the partners was not an asset item, but a liability item. As I have pointed out....
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....ds of the assessee. She relied upon the judgment of the Apex Court in the case of CIT Vs. T.V. Sundram Iyengar & Sons Ltd.[ (1996) 222 ITR 344 ] wherein it has been specifically held:- "Although the amount received originally was 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. ............... In other words, the principle appears to be that if an amount is received in 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 assessee's own money because of limitation or by any other statutory or contractual right. When such a thing happens, common sense demands that the amount should be treated as income of the assessee." 12. She argued that the amount in question by efflux of time could become the assessee's own money and the transfer is not an unilateral entry, as held by the Supreme Court in the case of Iyengar (supra) in the following words:- ....
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....ny of the hirer after its transfer to the profit and loss account, as a part of the circulating capital income it assumed the character of income chargeable to tax. 15. We may first distill the principle of law laid down in various judgments cited by the learned counsel for the parties. We may mention here that in another judgment pronounced today i.e. ITA 1623/2010 & ITA 503/2010 titled Logitronics Pvt. Ltd. Vs. Commissioner of Income Tax and Commissioner of Income Tax Vs. Jubilant Securities Pvt. Ltd. respectively, these very judgments are analysed in detail and, therefore, for the sake of brevity we are not repeating the said discussion. Suffice it to point out that this issue cropped up again in the Supreme Court in the case of The Travencore Rubber & Tea Co. Ltd. v. C.I.T., Trivandrum [243 ITR 158]. Analyzing these judgments, the Court reiterated that in Morley (supra), it had been held that the quality and nature of a receipt for income tax purposes were fixed once and for all when receipt was received and that no subsequent operation could change the nature of the receipt. However, in CIT Vs. Karam Chand Thapar [1996] 222 ITR 112, the Supreme Court held that the propositi....
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....gher. It is the assessee who frequently collected insurance amount in round figures for obtaining this insurance on the vehicles. The assessee does so for its own benefit as it wants to assure that the vehicle remains insured for the hire purchase duration as the assessee remains the owner of the vehicle in question during that period. But the matter does not rest here. What is important is that the insurance amount collected by the assessee from the hirer in round figures is also added to the total amount financed by the assessee for the purchase of the vehicle. Further, the installments which are fixed and are to be paid by the hirer are determined after inclusion of this amount. This would show that the receipt of the said amount becomes inseparable part of trading activity of the assessee as it becomes integral part and parcel of the transactions entered into between the assessee and the hirer. Again no doubt, at the time of final adjustment of the account, the hirer is entitled to seek refund of the excess insurance premium. Those hirers who come forward and seek the refund are paid. We are not concerned with that amount refunded by the assessee to those hirers. Here we are co....