2015 (7) TMI 517

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....he year, were observed to reflect a net increase of Rs. 28,09,953/-, being the difference between the amount of sundry creditors written back and of sundry debtors written off, at Rs. 30,42,500/- and Rs. 2,32,547/- respectively, to her capital account. The assessee claimed the same to be unsecured loans, received some 15 years ago, furnishing their break up as under: Sr. No. Name Amount (Rs.) 1 Diseto Tools Company 6,06,000 2 Balkishan & Son  1,95,000 3 Vinod Corporation  80,000 4  Manisha Trading Company 1,00,000 5  Desai Corporation  1,00,000 6 Kinner Textile  95,000 7 Samir Trading Company  1,00,000 8  Shantilal Lalchand & Sons  1,71,500 9  V. Navbheram & Company 1,95,000 10 N Vasantrai & Company 1,00,000 11  Dhanji Shivaji Bhanushali  1,50,000 12 Dhanji Bhaga Patel 2,50,000 13 Pravin Shivaji Furia (HUF) 1,50,000 14 Onida Enterprises 1,75,000 15 Manji Ladha Patel 1,25,000 16 Harilal Kuvarji Gala  1,50,000 17  Bombay Textile  3,00,000   ....

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....e reasons that follow, of the considered opinion that the impugned sum is liable to be considered as the assessee's income for the current year. Income - Concept & Scope 5.1 Income, inclusively defined u/s. 2(24) of the Act, is a term of widest amplitude, which would include any sum in the nature of income, i.e., which corresponds with and answers the common notion of the said term (also refer para 5.4). Case law in the matter is legion (refer: CIT vs. G. R. Karthikeyan [1993] 201 ITR 886 (SC); Emil Webber vs. CIT [1993] 200 ITR 483 (SC) (also refer para 7). True, capital receipts are excepted. The reason is, again, simple. Income, by definition, is always conceived in terms of accretion to capital. When, therefore, what is received stands established as capital, there is no question of it being considered as accretion thereto and, hence, as income. However, here again there are exceptions, which are essentially rules of evidence, coming into play where the receipt or the credit is not established as a capital receipt. Accordingly, section 68 deems any credit, nature and source of which is not satisfactorily explained, as income for the year of such credit. The same does not ....

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....ney, and if he fails to rebut the said evidence, it can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee, the Department cannot, however, act unreasonably (see pp. 804H. 805A - C).)'                                                                                                                                                                     ....

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....view of the propagation and proliferation of 'gifts' from unrelated parties. The same, however, is without prejudice to the generality of section 56(1). It would, therefore, be of little consequence even if section 56(2)(vi), the specific provision covering the period under reference, i.e., f.y. 2007-08, is considered as inapplicable in the facts of the case. In fact, section 56(2)(viib), inserted by Finance Act, 2012, duly incorporated in section 2(24) defining income, provides for treating the share premium in excess of the fair market value of the share as income. The apex court in T.V. Sundram Iyengar (supra) opined in favour of the write back of trade advances as income, de hors the provision of section 56(2), applying the concept of income, consistent with section 2(24), in the facts of the case. The efflux of time, coupled with the write back, so that it was no longer payable, it opined, was sufficient to signify a qualitative change in the nature of the sum as one of receipt of business. The finding of it representing a trade surplus (and, therefore, assessable u/s.28), in view of the trading relationship between the parties, is, though relevant, secondary, in the larger co....

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....account, while the earlier 'receipt' was that by way of incurring a liability for value received (in kind) or even if in the form of money, only for being paid back and, as such, not without consideration. The second receipt, however, is without consideration. Section 68 shall also, as afore-referred, apply in-as-much as there is fresh credit/s in the assessee's books in the form of credit/s to the capital account. In our view, the particular section is not of much significance considering the amount to be no longer a liability, but accretion the capital during the year, so that even section 56(1) shall hold, quite in the same vein as the hon'ble apex court found the write back to be assessable u/s.28 as business income in the case of T.V. Sundram Iyengar (supra). 5.3 The non-application of section 41(1), or as the case may be, section 59(1), which would apply only where the Revenue has discharged the onus of showing the impugned sums to have been allowed deduction in the assessment for any earlier year, is absent in the instant case. This, however, would be of little moment. Conclusion 5.4 We, for the reasons afore-stated, confirm the assessment of the impugned sum as inc....

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....in-as-much as these are no longer payable. Why? No reason is advanced. It is under these circumstances that the law permits the A.O. to draw an adverse inference of it as representing the assessee's income. As regards the year, there can again be little doubt in the matter. The impugned credit/s, which we have found as a fresh credit/s, is during the current year. The liability was accepted as genuine for and up to the immediately preceding year, while it is no longer payable as at the year-end. The taxable event, in terms of gain, thus, has taken place during the year, even if one considers the passing of the journal entry, recording so, on a particular (single) date in the books, to be a matter of convenience only. It is for these reasons that we find the impugned credit as corresponding and answering to the concept of income under section 2(24) and, further, as standing to fall to be assessed u/ss. 56(1) and 56(2), finding strong support in the decision in the case of T.V. Sundram Iyengar (supra). 6. The subject matter of Ground II is an addition in the sum of Rs. 3,03,424/-, being the write back, as stated, of earlier year expenses, to the assessee's capital account for the ....