1967 (8) TMI 3

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....ar ended December 31, 1958. Bharat Insurance Company Limited (hereafter referred to as the assessee-company) carries on insurance business. The policy-holders of the assessee-company paid certain amounts during earlier years on account of the premiums due on their policies. From the order of the Income-tax Officer it appears that the excess premium was entered in the books of the assessee-company in the premium deposit account. In the relevant accounting period the assessee-company transferred the sum of Rs. 33,905 to its revenue account. Nothing more is known about the previous history of the receipts or their treatment in the books. For instance, it is not known what treatment was accorded to the total amount of premiums when it was firs....

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....tion being the one received in relation to earlier years, there is no question of considering the same as external incomings of this year . . ." There is an inconsistency in the observation quoted above and in the statement of case drawn by the Tribunal inasmuch as in the statement of case the Tribunal observed that, "........ there was no question of considering the said receipts as external incomings of this year as the amounts in question were received in earlier years". All that the Tribunal had found in its order dated October 10, 1963, while disposing of the appeal, was that the amounts in question were received "in relation to earlier years". Two extreme arguments were addressed to us at the bar. The learned counsel for the revenue ....

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....ss external incomings of the year on the basis of physical receipt. It is equally difficult to accept the other extreme contention of Mr. Kirpal, the learned counsel for the revenue, that amounts become gross incomings irrespective of the date of receipt as soon as they are transferred to the revenue account. Mr. Kirpal's argument may be put thus : When the amounts are physically received and kept in premium deposit account, they do not go into the mass of the assessee-company's assets as there is an effective liability of the assessee-company to return the same to the policyholders. So long as that state of affairs continues, the money is not possessed of any profit-making quality about it as in the business sense it continues to be the po....