AI Drafter 
TaxTMI 
TaxTMI 
2004 (12) TMI 41
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.... Mercantile Bank is in the nature of casual receipt and not partaking of the nature of income liable to tax for the assessment year 1974-75?" The assessee is a registered firm engaged in the business of manufacturing and sale of brass, zinc and copper sheets. In the course of the business, the assessee placed an order with M/s. Ore and Chemical Corporation, New York, through its agent at Bombay for the purchase of 90 metric tonnes of copper ingots valued at $103805.87. The assessee also opened a letter of credit with the Mercantile Bank Ltd., Chandni Chowk branch, Delhi. The supplier despatched the goods on August 11/12, 1965, by the steamer (S.S. Express) and received the value thereof from the Mercantile Bank, through its agent in Amer....
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....micals Corporation, New York, towards the cost of goods, it demanded a sum of Rs. 3,54,808 from the latter. The bank did not comply with the demand of the assessee who then filed a suit in the Delhi High Court. The suit was finally compromised and the bank paid a sum of Rs. 1,42,000. The Income-tax Officer, "D" Ward, Yamuna Nagar (for short, "the Assessing Officer"), while making the assessment for the assessment year 1974-75, held that the amount received by the assessee from the bank was a trading receipt and was liable to be treated as such under section 41(1) of the Income-tax Act, 1961 (for short, "the Act"). Accordingly, he made an addition of Rs. 1,42,000. The Appellate Assistant Commissioner, Ambala, confirmed the addition made b....
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..... As far as the bank is concerned, the payment to the American company for the price of the goods as well as the reimbursement received by it from the insurance company were in dollars. The rupee equivalent of the dollar payment made by the bank was Rs. 4,99,063 whereas the rupee equivalent of the dollar received from the insurance company was Rs. 9,60,217.88. In this sense the bank did receive, in terms of rupees, considerably more than what it had paid to the American company. The question that arises is whether this was received by the bank on its own account or on the assessee's account. If it was received on the assessee's account, it would stand to reason that the entire difference of Rs. 3,34,808, after due adjustments, as set out at....
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....relief." We have heard Shri Rajesh Bindal, learned counsel for the Revenue, and Shri Akshya Bhan, learned counsel for the assessee. Section 41(1), as it stood in the year 1974, reads as under: "41.(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or....
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..... The amount received by the assessee as a result of settlement arrived at between the parties was nothing more than a casual receipt and not a trading receipt. Therefore, the same was not liable to tax and, in our considered view, the majority of the Tribunal did not commit any error in setting aside the orders passed by the Assessing Officer and the Appellate Assistant Commissioner. In Universal Radiators v. CIT [1993] 201 ITR 800, the Supreme Court considered a question some what similar to the one raised in this case and answered the same in favour of the assessee. The facts of that case show that the appellant, a manufacturer of radiators for automobiles, booked copper ingots from a corporation in the USA for being brought to Bombay....