TaxTMI 
TaxTMI 
2009 (2) TMI 37
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.... 1999-2000 solely based on the entry in the books of the Appellant made in the year 1998 ? 2. Whether the Tribunal was justified in law in holding that redemption of redeemable debentures, issued in 1988 was due in 1995 and thereafter it became income of the Appellant, despite the proviso to sub-Section 205C of the companies Act, according to which the liability of the assessee has not ceased?" 3. The appellant-assessee 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 is 1999-2000. On due date, the appellant-Company redeemed 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. The Assessee-Company, as 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 t....
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....ng for the appellant has submitted that the unclaimed amount could not have been treated to be time-barred debt. It is submitted by him that mere unilateral entry in the Books of Account of the debtors, itself is not relevant for the purpose of coming to the conclusion that the liability has come to an end. It is submitted that the said entry itself will not confer any benefit on the debtor. Shri Uasgaonkar further submitted that even if the debt has become time-barred, the liability has not ceased and as per Section 205C of the Companies Act, 1956, the Assessee was required to transfer the funds to the account of the Investor Education and Protection Fund. In order to substantiate his arguments, Shri Usgaonkar has relied upon a decision of the Honourable Supreme Court in the case of Commissioner of Income-Tax vs. Sugauli Sugar Works (P.) Ltd., reported 236 ITR 518. In the aforesaid Judgment, it has been held by the Supreme Court that mere unilateral transfer entry in account, without obtaining any benefit, cannot attract Section 41(1). It has also been held that the principle that expiry of the period of limitation prescribed under the Limitation Act could not extinguish the debt,....
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....n Fund. 8. The learned Counsel Shri Usgaonkar has fairly conceded that the amount, in question, was utilized for the purpose of Assessee's business. But, he has confined his argument only on the ground that the claim is not barred by limitation and in this respect, he has relied upon Section 205C of the Companies. Act. Section 205C reads as under: "205C. Establishment of Investor Education and Protection Fund. - (1) The Central Government shall establish a fund to be called the Investor Education and Protection Fund (hereafter in this section referred to as the "Fund") (2) There shall be credited to the Fund the following amounts, namely:- (a) amounts in the unpaid dividend accounts of companies; (b) the application moneys received by companies for allotment of any securities and due for refund; (c) matured deposits with companies; (d) matured debentures with companies; (e) the interest accrued on the amounts referred to in clauses (a) to (d); (f) grants and donations given to the Fund by the Central Government, State Governments, companies or any other institution for the purposes of the Fund; and (g) the interest or other income received out of th....
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....ind no hesitation to uphold the order of the A.O. who has rightly treated this amount as Trade Receipt and brought to tax." It has also been found by the Tribunal in para 9 of its order that the Assessee has not paid any interest after 1995. It is not in dispute that the repayment of the redeemable debenture which was issued in the year 1988 was due in 1995 and after 1995, the money was lying with the Assessee as unclaimed, which was not even subsequently transferred to the Investor Education and Protection Fund. 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 of Income-Tax vs. 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 assessee's own money because of limitation or by any other statutory or contr....
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....e did was the commonsense way of dealing with the amounts." In the instant case, since it is not in dispute that the amount, in question, has already been utilized by the Assessee for the purpose of its business from time to time and by Board Resolution the Assessee has transferred the amount to the Reserve Fund Account, and considering the Judgment of the Supreme Court in the case of Commissioner of Income-Tax vs. T.V. Sundaram Iyengar and Sons Ltd. (supra), the amount utilized for the purpose of business of the Assessee was required to be treated as business income. 10. 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....