Law: Income Tax Act, 1922

Section: 10(2A)

Income-tax Act (XI of 1922)--- S. 10 (2-A)-Amount in order to be made computable as profit orgain of a company, held, should have been first allowed to be deducted in any year as loss expenditure, or trading liability and assessee in any subsequent year having received either in cash or in any other manner any amount in respect of such loss or expenditure or have obtained some benefit in respect of such trading liabilities by way of remission or cessation thereof Amount under consideration never claimed by company, nor deemed to be deducted by Department, by way of loss, expenditure, nor referring to any benefit in respect of any trading liability obtained by company--Tribunal, held, rightly excluded such amount from being treated as profits of assessee company. JUDGMENT SAIDUZZAMAN SIDDIQUI, J. The following two questions were directed to be referred by order of the erstwhile High Court of West Pakistan, Karachi Bench, dated 29.11.1968 in I. T. C. No. 3 to the High Court for decision under section 66 (2) of the Income tax Act, 1922 and in consequence thereof the Tribunal has referred to us these questions for decisions :- "(1) Whether on the facts and in the circumstances of the case there was cessation of the trading liability within the meaning of section 10 (2A) of the Income-tax Act, specially when the creditors are not known and traceable to the assesses himself. (2) If the answer to the first question is in the affirmative, whether the income-tax officer was right in taxing the said trading liability under section 10 (2.A) during the year under consideration." We have heard Mr. Nasrullah Awan, the learned counsel for the Department and Mr. Athar, the learned counsel for the respondent-Company. The only question which requires determination in the case is whether a sum of Rs. 26,873 which was received by the company towards certain claims in respect of fire which took place in the year 1944 in Bombay and which the company had kept in a suspense account on the ground that this amount does not belong to the company but is payable to certain unascertained creditors on receiving claim from them, could be appropriated and treated as profits or gains of the…

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