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Section 10(3) of the Income-tax Act, 1961 [Corresponding to section 4(3)(vii) of the Indian Income-tax Act, 1922] - Casual and non-recurring receipts - Assessment year 1943-44 - Whether where loss suffered by assessee in forward share dealing was allowed as permissible deduction but in subsequent year liability was discharged as creditor agreed to forego his claim, sum foregone by creditor could not be treated as assessee's income - Held, yes FACTS The assessee, who dealt in shares incurred certain loss in forward share dealings. This loss was duly adjusted against the business receipts in the assessment for the relevant assessment year which meant that the department accepted, the sum as a permissible deduction. In the subsequent year this liability was settled by the assessee paying a sum of Rs. 5,301 and the creditor agreeing to forego his claim. The department now claimed that this sum must be looked upon as an income of the assessee liable to tax. On reference: HELD In the instant case, it could not be said that the sum which was remitted by the creditor had been received by the assessee as income which was liable to tax. Following the decision in the case of Mohsin Rehman Penkar v. CIT [1948] 16 ITR 183, it was held that sum foregone by creditor was not assessee's income within meaning of section 2(6C) of 1922 Act and would not be included in its total income. Note: The case was decided in favour of the assessee. CASE REVIEW Union Bank of Bijapur and Sholapur Ltd. v. Commissioner of Income-tax, Bombay [1942] 10 I.T.R. 21 - distinguished. Mohsin Rehman Penkar v. Commissioner of Income-tax, Bombay City [1948] 16 I.T.R. 183 - followed and relied upon. CASES REFERRED TO Mohsin Rehman Penkar v. CIT [1948] 16 ITR 183 (Bom.), Union Bank of Bijapur and Sholapur Ltd. v. CIT [1942] 10 ITR 21 (Bom.) and Agarchand Chunnilal v. CIT [1948] 16 ITR 480 (Nag.). Y.P. Pandit for the Appellant. Sir Jamshedji Kanga for the Respondent. JUDGMENT Chagla, CJ.-The question that is raised in this reference is really covered by the decision which my brother and I gave and which is reported in Mohsin Rehman Penkar v. CIT [1948] 16 ITR 183 . In that case we held that if a mercantile…

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