Law: Income Tax Act, 1922

Section: 10(2A),10,10(2)(a),10(1),6,7,8,9,10(2)

Income-tax Act, 1922 -- Sections 6, 7, 8, 9, 10, 10(2A) -- Business -- Trading liability -- No business done by assessee in previous year -- Cessation of past year's trading liability in previous year -- Whether liable to tax in assessment year -- Held no -- Trading liability -- Compensation payable by assessee to creditor in terms of awards of Arbitration Tribunal -- Failure of creditor to obtain decree from court in time -- Liability not legally enforceable -- Liability of assessee, whether ceased -- Held no Allowable deduction -- Trading debt -- Amount sought to be deducted representing compensation payable by assessee in terms of an award on account of failure to fulfil certain forward contracts -- Creditor submitting awards in Court for passing decrees -- Suits however dismissed in default -- Creditor taking no further steps to recover debt -- Assessee, held, continues to be liable for amount, notwithstanding claim becoming barred by limitation -- Amount to be excluded from assessment unless award itself vitiated by fraud or misconduct on part of arbitrators -- Provisions to be read together -- Business income -- Liability to tax -- Assessee must have "carried on" business in previous year relevant to assessment year -- Corresponding Sections: Income-tax Ordinance, 1979 -- Section 25 - ORDER The order was passed by A. MANNAN, Judicial Member.---This appeal is at the instance of the department and relates to assessment year 1958-59 supplementary. The facts of the case may briefly be stated as follows. 2. During the assessment year 1951-52 (accounting period ending on 30th June 1951, the appellant filed a return declaring a net loss of Rs. 45,230 from his business in jute. After scrutiny of accounts, the Income-tax Officer computed the total income of the assessee at Rs. 56,894 after allowing a deduction of a sum of Rs. 37,850. The deduction allowed represented the amount of compensation payable by the assessee to Messrs. O & Company, on account of their (assessees) failure to fulfill some forward contracts in jute entered with that company. This sum of Rs. 37,850 it may be stated here was payable by the assessee in terms of two awards dated 28th August…

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