Oak, C.J. - (1.) THIS is a reference under Section 256 of the Income-tax Act, 1961. The Pioneer Consolidated Company of India, Ltd., New Delhi, is the assessee. The assessment year is 1962-63. The accounting year was the financial year 1961-62,
(2.) THE assessee is a public limited company carrying on the business of clearing and forwarding agents, selling agents and commission agents. During the course of its business the company received various amounts from its constituents for incurring expenses for and on behalf of the constituents, and towards commission of the company for services rendered to the constituents. From the various amounts received by the company from a number of constituents a total sum of Rs. 29,643 was lying in the books of the company to the credit of those constituents up to 1960-61. Those amounts were not claimed by the respective constituents. During the relevant accounting year the assessee-company transferred the amount of Rs. 29,643 to the credit of its profit and loss account. THE Income-tax Officer treated this amount of Rs. 29,643 as income of the assessee-company during the year 1961-62. THE assessee-company urged before the Appellate Assistant Commissioner and the Appellate Tribunal that the sum of Rs. 29,643 could not be treated as income of the assessee for the assessment year 1962-63. THE assessee's contention was rejected by the Appellate Assistant Commissioner and by the Tribunal. Again, the assessee was sole selling agent for Messrs. Turpentine and Subsidiary Industries Ltd. up to 1955-56. Under the terms of the agency, the assessee was responsible for realising outstanding claims for and on behalf of the Turpentine and Subsidiary Industries Ltd. The assessee-company was under a legal obligation to pay the principal for the unrealised amounts. During the relevant accounting year the assessee-company paid a sum of Rs. 8,679 to the principal. This amount was claimed by the assessee as business expenditure. The claim was disallowed by the Income-tax Officer. The same view was taken by the Appellate Assistant Commissioner and by the Appellate Tribunal, Allahabad. Being dissatisfied with the decision of the Tribunal on these two points, the assessee applied to the Tribunal for stating a case to this court. Accordingly, the Tribunal has referred the following two questions of law to this court: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 29,643 being the credit balance written off was income of the assessee chargeable to income-tax ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in coming to the conclusion that the deduction of Rs. 8,679 was not allowable to the assessee in the assessment year 1962-63 because the selling agency in respect of which the amount was payable had ceased to exist in the assessment year 1955-56 ?"
(3.) FIRSTLY, we take up question No. 1 relating to the sum of Rs. 29,643. It is significant that the assessee itself credited this amount to its profit and loss account. Mr. M. P. Mehrotra appearing for the assessee contended that mere entry in the accounts of an assessee does not create a liability to tax. That is true. But an entry in the accounts of a company indicating a receipt is, prima facie, evidence of income. The assessee advanced a number of pleas in support of its contention that the sum of Rs. 29,643 did not represent the assessee's income. It was suggested that it might be capital receipt, or a receipt in the nature of a windfall. It was also suggested that it might be a receipt or income of some earlier year. The various alternatives may now be considered.;