Sabyasachi Mukharji, J. - (1.) In this reference under Section 256(1) of the I.T. Act, 1961, the following question is raised : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 18,224 received by the assessee could not constitute income of the assessee for the assessment year 1962-63 ?"
(2.) The relevant facts for answering this question as found by the Tribunal are as follows: "In these grounds, the decision of the Appellate Assistant Commissioner upholding the disallowance made by the Income-tax Officer on an amount of Rs. 18,224 collected as 'general average' by the assessee is contested. One of the ships belonging to the assessee, i.e., APJ Ambar, on voyage from Madras to Calcutta in May, 1961, experienced serious engine trouble resulting in a complete breakdown. The ship was thereafter towed to Calcutta and it discharged its cargo on the 6th June, 1961. In respect of the cargo a 'general average' was declared. The consignees, as a consequence, had to offer the underwriters, guarantees or in the alternative make a cash deposit of a value equivalent to 2% of the value of the cargo. The cash deposit received was to the extent of Rs. 18,223.84. This was kept in deposit in a joint trust account of the shipowners and the agents of Lloyd's Insurance with the National and Grindlays Bank Ltd., Calcutta. As the total amount in deposit was less than Rs. 25,000, no interest had been received by the assessee. It was stated that subsequently the average adjusters had recommended a refund of Rs. 7,257.76, which was in excess of the final amount of contribution. The assessee has stated that from the deposit balance of Rs. 18,223, if the amount refundable of Rs. 7,257 was deducted, the income which accrued in 1964-65 when the final report of the adjusters was finalised was Rs. 10,996. The actual amount refunded out of Rs. 7,257 was Rs. 1,205 and the balance of Rs. 6,052 was still lying deposited in the joint account. The authorities below were of the view that since repair expenditure on the ship was claimed as a revenue expenditure, the amount of Rs. 18,224 had to be brought to tax. The learned counsel for the assessee submitted that the amount of Rs. 18,224 could not constitute the income of the assessee as the amount wa8 received in trust by the assessee and the assessee held the same in a fiduciary capacity and the amount was also deposited in a separate joint account (the other party being Lloyd's agents at Calcutta) with the bank. In support of this contention reliance was placed on the decision in CIT v. Sandersons & Morgans [1910] 75 ITR 433 (Cal) and also the decision in Bijli Cotton Mill (P) Lid. v. CIT . We have considered the rival submissions. The amount of Rs. 18,224 received by the assessee in this year was clearly in the nature of a security deposit and was held by the assessee in a separate joint trust account. The final report of the average adjusters was also not received in this accounting period. In our view on the facts no portion of the amount of Rs. 18,224 can constitute the income of the assessee for this accounting period. The addition made of Rs. 18,224 is accordingly deleted."
(3.) Taking into account the facts and circumstances of the case and the conclusion arrived at by the Tribunal, we are of the opinion that the Tribunal was right in holding that the sum of Rs. 18,224 received by the assessee could not constitute the income of the assessee for the assessment year 1962-63. But we also observe that the assessee has stated that subsequently the average adjusters had recommended a refund of Rs. 7,257.76, which was in excess of the final amount of contribution. The assessee has also stated that from the deposit balance of Rs. 18,223, if the amount refundable of Rs. 7,257 was deducted the income which accrued in 1964-65, when the final report of the adjusters was finalised, was Rs. 10,966.;