Sabyasachi Mukharji, J. - (1.) In this reference Under Section 256(2) of the I.T. Act, 1961, the following questions have been referred to this court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 8,264 was includible in the assessment for the assessment year 1970-71, as income of the previous year ended December 31, 1969 ?
(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 55,920 was includible in the assessment for the assessment year 1970-71, as income of the previous year ended December 31, 1969 ?" 2. This reference relates to the assessment year 1970-71. The assessee is a United Kingdom company which carries on business in India through its branches at Calcutta and Bombay. The Calcutta branch acts as the agents for various tea and steamer companies incorporated outside India, as also for other overseas principals. The Bombay branch acts as agents for Lloyds. Both the branches deal in sundry electrical and other goods. The books of account of both the branches in India are closed on 31st December. The assessment year 1970-71, with which we are concerned, was in respect of the relevant accounting year being the calendar year 1969. In the company's books of account for the year ending on December 31, 1969, the following amounts receivable as interest on advance was found credited in suspense account: Name of the branch Amount credited in suspense a/c. as interest Name of the party from whom interest was receivable Rs.Calcutta 8,264 M/s. Bags & Cartons, New Delhi. Bombay 55,920 Speciality Papers Ltd., Bombay.
(3.) The assessee was following the mercantile system of accounting. The ITO treated both items of interest as the assessee's income for the assessment year 1970-71.;