AJIT SINGH BAINS,J. - (1.) THIS is a reference by the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, under Section 256 (1) of the I. T. Act, 1961 (hereinafter referred to as "the Act"), made on the application of the Additional Commissioner of Income-tax, Punjab, J. and K. and Chandigarh, Patiala. The question of law that has been referred for the opinion of the High Court is as under : "whether, on the facts and in the circumstances" of the case, the Tribunal was justified in law in holding that the amount of Rs. 1,14,486 in question was not taxable in the hands of the assessee-firm in the assessment year 1952-53 ?"
(2.) THE facts giving rise to this reference are as under : M/s. Tulsi Ram Karam Chand (hereinafter referred to as the "assessee-firm") was a firm consisting of three partners, namely, (1) L. Karam Chand Nayar, (2) L. Lachhman Dass Nayar, and (3) L. Chuni Lal Nayar. Partners Nos. 2 and 3 were real brothers. The assessee-firm carried on business with its head office at Amritsar. There was another firm under the name and style of M/s. Tulsi Ram Kanhaya Lal carrying on business with its head office at Ahmedabad. This firm will hereinafter be referred to as the "ahmedabad firm". The partners of the Ahmedabad firm were, (1) L. Lachhman Dass Nayar, (2) L. Chuni Lal Nayar and (3) L. Ralia Ram Khanna. Thus, it emerges that L. Lachhman Dass and L. Chuni Lal Nayar were partners in both the firms. In the year 1947, a permit was issued for supply of 250 bales of grey cotton cloth in favour of the Textile Commissioner, Jammu. The assessee-firm had undertaken to supply this cloth to the Textile Commissioner, Jammu, and for this purpose it placed an order with the Ahmedabad firm for the supply of 176 bales of cloth to be consigned by rail to the Textile Commissioner at Jammu Tawi Railway Station. The Ahmedabad firm complied with all the formalities of the order and consigned the required goods to "self" and sent the railway receipt along with the invoice to the assessee-firm at Amritsar. The assessee-firm in its turn re-endorsed the railway receipt in favour of the Textile Commissioner, Jammu, and sent the same to its bank at Jammu for collection. All this happened in July, 1947. Due to partition of the country and the disturbances during the year 1947, the railway wagons carrying 176 bales of cloth, which were despatched by the railway authorities, could not be traced and the goods were, thus, lost in transit. The accounting year of the assessee-firm ended on July 7, 1948. Upon receipt of the invoice from the Ahmedabad firm, the assessee-firm had afforded a credit for Rs. 1,74,827 (price of 176 bales) by raising a debit to the account of the Textile Commissioner, Jammu. But on learning about the loss of the goods in transit, the assessee-firm, at the close of the year of account, credited the Textile Commissioner, Jammu, and debited the profit and loss account with a sum of Rs. 1,84,045.
(3.) ON October 5, 1948, the Ahmedabad firm filed a suit against the Union of India in respect of the loss of the goods sent through the railway authorities. In the meantime, the assessee-firm was dissolved on March 18, 1950, and the Ahmedabad firm was also dissolved at about the same time. The suit filed by the Ahmedabad firm was ultimately compromised on June 18, 1951, and the erstwhile partners of the Ahmedabad firm, viz. , Lala Lachhman Dass Nayar, Lala Chuni Lal Nayar and Lala Ralia Ram Khanna, received from the railway authorities a total sum of Rs. 1,24,586 according to their shares in the dissolved firm and the aforesaid amount was paid by them to the erstwhile partners of the assessee-firm.;