SETH KISHORI LAL BABULAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under section 66(1) of the Income-tax Act. Two questions have been referred for the opinion of the court. They are :

(2.) THE case relates to the assessment year 1946-47, relevant to the previous year, which was the financial year 1945-46. THE facts in brief are : the assessee is a Hindu undivided family. It carries on money-lending business. Its method of accounting is the cash basis. In the course of its money-lending business it lent a sum of Rs. 51,315 to one Swaleh Khan. THE debtor was landlord within the meaning of the U. P. Encumbered Estates Act. A decree against the landlord-debtor was passed in favour of the assessee on September 29, 1943, for a sum of Rs. 1,09,500 which included both principal and the accumulated interest. In due course, in pursuance of the decree the Collector gave an award on March 29, 1945, offering to the assessee transferable U. P. government Encumbered Estates bonds of the face value of the decretal amount, in lieu of cash in full settlement of the assessees claim against the landlord-debtor. THEse bonds were accepted by the assessee on March 16, 1946, that is, within the accounting period relevant to the assessment year in question. Out of these bonds, on March 26, 1946, that is, still within the accounting period, the assessee sold bonds worth Rs. 80,000 for a sum of Rs. 79,228. THE assessee credited the sale proceeds in his account books in the account of Mohammad Swaleh as follows : <FRM>JUDGEMENT_502_ITR49_1963Html1.htm</FRM>

(3.) THE reference shall be returned to the Income-tax Appellate Tribunal, Allahabad, with this answer under the seal of the court and the signature of the Registrar.