SHIV PRASAD RAM SAHAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a case stated under Section 66(1) of the Income-tax Act, 1922, by the Income-tax Appellate Tribunal, Allahabad Bench. The material facts of the case are these. The relevant year of assessment is 1957-58, the previous year being the year ending on Diwali in 2013 (October, 1956). The assessee is a registered partnership firm consisting of two persons, Sri Shiv Prasad and Sri Ram Sahai, having equal shares in the profits and losses. The assessee-firm carried on, inter alia, money-lending business and in the course of its money-lending business it had advanced a sum of Rs. 71,010 some time in 1948-49, to another registered firm of M/s. Gwalior Glass Industries (hereinafter called the debtor firm). There were four partner of the debtor firm, two of whom were also partners of the assessee firm. The two other partners were Sri Ram Prasad and Sri Jagdish Prasad. The assessee admittedly adopted the mercantile system of accounting. For the assessment year 1948-49 to 1956-57, the assessee had returned the interest income from the aforesaid loan to the debtor firm on the mercantile system of accounting, i.e., on the accrual basis. In the relevant year of accounting, however, the sum of Rs. 20,400, which had accrued on the said loan was not debited in their accounts. The Income-tax Officer asked the assessee to show cause why the accrued income of Rs. 20,400 should not be included in the assessment. The explanation given was that the debtor firm was in an embarrassed financial condition and, therefore, the interest had not been debited to this account. The Income-tax Officer, on a scrutiny of the details of the account of this debtor in the books of the assessee-firm, found that the assessee had advanced a further sum of Rs. 1,000 on January 6, 1956, and Rs. 18,000 on November 1, 1956, which it would not have done if the debtor firm was in financial straits, and accordingly added a sum of Rs. 30,100 to the income of the assessee as interest accrued at the rate of 12 percent. On Rs. 1,70,000.

(2.) ON appeal, the Appellate Assistant Commissioner held in favour of the assessee observing :

(3.) THE moot question is when did the succession, if at all, take place. THEre was no controversy in that there was succession. THE Tribunal had recorded that the succession took place on October 12, 1948. If this is a question of fact as held by the Tribunal and the High Court and as contended by the Revenue, them relief can only be given in the assessment year 1950-51. But is it a pure question of fact or is it a mixed question of law and fact having regard to the relevant scheme of the Act ?