COMMISSIONER OF INCOME TAX U P Vs. LALA GIRJESH BAHADUR PAL

JUDGEMENT

(1.) THIS reference under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the Act"), has been made at the instance of the Commissioner of Income-tax, U. P., Lucknow, by the Income- tax Appellate Tribunal, Allahabad Bench, Allahabad (hereinafter referred to as "the Tribunal"). The question referred to this court for its opinion reads:

(2.) THE assessee is a Hindu undivided family and the reference relates to the year 1956-57 for which the previous year is the year ending on March 31, 1956. It is clear from the statement of the case submitted by the Tribunal that the assessee was maintaining its accounts on cash basis. For the assessment year 1956-57 the only source of income to the assessee is said to be interest on securities. The assessee had advanced large amounts of money to Messrs. M. K. M. O. Sugar Mills (Private) Limited, Munderwa, District Basti. For the assessment year to which these proceedings relate a sum of Rs. 3,05,830 (principle) and another sum of Rs. 64,020 (interest), in all a total of Rs. 3,69,850, was due to the assessee from Messrs. M. K. M. O. Sugar Mills (Private) Ltd. The assessee filed a suit for the recovery of this amount. This suit was compromised by the parties and a compromise decree was passed which contained the following recital:

(3.) IN the present case it is clear from the facts stated by the Tribunal that the relationship of debtor and creditor between the assessee and Messrs. M. K. M. O. Sugar Mills (Private) Ltd. had come to an end. The operative portion of the decree clearly shows that the amount of debt had been satisfied (the decree uses the word "satisfied"). It is true that another mortgage deed was executed in favour of the sons of the karta of the assessee. The result of this transaction was that a new debt came into existence payable by Messrs. M. K. M. O. Sugar Mills (Private) Ltd. to the sons of the karta of the assessee. We would like to point out that the assessee in the present case is not the karta of the Hindu undivided family but the Hindu undivided family itself. Consequently, if another mortgage deed had been executed in favour of the sons of the karta of the assessee it cannot be said that there is any relationship of debtor and creditor between the assessee and Messrs. M. K. M. O. Sugar Mills (Private) Ltd. All the cases relied upon by the learned counsel for the assessee are distinguishable as they were cases of substituted security and the present is not. It is a case where the debt stood fully satisfied.