CH.G. KRISHNAMURTHY, SENIOR VICE PRESIDENT Order This is appeal filed by assessee, Bhai Mohan Singh, objecting to inclusion of sum of Rs. 1,20,670 in his total income. This inclusion has long history behind it and unless we refer to it, appreciation of contentions raised both for and against inclusion will become obscure. 2. assessee, Bhai Mohan Singh, is son of Bhai Gian Chand, who died on 18th Aug., 1954. Bhai Gian Chand and Bhai Sunder Das were brothers and sons of Bhai Hans Raj. Bhai Sunder Das died on 27th Oct., 1963, leaving behind him five sons and daughter. Bhai Mohan Singh is only son of his father, Bhai Gian Chand. He has three sons but no daughter. 3 . Bhai Gian Chand and Bhai Sunder Das, father and uncle of assessee Bhai Mohan Singh, carried on extensive construction business in Rawalpindi Division of undivided India. They joined in business sometime in 1922. business ran into several crores. Bhai Gian Chand and Bhai Sunder Das came to India sometime in 1946. Sometime in March 1954, Bhai Sunder Das, with view to avoid attachment of his assets for payment of huge income tax liabilities that came upon him in respect of income earned in Pakistan, got deposited by Bhai Gian Chand Rs. 15 lakhs in names of his two daughters, styled them as gifts. That amount was first deposited in State Bank of Calcutta, in fixed deposits, in names of Smt. Govind Jaswant Singh and Karan Singh. Those amounts moved from place to place and from hand to hand and eventually came into possession of Bhai Mohan Singh, assessee before us, only to be held as for and on behalf of those persons as trustees. That sum of Rs. 15 lakhs came into possession of Bhai Mohan Singh, as and by way of trust for and on behalf of daughters, was fact accepted by ITO in income-tax assessments. In estate duty proceedings taken on death of Bhai Sunder Das, on admission of assessee in his income-tax proceedings that he was only nominee insofar as these sums were concerned, Department was satisfied and treated money as belonging to Bhai Sunder Das. relevant observations made by Asstt. CED in his order are not reproduced here, as they are not considered necessary. Out of sum of Rs. 15 lakhs, Bhai Mohan Singh returned to those parties, on various dates, starting from 2nd Nov., 1954 and ending with 21st March, 1956 amounts amounting to Rs. 4,35,000, leaving balance of Rs. 10,33,000 due by 31st Oct., 1956. This is figure admitted as owing to them by members of late Bhai Sunder Das in certificate issued on 5th Sept., 1966. 4 . This sum, which came to assessee in circumstances stated above, was utilised by him in making fixed deposits in his own name, on which he earned interest. In account books maintained by assessee, there was separate account opened for Bhai Sunder Das, to which account these sums were credited and also interest received (paper book, pp. 17 to 19). net effect of crediting of interest and withdrawals made from time to time for payment of income-tax, etc., resulted in amount swelling to Rs. 17,89,163 by 31st March, 1972. 5. For asst. yr. 1973-74, assessee filed return of income admitting income of Rs. 1,01,470. In Part III of return, assessee showed interest of Rs. 1,20,670 received from fixed deposits, made out of money, referred to above. Showing it under head 'Income from other sources ' he did not include it in total income and claimed it to be not taxable on ground that it was held in trust on account of Bhai Sunder Das. It was also stated that this amount was taxable in hands of Bhai Sunder Das as in past. When ITO asked why this sum should not be included in assessment, assessee replied that information regarding this was already submitted in past and that Department had accepted this money as belonging to Bhai Sunder Das and his estate. It was also pointed out that Tax Recovery Officer (TRO) treated assessee as garnishee for sums owed by Bhai Sunder Das & Group, and assessee paid Rs. 38,707 at one time, Rs. 9,019 at another time and Rs. 7,177 at yet another time. This showed that it was accepted by Department that money did not belong to assessee but to estate of Bhai Sunder Das, and since money did not belong to him, interest on fixed deposits did not belong to him. It was further pointed out that in case ITO should entertain doubt, legal heirs of Bhai Sunder Das could be summoned and assessee even deposited requisite diet money. could be summoned and assessee even deposited requisite diet money. 6. ITO was not prepared to accept this contention. He held that Bhai Sunder Das died in 1963 and assessee did not accept liability to anybody. There was, thus, no debt owed by assessee on last day of previous year relevant to year under assessment to anyone. ITO further pointed out that question of calling one for evidence would arise only when confirmatory letters were filed by those persons. Since no confirmatory letters were filed in this case, question of calling them would not arise. Relying upon Supreme Court decision in case of H.E.H. Nizam's Religious Endowment Trust vs. CIT (1966) 59 ITR 582 (SC), ITO observed that onus to establish exemption was on assessee, who claims exemption of any class of income and that onus was not discharged in this case. He also dealt with merits of assessee's claim. assessee's claim was that sum of Rs. 17,89,183 was debt owed by him to Bhai Sunder Das as on 31st March, 1973, and that money was held by him under trust. To this, objection of ITO was that, there was nothing by way of documentary evidence to establish that money was held by assessee under trust. No legal obligation existed binding assessee to pay this money to estate of Bhai Sunder Das. If at all there was any legal obligation, as contended for by assessee, it could only be obligation created by assessee himself and self-imposed obligation could not operate as superior overriding title, diverting income at source. assessee contended before ITO that it was not fair and proper on part of Department to call for details of this sum and other evidence when, in all previous assessment years, said amount was not included in assessment. There were no fresh facts or materials or evidence coming into possession of Department to take different view. But ITO took view, that even if it was conceded that amount was owing by assessee to estate of Bhai Sunder Das, debt became barred by limitation. Various authorities, cited by assessee to contrary, did not find favour with ITO. It may be noticed here that assessee's submission that even though liability to pay said sum to estate of Bhai Sunder Das existed on death of Bhai Sunder Das in 1963, there arose quarrels among members of that family ; with result assessee was not certain as to who, are legal representatives who should receive money and who could give valid discharge for debt on behalf of all. assessee requested them to let him know to whom money should be paid. Since no reply was coming to assessee, he withheld repayment of debt to them, but held same on trust for them. assessee never denied liability to pay to them, but only wanted person to whom money should be paid. There is reason for assessee to entertain doubts as to legal heirs of Bhai Sunder Das. At one time, it was claimed that there was partial partition in respect of this particular book debt on 31st March, 1956, amongst members of family. At another point of time, Smt. Somawanti, widow of Bhai Sunder Das, claimed that she was entitled to one-seventh of estate of Bhai Sunder Das according to will. Thus, doubt arose as to whether heirs of late Bhai Sunder Das were claiming money on basis of alleged partial partition in family or on basis of alleged will or on grounds of survivorship. assessee further submitted that he was also not aware, whether any probate of alleged will was taken from Court. This incapacity and disability to make repayment, in spite of his best intentions, was construed by ITO as amounting to denial of liability. To prove point that legal heirs of Bhai Sunder Das were demanding payment and assessee was complying, he referred to orders served on him by TRO demanding assessee to clear income-tax demand owing by Bhai Sunder Das out of aforesaid sum, which assessee promptly complied with. TRO could not have suo motu demanded from assessee payment of tax dues of Bhai Sunder Das, unless so requested for by legal heirs and assessee would not have complied with unless he accepted liability as subsisting. But ITO stuck to his line of argument that debt became barred by limitation and there was no legal liability and creditors of assessee were not even in position to enforce their rights, by filing suit for recovery of aforesaid debt. liability, according to ITO, which was not legally enforceable, could not be allowed as deduction. What influenced ITO to suppose that debts became barred by limitation was fact, that though books of account showed that there was debt owing by assessee to Bhai Sunder Das, there were no payments made after 1957 except for payment of income tax. ITO believed that if assessee was honest enough to repay money, nothing prevented him from depositing money in Court and requesting Court to distribute it among legal heirs of Bhai Sunder Das. Since assessee did not adopt this course, it showed that assessee was not owing money to estate of Bhai Sunder Das. In attempt to prove that assessee had intention of repaying debt, it was pointed out to ITO that assessee had kept equivalent money separately in bank account, and had not used it for business purposes. According to ITO, this fact did not establish that assessee had intention of making payment to creditors. He attributed allowance in past assessments to mistaken appreciation of facts and since principle of res judicata did not apply to income-tax proceedings, he justified course of departure. In this manner, entire sum of Rs. 1,20,670 was added back to income of assessee. 7. Aggrieved by this decision, assessee preferred appeal to CIT (A). That Officer heard case at length. arguments addressed before CIT (A) were summarised by him as under : (i) fact that debt was owed by Bhai Gian Chand to Bhai Sunder Das was established ; (ii) facts that assets corresponding to this debt passed to assessee was established by order of AAC dt. 1st Jan., 1962, for asst. yr. 1947-48, in case of estate of Bhai Sunder Das ; (iii) Therefore, legal liability to discharge debt and make over interests earned on funds devolved on assessee under art. 288 of Mulla's Hindu Law. This liability was never disputed by assessee, which is to be inferred not only from substantial payments that are made by assessee but also because liability had always been acknowledged by assessee in his books and further he, by letter dt. 23rd June, 1971 addressed to manager, estate of Bhai Sunder Das, admitted that sums aggregating to Rs. 16,18,383.86 was held by him as on 31st March, 1971 in trust on behalf of estate of late Bhai Sunder Das ; (iv) That this debt should not be viewed as loan but as deposit. There was no duty cast upon depositee to find out depositor to repay money, unlike in case of debtors, who are to go out in search of creditors as in case of loans. limitation to sue depositor would commence only after person, who had made deposit, seeks return of deposit and creditor fails to honour it. There was no demand by creditor. There was doubt in creditor's mind as to who are claimants entitled to repayment. claimants never established their eligibility for repayment, either by producing probated will or succession certificate nor legal representatives of Bhai Sunder Das ever joined together to claim repayment of amount, Consequently, limitation did not start at all. Therefore, question of liability, getting extinguished or becoming barred by limitation or debt becoming unenforceable at law, did not arise. Reliance was placed for these propositions on ss. 21 and 22 of Limitation Act, 1963, and on decision of Privy Council in Mohd. Akbar Khan vs. Avtar Singh AIR 1956 PC 171 (sic) and several other cases ; (v) Once moneys were deposited with assessee by creditor, it is open to assessee to deposit this money in his own name and that does not prove that moneys belonged to assessee ; and (vi) Past history of case demonstrated that it created obligation in nature of trust within meaning of ss. 80 to 94 of Indian Trusts Act, 1882, and, consequently, assessee has no beneficial interest in that amount except to hold it on trust for legal representatives of Bhai Sunder Das and, consequently, neither deposits nor interest earned thereon belonged to assessee. 8 . After considering these points, CIT (A) framed following issues as arising out of appeal : (i) Was amount of Rs. 17,68,000, determined as liability of Bhai Gian Chand to Bhai Sunder Das, in nature of deposit and, consequently, was sum of Rs. 10,33,000 which was outstanding on this account on 1st April, 1956, from Bhai Mohan Singh to his uncle, also in nature of deposit ? (ii) If liability was not deposit, had it become barred by limitation and, hence, unenforceable against Bhai Mohan Singh and if so, by what time ? (iii) Even if it had become unenforceable against Bhai Mohan Singh, was it revived by letter dt. 23rd June, 1971 signed by one Ram Narain for Bhai Mohan Singh and addressed to manager of estate of late Bhai Sunder Das ? (iv) Did liability at any time create obligation in nature of trust on assessee under operation of provisions of s. 94, r/w s. 95, of Indian Trusts Act ? (v) Was any overriding diversion of income created as result of such obligation in nature of trust ? On each of these issues, conclusion of CIT (A) was against assessee. He was of opinion that for sum to become deposit within meaning of s. 22 of Limitation Act, there must be actual handing over of money by way of deposit and there was nothing in this case to show that actual money was ever handed over. Sec. 22 applies to moneys deposited under agreement which shall be payable on demand, and in this case there was no evidence of deposit of money nor was there any agreement to show that money was repayable on demand. Since it was not deposit, it can only be taken as loan and account maintained by assessee showed no payments after 1960. There was payment made in 1968 but according to CIT (A), this was ex gratia payment and not payment contemplated under Limitation Act. other payments made related to income tax. They could not, therefore, be taken as repayments. Thus, liability to repay money extinguished and loan ceased to become unenforceable. Then letter of 23rd June, 1971, according to him, did not revive debt. That letter was only acknowledgment of debt within meaning of s. 18 of Limitation Act, and could not be construed as holding any promise to pay debt. Nor could it be said to constitute valid agreement, as neither there was any offer to pay that money nor any acceptance by either side. He held that no constructive trust was created, within meaning of s. 94 of Indian Trusts Act. According to CIT (A), for s. 94 to apply, assessee must be in possession of property. In his view, there was no connection between money said to have come into possession of assessee in 1954-55 and fixed deposit. In absence of connecting link, s. 94 could not be invoked. This theory of extinguishment of debt was also used to turn down assessee's contention that there was legal obligation created by course of events amounting to constructive trust within meaning of s. 94. He also held that under circumstances of case, existence of overriding title diverting income at source, did not simply arise. 9 . main reason that prevailed with CIT (A) to hold against assessee, on all these points, is his understanding that there were no repayments made after 1960 which extinguished in toto debt, with consequence that no debt existed so as to create obligation to pay interest. 10. We will have now to deal, whether this understanding of CIT (A) is correct in law and based on facts. effort of R. Ganeshan, appearing on behalf of assessee, was to prove, that on each of these issues, understanding of CIT (A) was erroneous. First and foremost, point urged was that it is factually incorrect to state that there were no repayments. By filing copy of account of Bhai Sunder Das in books of assessee, he sought to prove that there were repayments even as late as 1973 though in partial discharge of income-tax liabilities of Bhai Sunder Das. repayments made to IT Department was payment made by assessee to Bhai Sunder Das and it went to reduce liability. He submitted that it is not object with which payment was made that is relevant as much as factum of repayment. He then submitted that assessee was admitting liability to estate of Bhai Sunder Das in his account books, by claiming it as debt owed to that estate even till today. acceptance by TRO on basis of averments of legal representatives of Bhai Sunder Das that so much of money was owing by assessee to that group, was itself proof that debt was very much alive and did not cease to be debt. Mr. Ganeshan produced before us proceedings that took place before TRO. He urged that there was no mention in order of CIT (A) as to why in past years, Department had accepted it as liability, allowed deduction for interest, and why it deviated this year when facts remained same. He argued that there was total misappreciation and misunderstanding of sections of Limitation Act as well as Indian Contract Act, 1872. He submitted that to create obligation in nature of trust, within meaning of Indian Trusts Act, it is not necessary that there should be document. From conduct of parties, obligation in nature of trust can be inferred and in fact ss. 80 to 94 envisaged such constructive trusts and enumerated various possibilities, in none of which writing is necessary or even contemplated. Similarly, when debt was acknowledged by assessee and continued to be so, debt can never be said to have been barred by limitation. He filed before us voluminous paper-book to show various circumstances and occasions when assessee had acknowledged debt either in writing or by making payment or in his income-tax returns as well as wealth-tax returns. evaluation of this evidence by Department is miscarriage of justice. Much was made of fact that assessee denied liability to legal representative of Bhai Sunder Das. statements made by Bhai Sunder Das at different occasions were also construed by Department as admission on their part that assessee denied liability to them. Ganeshan contended that point missed was owing to disputes among legal representatives of Bhai Sunder Das, it became impossible for assessee to identify and determine legal representatives eligible for repayment of debt, so as to get valid and complete discharge of debt. assessee never denied liability to estate of Bhai Sunder Das though he said that to any of single individual legal representative he would not be in position to pay. When amount involved is so huge, Ganeshan submitted that assessee could not be expected to make payment to any one of legal representatives claiming for all or on behalf of all and incur risk of law suits and expose to litigation. assessee is bound to satisfy himself in this matter and insist upon proper proof and when legal representatives do not come forward with required proof and if they take time to settle matter amongst themselves, Ganeshan argued that it cannot be said that debt ceased to exist or assessee denied liability. Assuming that assessee denied liability to repay money to estate of Bhai Sunder Das, in law, such denial will take assessee nowhere, because legal representatives can always file suit in Court of law and recover money. Even if it is held that filing of suit i s barred by time, debt is never extinguished. Department having accepted in past that debt existed and allowed interest, it is not open t o Department to turn round and say on same evidence that no debt existed. Ganeshan has again pointed out that this matter when it came before Tribunal once, Tribunal set aside matter and restored it to file of TRO with direction to examine legal representatives and then arrive at fresh conclusion. This was not done by Department at all, and whosoever was examined had only said that Bhai Mohan Singh denied payment to him or to her but not to estate. assessment now made cannot be said to be in pursuance of directions given by Tribunal but in way in violation thereof. There is another point, that is worthy of note. ITO relied on order of CIT (A) for asst. yr. 1972-73 to support inclusion of income. That was reopened assessment under s. 147 of IT Act, 1961 (' Act '). appeal was confirmed by CIT (A), holding that s. 147 was rightly applied. Merits were not gone into. ITO was not, therefore, justified in relying upon that order. Our attention is also invited to estate duty assessment made on Bhai Sunder Das, wherein Asstt. CED held that debt in question was liability owed by assessee to that estate. There was intention to repay debt, which was more than evident from surrounding circumstances and entries passed in accounts more particularly by earmaking this sum for repayment to estate of Bhai Sunder Das. He also relied upon provisions of Limitation Act to clear misappreciation of legal position entertained by CIT (A). 11. learned Departmental Representative strongly relied on orders of authorities below, more particularly that portion of order where denial by legal heirs was emphasised. He reiterated that in absence of any payment, no debt existed, and in case of non-existent debt, no obligation in nature of trust ever arose. At one stage it was pointed out that assessee was trying of file interpleader suit to decide legal heirs, to whom amount could be paid. Relying upon that, he submitted, that it showed that assessee did not accept liability but we are unable to see how it is. Relying upon order of Asstt. CED in case of Bhai Sunder Das, he sought to show that there could be no deposit at all. Then he took us through statement given by Bhai Mohan Singh before CIT (A) and particularly question Nos. 62 and 66 and endeavoured to show that assessee denied liability. To question No. 62, answer elicited was that assessee denied liability to anyone of legal representatives named therein individually. In reply to question No. 66, he again repeated same thing. learned Departmental Representative, R.N. Bara, argued, basing on these replies, that assessee denied liability and cannot now be heard to say that liability existed so as to contend that interest earned on investment of this liability in fixed deposit is income held in trust on behalf of legal representatives. 1 2 . We have carefully considered matter and, in our opinion, Department is not justified at all in saying that liability to pay this sum to legal representatives of Bhai Sunder Das did not exist. careful reading of order of CIT (A) as well as ITO shows, that they proceeded on assumption that liability to pay amount to legal representatives of Bhai Sunder Das ceased to exist long back, mainly for reason that there were no payments made. It is to be noted in this context that on 5th Sept., 1966 for and on behalf of member of Bhai Sunder Das & Sons, erstwhile HUF, certificate was given which was in following terms : " This is to certify that sum of Rs. 14,68,000 was due to us from late Bhai Gian Chand, when he died on 18th Aug., 1954. Subsequently, his son, Bhai Mohan Singh, undertook liability of his father, he being legal heir of deceased, and he paid following amounts after his death : . Rs. 2-11-1954 15,000 18-11-1954 20,000 19-11-1954 1,00,000 21-2-1955 1,00,000 2-7-1956 1,00,000 30-1-1956 50,000 21-3-1956 50,000 . 4,35,000 and, thus balance remained payable to us as Rs. 10,33,000 on 31st March, 1956. For and on behalf of DT. 5th Sep., 1966 members of late Bhai Sunder Das & Sons, erstwhile HUF." This shows that legal representatives of Bhai Sunder Das were admitting that sum of Rs. 10,33,000 was owing to them even as late as 5th Sept., 1966. On 22nd Nov., 1968, Bhai Surjit Singh Sabharwal son of Bhai Sunder Das wrote letter to assessee from Calcutta. In this letter, he pointed out that he collected cheque on 10th Nov., 1968 and expressed his thanks and gratitude personally on his behalf and on behalf of his brothers for payment. Further, it was mentioned in that letter, that they needed Rs. 2.5 lakhs more to complete hotel project and requested for releasing at least Rs. 1 lakh by 20th Dec., 1968. Apart from this, there was very crucial and telling paragraph in this letter which should clear cobwebs of confusion that set in around this enigma : " When you get time, please do keep in mind to instruct bank to release interest on fixed deposit as and when it is due. I had talk with Swinder Singh yesterday on telephone, who is at Ranchi. Please instruct your office to let Swinder Singh know, how amount is to be credited." This shows that Surjit Singh as well as Swinder Singh, sons of Bhai Sunder Das, know full well that fixed deposit made by Bhai Mohan Singh in his name, which is now in dispute, belonged to them and that interest on it was due to them and request was made to release interest. What would this show other than admission by legal representatives of Bhai Sunder Das that huge amount was owing to them from Bhai Mohan Singh. Bhai Mohan Singh, it is to be remembered, did not even once contradict at any point of time that no money was owing from him to them. It is no doubt true in several statements recorded by TRO. Bhai Mohan Singh had repeatedly said that he did not give any money to any individual representative, but he never denied liability to estate of Bhai Sunder Das. On contrary, be categorically admitted it. His explanation that he had to resort to this line of action, is understandable. He was not sure of legal representatives and they were indeterminate. He may not get valid discharge. This apprehension entertained by assessee cannot be minimised or ignored. That they are adopting different stands, is proved by fact that at one time they were saying that there was partition in which this debt was divided while at other time they were claiming that there was will. At best, it can be said that assessee was taking advantage of disputes in their family or loophole in legal position, to postpone payment as long as he could. Maybe, in process, he is getting advantage of use of money that does not mean that liability got extinguished merely because payment was postponed or delayed. 1 3 . Further, there is enough evidence on record to show by way of acknowledgment given by legal representatives of Bhai Sundar Das that they were receiving payments from assessee on several occasions and it is unnecessary for us to refer to each one of them. We may just refer to another piece of evidence which is at p. 6 of paper-book, which is again letter written by Bhai Swinder Singh, for and on behalf of Bhai Sunder Das & Sons, to assessee on 12 th May, 1969 where receipt of letter dt. 22nd April, 1969 was acknowledged, along with original certificates for deduction of tax at source on account of income-tax under s. 203 of Act on account of interest amounting to Rs. 13,536.89 and Rs. 71,095.60, on amount held by assessee on their behalf. This shows again that even on 12 th May, 1969, understanding between parties as well as their conduct was that assessee was holding money on account of Bhai Sunder Das & Sons, that interest earned on fixed deposits belonged to them and tax deduction certificates were being passed on to them. Now, that letter also shows that receipt was enclosed by them to Bhai Mohan Singh, acknowledging payment of balance amount of interest. How deep and real are disputes between legal representatives of Bhai Sunder Das and how careful assessee was in getting proper and due discharge for amount paid by him to them, is indicated by agreement signed by them and given to assessee, which is at p. 7 in paper-book : " We undersigned (beneficiaries) of estate of Bhai Sunder Das, need money for purposes, needs and benefit of our respective F, and Bhai Mohan Singh has paid us Rs. 84,632.01 (Rupees Eighty-four thousand six Mohan Singh has paid us Rs. 84,632.01 (Rupees Eighty-four thousand six hundred thirty-two and paisa one only to meet same. We hereby jointly acknowledge receipt of said sum of Rs. 84,632.01 (Rupees eighty four thousand six hundred thirty-two and paisa one) only received from Bhai Mohan Singh, son of late Bhai Gian Chand, as per details below on account of interest for period 1st April, 1968 to 3rd March, 1969 of R s . 71,095.62 and for period 4th April, 1968 to 4th April, 1969 of Rs. 13,536.39 as amount held by him in trust, and we hereby undertake to apportion same according to our mutual arrangement. Bhai Mohan Singh will not be responsible in any manner for any differences amongst brothers in matter of apportionment of amount. Rs. . 10,000.00 on 22-3-1967, by cash to Bhai Sardar Singh. on 19-11-1968, by cheque in name of 10,000.00 Bhai Sunder Das & Sons. on 5- 12 -1968, by cheque in name of 5,000.00 Bhai Sunder Singh. 2,003.13 interest on above up to 31-3-1969. by delivery of original tax deduction 8,464.08 certificates for amounts of tax deducted at source out of interest. 29,164.81 vide cheque No. 553361, dt. 30-4-1969. 84,632.02 . (sic) We further hereby absolve Bhai Mohan Singh of any obligation to any claim that may be made by any other person, claiming under Bhai Sunder Das, settlement of which would be entirely our responsibility. Swinder Singh For self and Karta on behalf of family. Bhai Trilochan Singh For self and Karta on behalf of family. Bhai Balbir Singh For self and Karta on behalf of family. Bhai surjit Singh For self and Karta on behalf of family. Bhai Sardar Singh For self and Karta on behalf of family." Then in books of assessee, there is account opened for Bhai Sundar Das which opened with credit balance of Rs. 14.68 lakhs on 19th Aug., 1954. interest on that amount was credited every year and payments made were debited so that by 31st March, 1972, credit balance was of Rs. 17,89,163 after crediting interest of Rs. 1,20,616 on 31st March, 1972. amounts paid to ITO on behalf of Bhai Sunder Das & Sons was also debited to this account. copy of account up to 31st March, 1975 was also given to us, which showed credit balance of Rs. 19,50,991.02 by 31st March, 1975 after crediting interest of Rs. 96,162. sum of Rs. 9,019 was debited to this account on 6th Sept., 1974, which represented arrears of income-tax demand of Bhai Sunder Das for 1960-61 paid to ITO. There were also payments made earlier towards income-tax. This shows position of this account in books of assessee. We have already shown that legal representatives of Bhai Sunder Das have never stated that no money was owing to them from assessee and on contrary, there were transactions between assessee and them and acknowledgments given by them and they have also said more than once that money was held by assessee in trust for them. Secondly, we have also seen that assessee is making payments to IT authorities in discharge of tax liabilities of legal representatives of Bhai Sunder Das. Thirdly, assessee is admitting this liability in its accounts. question then is, can it, in this background, be said that debt ceased to exist ? Can payments made to IT authorities by assessee be ignored ? In our opinion, payments made to IT authorities on behalf of legal representatives of Bhai Sunder Das are to be deemed to be payments made to assessee. There cannot be any quarrel on this proposition. Act clearly provides for this situation in section. Therefore, limitation does not end from 1968, as supposed by CIT (A), but from last date of last payment which is 6th Sept., 1974. There is, therefore, no question of debt getting extinguished or becoming unenforceable. We have also shown that assessee never denied liability to pay money to estate of Bhai Sunder Das & Sons, although he was denying payment to any individual representative all because he wanted to save his position and secure proper and valid discharge for payment made. In case of payment made to income-tax, law deems it valid and proper discharge. But such redemption is not possible according to assessee's stand, if payments are made individually to anyone of legal representatives. He wanted them to come collectively to him for payment and no doubt he had taken positive advantage of disunity, if at all that existed in their group. agreement extracted above also shows that on occasions they all came together to give valid discharge and that discharge was in end of 1969. It is, therefore, totally incorrect to say that debt extinguished and became unenforceable from 1963 onwards. That apart in wealth-tax assessments for all previous assessment years amount claimed was being allowed as deduction and interest income was being excluded in income-tax assessment. abrupt departure this time, for which there is no valid reason except suspicion and partial appreciation of evidence, is not perhaps warranted. 14. Sec. 18 provides effect of acknowledgment in writing as follows : " 18. Effect of acknowledgment in writing. (1) Where, before expiration of prescribed period for suit or application in respect of any property or right, acknowledgment of liability in respect of such property or right has been made in writing signed by party against whom such property or right is claimed, or by any person through whom he derives his title or liability, fresh period of limitation shall be computed from time when acknowledgment period of limitation shall be computed from time when acknowledgment was so signed. (2) Where writing containing acknowledgment is undated, oral evidence may be given of time when it was signed ; but subject to provisions of Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received." This clearly says that where, before expiration of prescribed period for suit or application in respect of any property or right, acknowledgment is made in writing signed by party against whom such property or right is claimed, or by any person through whom he derives his title or liability, fresh period of limitation shall be computed from time when acknowledgment was so signed. Acknowledgment means definite admission of liability. It is not necessary that there should be promise to pay ; simple admission of debt is sufficient. Surrounding circumstances also can be taken into consideration in construing words used in writing B. Shambumal Gangaram vs. State Bank of Mysore AIR 1971 Mys. 156. In Official Liquidator vs. Bishan Singh 1968 All. L.J. 171 and Mohesh Lal vs. Busunta Kumaree 6 Cal. 340, it was held that where series of acknowledgments have been made, each within new period arising from previous acknowledgment and first is within three years of date of debt, debt is kept alive. All circumstances in case point to conclusion that there was unconditional acknowledgment of debt due to estate of Bhai Sunder Das and denial to pay to any one individual does not obliterate liability owing to estate but on contrary supports it. Even CIT (A) accepts that there was acknowledgment by letter dt. 23rd June, 1971 written by representative of assessee. This acknowledgment given on 23rd June, 1971 revives debt, if it is held that it was time-barred. further period of three years commences from 23rd June, 1971, which makes debt subsisting during relevant accounting year. acknowledgment of current account implies acknowledgment to have accounts settled and implies that promise to pay should balance turned out to be against person making it Bengal National Bank vs. Jatindra 56 Cal. 556. CIT (A) is therefore, in error in construing this letter as acknowledgment without promise to pay. promise to pay may even revive time-barred debts. acknowledgment can be made not only by assessee but also by his authorised representative. person, who wrote letter, has full authority of assessee and in any case, assessee did not deny it but on contrary admitted that it was on his behalf. In this letter, there was clear admission that said sum was being held on trust. Sec. 19 of Limitation Act may also be seen in this regard. It provides that where payment on account of debt or of interest on legacy is made before expiration of prescribed period by person liable to pay debt or legacy or by his agent duly authorised in this behalf, fresh period of limitation shall be computed from time when payment was made. It was in pursuance of this, IT Act provided that payment made to ITO or TRO, as case may be, and tax due to it will be deemed to be payment made to debtor in full discharge and this is why we say that when payment on account of income- tax was made to TRO, that was payment to be deemed to be payment to debtor and that gives fresh period of limitation and if we carefully compute each one of payments to IT authorities, it is before expiration of prescribed period. 15. We may also notice at this stage difference between deposit and loan. In case of loan, money passes from payer to payee at instance and for requirement or use of latter, while in case of deposit payee receives money at instance of payer and requirement or use of payee is not relevant fact for consideration. Surrounding circumstances, relationship of parties and character of transaction, are all factors decisive of whether transaction is deposit or money or loan Ram Janki Devi vs. Juggilal Kamalapat AIR 1971 SC 2551. In case of doubt, presumption is that transaction is deposit and not loan. depositee stands in fiduciary relation to depositor. It has been held in Kanyalal Supdubhai vs. Hiralal Deoram AIR 1947 Bom. 255 that where money is deposited in confidence, transaction is deposit made in trust and depositee stands in fiduciary relation to depositor and is liable to render account to depositor. In this case, history, and genesis of amount showed that this money was entrusted to care of Bhai Mohan Singh to be held in deposit for benefit of legal heirs, with view to evade attachment of same from income-tax. About origin, there is no dispute. This origin clearly indicates that money came to assessee by way of deposit and not by way of loan. essential requisite of loan is that money must come to assessee at his request and for his use, which was not case here. Therefore, there is enough evidence to show that this is only deposit and not loan and for deposit ; under s. 22, time of limitation runs from date when payment was demanded and in this case it was continuing debt. question of debt becoming extinguished or becoming unenforceable by operation of s. 22 does not arise. In our opinion, CIT (A) also is in error in holding that there is no constructive trust insofar as this money is concerned. Sec. 94 of Indian Trusts Act, quoted by him, clearly applies to facts of this case and assessee does hold this money in trust for legal representatives of Bhai Sunder Das and there is no escape from that situation. reason that there was no legal obligation, cannot be accepted because origin of this deposit and subsequent conduct clothe this transaction with legal obligation to hold money in trust. Looked at from any angle, it does appear that assessee did owe this money to Bhai Sunder Das & Sons and that liability did not extinguish and is enforceable at law and, therefore, live debt. Assuming for sake of argument that debt became unenforceable, then only remedy to file suit is barred and debt never ceased to subsist. This is well-settled law and we do not have to dwell on this subject. Thus, we arrive at position where creditor, Bhai Sunder Das & Sons, claims debt and continue to do so ; debtor, i.e., assessee admits liability and acts on that basis. There, how can debt be said to have extinguished. debtor in no case alters legal position, by terminating unilaterally liability. Since this is main reason, if not only reason (others being supporting reasons), that weighed with Revenue to hold that debt extinguished and liability to make over interest to Bhai Sunder Das & Sons ceased and since it has been found that debt existed, we hold that approach of Revenue is not correct. We, therefore, find it extremely difficult to agree with conclusions of Department. 16. We, therefore, hold that assessee's claim to exclude this interest from its income has to be accepted as in earlier assessment year and nothing has happened to deviate from past procedure. 17. In result, appeal is allowed. *** BHAI MOHAN SINGH. v. INCOME TAX OFFICER