HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 161 / 2017 Pr Commissioner Of Income Tax Jaipur-Ii ----Appellant Versus M/S Modern Threads (I) Ltd ----Respondent For Appellant(s) : Mr. K.D. Mathur for Mr. R.B. Mathur HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 02/06/2017 1. issue is covered by decision of this Court in tax Appeal No.144/2010, 145/2010 and 146/2010 decided on 26 th April, 2017 wherein it has been held as under:- "Counsel for appellant contended that issue is now squarely covered by decision of Delhi High Court in Commissioner of Income Tax vs. Jindal Equipments Leasing and Consultancy Services Ltd. reported in (2010) 325 ITR 87 (Delhi) wherein it has been observed as under:- "7. We do not find any merit in this preliminary submission of learned Counsel for assessee. assessing officer had made addition in terms of Section 41(1) of Act read with Section 28(i) of Act, which was upheld by Commissioner (Appeals). No doubt, Tribunal has held that Section 41(1) does not apply to which legal position is constituted (sic-conceded) by learned Counsel for revenue before us, revenue still wants that addition be sustained under provisions of Clause (iv) of Section 28 of Act. revenue is not disputing facts on basis of which decision of Tribunal is based. Submission is that on these very facts, provisions of Section 28(iv) of Act shall be attracted. It is pure question of law and therefore, amended ground as raised by revenue can be allowed. position in MCorp Global (P) Ltd. (supra) was entirely different. In that case, transaction in (2 of 4) [ITA-161/2017] question was treated as lease transaction in earlier assessment years and depreciation was granted on that basis. However, in assessment year in question, same very transaction was treated as financial transaction and depreciation was disallowed. It was in this backdrop, Supreme Court opined that depreciation given to assessee could not be withdrawn, (sic) when finding of fact that transaction in question was leased and not financial transaction had become final and had not been challenged. 8. With this, we proceed to examine this aspect on its own merit, viz., whether provisions of Section 28(iv) of Act are attracted in given case. Thus, what is to be seen is that as to whether written off amount of Rs. 1,46,53,065 in its books of accounts by JSPL amounts to value of any benefit or perquisite whether convertible into money or not can be treated as "profits and gains from business". prerequisites for attracting said provisions are: (i) Benefit or perquisite arising in course of business is of nature, other than cash or money. It is for this reason expression "whether convertible into money or not" is mentioned in Clause (iv). Bombay High Court has interpreted this very Clause in case of Mahindra & Mahindra Ltd. v. CIT MANU/MH/0199/2003 : (2003) 261 ITR 501 (Bom) in following manner: The-income which can be taxed under Section 28(iv) must not only be referable to benefit or perquisite, but it must be arising from business. Secondly, Section 28(iv) does not apply to benefits in cash or money see CIT v. Alchemic (P) Ltd. MANU/GJ/0053/1980 : (1981) 130 ITR 168 (Guj). 4.1 same view taken by Madras High Court in Commissioner of Income Tax vs. M/s Innvol Medical India Ltd. (2013) 219 Taxman 123 (Mad); Iskraemeco Regent Limited (Originally Seahorse Industries Ltd. and subsequently in Iskraemeco Seahorse Ltd.) vs. Commissioner of Income Tax (2011) 331 ITR 317 (Mad); Mahindra and Mahindra Ltd. vs. Commissioner of Income Tax and Commissioner of Income Tax vs. Mahindra and Mahindra Ltd. (2003) 261 ITR 501 (Bom) and other judgment of Bombay High Court in CIT vs. Xylon Holdings (P) Ltd. in ITA No.3704/2010 decided on 13.9.2012 and decision of Gujarat High Court in Commissioner of Income Tax-I vs. Gujarat State Fertilizers and Chemicals Ltd. (2013) 217 Taxman 343 (Guj.). 5. Counsel for department Mr. Mathur has supported judgment of Tribunal and contended that in view of observations made by Supreme Court in (3 of 4) [ITA-161/2017] Polyflex (India) Pvt. Ltd. vs. Commissioner of Income Tax (2001) 251 ITR 527 wherein it has observed as under:- We are inclined to think that in case where statutory levy in respect of goods dealt in by assessee is discharged and subsequently amount paid is refunded, it is first clause that more appropriately applies. U will not be case of benefit accruing to him on account of cessation or remission of trading liability. U will be case which squarely falls under earlier clause, namely, "obtained any amount in respect of such expenditure". In other words, where expenditure is actually incurred by reason of payment of duty on goods and deduction or allowance had been given in assessment for earlier period, assessee is liable to disgorge that benefit as and when he obtains refund of amount so paid. consideration whether there is possibility of refund being set at naught on future date will not be relevant consideration. Once assessee gets back amount which was claimed and allowed as business expenditure during earlier year, deeming provision in Section 41(1) of Act comes into play and it is not necessary that Revenue should await verdict of higher Court or Tribunal. If Court or Tribunal upholds levy at later date, assessee will not be without remedy to get back relief. 5.1 He also relied upon decision of Supreme Court in CIT vs. T.V. Sundaram Iyengar and Sons Ltd. (1996) 222 ITR 344 wherein it has been held as under:- principle appears to be that if amount is received in course of trading transaction, even though it is not taxable in year of receipt as being of revenue character, amount changes its character when amount becomes assessee's own money because of limitation or by any other statutory or contractual right. When such thing happens, commonsense demands that amount should be treated as income of assessee. assessee had received deposits in course of its business which were originally treated as capital receipts. Some of deposits were neither claimed by nor returned to depositors. There is no dispute that deposits were received in course of carrying on of business of assessee. Although it was treated as deposit and was of capital nature at point of time it was received, by influx of time money has become assessee's own money. What remains after adjustment of deposits has not been claimed by customers. claims of customers have become barred by limitation. assessee itself has (4 of 4) [ITA-161/2017] treated money as its own money and taken amount to its profit and loss account. There is no explanation from assessee why surplus money was taken to its profit and loss account even if it was somebody else's money. In fact, as Atkinson, J. pointed out that what assessee did was commonsense way of dealing with amounts. Therefore, amount was taxable as trade receipt in hands of assessee. 6. We have heard counsel for parties. 7. In view of above, even otherwise loan which was taken was capital investment and always treated in capital account as liability and if it is so, it will naturally go as wiping out capital liability. 8. In that view of matter, contention taken by appellant is required to be accepted. view taken by CIT(A) is required to be restored and that of tribunal is required to be reversed. 2. In view of above, no substantial question of law arises. 3. appeal stands dismissed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. b.m.Gandhi/5 Pr. Commissioner of Income-tax, Jaipur-II v. Modern Threads (I) Ltd