Holding

Unclaimed deposits, though capital at receipt, become taxable business income when they are appropriated to the profit and loss account after the right to claim them is barred.

Summary

M/s T.V. Sundaram Iyengar & Sons Ltd. received deposits from customers in the ordinary course of its trade. The deposits were initially recorded as capital receipts (security deposits). When a portion of these deposits remained unclaimed for a long period, the company wrote them off to its profit and loss account. The Income Tax Officer treated the amounts as taxable income, but the Commissioner of Income Tax (Appeals) and the Tribunal held them to be capital receipts and deleted the addition. The Revenue appealed to the Supreme Court. The Court held that amounts received in the course of business, even if capital in nature at receipt, become taxable income when they become the assessee's own money because the claim becomes time‑barred and the company treats them as its own profit. Accordingly, the unclaimed deposits were to be added to total income. The Court allowed the Revenue's appeal.

Issues considered

Whether deposits received in the course of business, initially treated as capital receipts, become assessable as income when they are written off to the profit and loss account after the claim becomes time‑barred.

Legislation cited

Income Tax Act, 1961s. 256(2), s. 28(1), s. 41(1)

Subjects

Income TaxCapital receiptsRevenue receiptsUnclaimed depositsTime-barred claimsProfit and loss accountSection 28(1)Section 41(1)Business income

Judgment

COMMISSIONER OF INCOME TAX, MADURAI A
v.
MIS. T.V. SUNDARAM IYENGAR AND SONS LTD.

SEPTEMBER 11, 1996
B
(A.M. AHMADI, CJ., B.P. JEEVAN REDDY AND
SUHAS C. SEN. JJ.]

Income Tax Act 1961-Sections 28(1), 41(1)--Business Income-Capi-
tal Receipts-From trading transactions-Deposits received-{fnclaimed and C
time barred retained by the assessee-Treated as income of the asses-
see-Held, the money was received by the assessee in course of carrying on
its business-Although it was treated as deposit and was of capital nature at
the point of time it was received, by efflux of time the money had become the
assessee's own money-Assessee itself has treated the money as its own money
and taken the amount to its profit and loss account-Hence such amounts D
rightly taken as income for the purposes of Income tax.

The respondent assessee received deposits in the course of the
carrying on its business. The deposits were of capital nature at the point
of time of receipt by the assesseto and were treated as capital receipts. Some
of the deposits were neither claimed by nor returned to the depositor. E
During the assessment, the appellants found that the assessee had trans-
ferred certain amount to the profit and loss account of the company. It
was found that these amounts were not included in the total Income of the
assessee. The sums were stated to be credit balance standing in favour of
the customers of the ·company.· Since these balances were not claimed by F
the customers, the amounts were transferred by the assessee to the profit
and loss account. The Income Tax officer held that the surplus had arisen
as a result of trade transactions; the amounts had a character of income
and had to be added as income of the assessee for the purpose of income
tax assessment;
G
On appeal, the Commissioner of Income tax· deleted the additions
on the ground that the amounts were excess trading advances given by the
customer to the assessee, therefore they were not revenue receipts but
capital receipts; and when the assessee wrote back such a credit balance,
it did not constitute part ofits taxable income. The Tribunal dismissed the H
785
786 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A appeal preferred by the Revenue and also refused to make a Reference to
the High Court, as according to it no question of law arose in this case.

The High Court disposed of the application made to it under +.
S.256(2) and held that the matter stood concluded in the light of the !-"'

decision of the Madras High court in the case of Commissioner of Income
B Tax, Tamil Nadu-1 v, A. V.M. Ltd., (1984) 146, ITR 355. Aggrieved by the
High Court's order, the Revenue preferred the present appeal.

Allowing the appeal, this Court

HELD : 1.1. The amounts in question were not in the nature or
c security deposits held by the assessee for performance or contract by Its
constituents. The amounts were depleted by adjustments made from time
to time. The amounts were not given and retained as security to be retained
tlll the lulntment or the contract. The deposits were taken in course or the
trade and adjustments were made against these deposits In course or
D trade. Tlie unclaimed surplus retained by .the assessee was Its trade
receipt. The assessee itself had treated the amount as its trade receipt by •
bringing It to Its pront and loss account. (793-E; H; 794·A1 ~

Morley (H.M. Inspector of Taxes) v. Messrs. Tattersall, (1939) 7 ITR
316 CA, re.rerred to.
E
1.2. The assessee, because or the trading operation had become
richer by the amount which it transferred to its proftt and loss account.
The moneys had arisen out ol ordinary trading transactions. Although the
amounts received originally was not income but the amounts having
remained with the assessee for a long period, by lapse or time, the claim
F of the deposit became time barred and the amount attained a totally
different quality. It became a deftnite trade surplus. [796-8)
Punjab Steel Scrap Merchants Association Ltd. v. Commissioner of
Income Tax, Punjab, (1961) 43 ITR 164, referred to. ,

G 1.3., An amount received in course of trading transaction, even '<::::
though it is not taxable in the year of receipt as being of revenue character,
changes its character when th.e amounts becomes the assessee's own money
because oflimitation or by any other statutory or contractual right. When
such a thing happens, common sense demands that the amount should be
H treated as income of the assessee.
C.l.'L v. T.V.SUNDARAMIYENGARANDSONS LTD. [SEN,J.] 787

Punjab Distilling Industries Ltd. v. Commissioner of Income Tax, A
Simla, (1959) 35 ITR 519, referred to.

2.1. The money was received by the assessee Jn the course or carrying
on Its business. Although It was treated as deposit and was or cdpital
nature at the point of time It was received, by emux of time the money had B
become the assessee's own money. What remained after adjustment of the
deposits had not been claimed by the customers. The claims of the cus·
tomers have become barred by limitation. n1e assessee Itself has treated
the money as Its own money and taken the amount to Its pront and loss
account. n1ere Is no explanation from the assessee why the surplus. money
....
was taken to Its pront and loss account even If It was somebody else's C
money. In fact what the assessee did was the common sense way of dealing
with the amounts. [796·C·D]

Commissio11er of Income Tax, West Bengal, I v. I. V. S1111dersons and
Morgans, (1970) 75 ITR 433; Pioneer Co11solidated Company of India Ltd.
v. Commissioner of Income Tax, U.P., (1976) 104 ITR 686; Commissioner D
of /11come Tax, Tamil Nadu-1. v. A. V.M. Ltd., (1984) 146 ITR 355; Commis-
sioner of Income Tax, Bombay City-IV v. Batliboi and Co. Pvt. Ltd., (1984)
149 ITR 604 and Jay's 771e Jewellers Ltd. v. Com111issio11er of lnla11d Revenue,
29 Tax Cases 274, referred to.
E
CIVIL APPELLATE JURISDICTION: Civil Appeal ~o. 11864-67
of 1996.

From the Judgment and Order dated 6.11.89 of the Madras High
Court in T.C.P. Nos. 244-47 of 1989.
F
S.C. Manchanda, S.N. Terdol and R. Sathish for the Appellant.

A.T.M. Sampath and V. Balaji for the Respondent.

The Judgment of the Court was delivered by
G
SEN, J. Leave granted.

The amounts in dispute in this case are small 'and the tax effect is
even smaller. We would have declined to go into the dispute at this stage,
but for the fact that an interesting question of law is iilvol\red. ·H·
788 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A The income tax assessment of M/s. T.V. Sundaram Iyengar & Sons
Ltd. for the assessment years 1982-83 and 1983-84 were completed on 1st
August, 1984. The Income Tax Officer found that the assessee had trans-
ferred,,an amount of Rs. 17,381 to the profit and loss account of the
company during the accounting period ended on 31st March, 1982 (assess-
ment year 1982-83), and an amount of Rs. 38,975 during the accounting
B period ended on 31st March, 1983 (assessment year 1983-84). But these
.amounts were not included in the total income of the assessee. The sums
were stated to be credit balances standing in favour of the customers of
the company. Since these balances were not claimed by the customers, the
amounts were transferred by the assessee to the profit and loss account.
C There is no dispute that the amount was received by the assessee in course
of trade transactions. The Income Tax Officer was of the view that because
the surplus had arisen as a result of trade transactions, the amounts had a
character of income and had to be added as income of the assessee for the
purpose of income tax assessment.
D
The Commissioner of Income Tax (Appeals), held in his order that
since the parties were not claiming these amounts for a long time, the
asscssee wrote back these amounts by crediting them to profit and loss
account. Such an amount cannot lie treated as income either under Section
41(1) or under Section 28, since these were excess trading advances given
E by the clients to the assessee. In the first instance, these amounts were not
revenue receipts, but were capital receipts. When the assessee writes back
such a credit balance, it would not constitute part of his taxable income.
The additions were, therefore, deleted by the Commissioner of Income
Tax.
F
On further appeal, the Tribunal took the same view and rejected the
contention of the department that these amounts were essentially trading
receipts and were in a revenue nature and, therefore, were liable to be
included in the computation of assessee's taxable income. The tribunal took
note of the decision of Punjab H\gh Court in the case of Punjab Steel Scrap
G Merchants' Association Ltd. v. Commissioner of Income Tax, Punjab, 43
1.T.R. 164 but held that the decision of the Madras High Court in the case
of Commissioner of Income Tax, Tamil Nadu-1 v. A.V.M. Ltd., 146 I.T.R.
355 was binding upon it and, therefore, dismissed the appeal.

H An application· was made to the tribunal to refer the question of law

/
C.l.T. v. T.V.SUNDARAMIYENGARANDSONSLTD. [SEN,.!.] 789

arising out of the order of the tribunal to the High Court. The application A
was dismissed by the tribunal holding that no question of law arose in this
case. On further application to the High Court under Section 256(2), the
High Court held that the question now sought to be agitated was complete-
ly concluded by the d,ecision of that Court in the case of A. V.M. Ltd.
(supra). Hence this Appeal. B
It has been contended on behalf of the appellant that there is a
conflict of decisions among the High Courts on this question. Some of the
High Courts have taken the view that. if deposits taken by the company in
course of its trading operations were not refunded at all or in full, the
amounts retained by the assessee and tai>en to profit and loss account C
would constitute its income. The second view which has been adopted by
some other High Courts is that if the deposits taken were ?riginally of a
capital nature, its character will not change merely by lapse of time and
even when the amount is taken to the profit and loss account of the
assessee. The origin of the amouct may be the business activity of the
assessee. But every receipt in the business carried out by the assessee is D
not income.

It· has been urged that on review of the conflicting decisions of the
Tribunals, the following question of law raised by the Department should
have been referred to the High Court for its decision : E
Whether on the facts and in the circumstances of the case, the
appellate Tribunal is right in law in deleting the addition made by
the Income Tax Officer representing unclaimed sundry credit
balances written back to the.Profit & Loss Account by the assessee
during the previous year relevant for the assessment year under F
consideration?

It may be mentioned that three other questions of law on some. other
points decided by the Tribunal were directed to be referred to the High
Court under Section 256(2) of the Income Tax Act. Since the case relates G
to assessments for the assessment years 1982-83 and 1983-84, we have
decided to deal with and answer the question instead of directing a
reference to the High Court for its opinion. The assessee had received
deposits in course of its business which were originally treated as capital
receipts. Some of the deposits were neither claimed by nor returned to the
depositors. There is no dispute that the deposits were received in course H
790 SUPREME COURT REPORTS (1996) SUPP. 5 S.C.R.

A of the carrying on of the business of the assessee. The only point to be
decided is that even though the deposits were of capital nature at the point
of time of receipt by the assessee, could its character change by ef flux of
time? In the case of Morley (H.M. lllspector of Taxes) v. Messrs. Tattersall,
4:
(1939) 7 ITR 316 CA, it was laid down by Lord Greene that the taxability
,.
of a receipt was fixed with reference to its character at the moment it was
B received and that merely because the recepient treated it subsequently in
his income account as his own did not alter that character. This principle
of law is the basis of several judgments delivered on this issue by our courts.
In some cases, the principle laid down by Lord Greene has not been
followed because of special facts, but the principle as such has not been
c doubted.

We shall refer to some of the cases decided by our courts to see how
-
this principle was understood and applied.

In the case of Punjab Steel Scrap Merchants' Association Ltd. v.
D
Commissioner of Income Tax, Punjab, (1961) 43 ITR 164, the assessee
company was a dealer in scrap iron. It received from its constituents a
deposit in advance for the supply of scrap. If the price of scrap iron ....
delivered was more than the amount deposited, the assessee recovered the
excess. Where the price of scrap iron delivered was less than the amount
E deposited and a surplus remained with the assessee and the constituents
did not claim the excess amount, the assessee retained the amounts to the
credit of the constituents. Unclaimed credit balances, after a period of
three years were transferred by the company to its profit and loss account.
The amounts so transferred to the profit and loss account were held by
F the Punjab High Court to be trading receipts and liable to be included in
the computation of the assessee's taxable income. It was held that the
amounts in question were payments towards price of the scrap iron which
was to be supplied to the constituents. They were essentially trading
receipts. The case of Morley v. Tattersall (supra) was distinguished on the
ground that in that case the moneys received by Tattersall were never the
'-.
G moneys of the firm but moneys of the- customers. ..,
In the case of Punjab Distilling Industries Ltd. v. Commissioner of
Income Tax, Simla, (1959) 35 I.T.R. 510, the assessee carried on business
as a distiller of country liquor and sold the produce of its distillery to
H licensed wholesalers. Under a scheme devised by the Government, the
C.l.T. v. T.V. SUNDARAM IYENGAR AND SONS L"ffi. (SEN, J.) 791

distiller used to charge the wholesalers a price for the bottles in which the A
liquor was supplied at rates fixed by the Government, which the distiller
was bound to repay when the bottles were returned. Additionally, the
assessee took from the wholesal:':rs certain further amounts described as
security deposits without the Government's sanction and entirely as a
condition imposed by the assessee itself for the sale of its liquor. The
B
moneys described as security deposits were also returned as and when the
bottles were returned. The price of the bottles received by the assessee was
entered by it in its general trading account while the additional sum was
entered in the general ledger under the heading "empty bottles return
security deposit account". After the bottles were returned; the assessee was
left with a surplus in the security deposit account. The question was C
... whether this amount left with the assessee even after the refunds were
made could be treated as business income of tJ,e assessee. It was held by
a Bench of Three Judges of this Court that the additional amounts taken
as deposits were integral parts of the commercial transactions of the ~ale
of liquor in bottles. When they were paid, they were the moneys of the D
assessee and remained thereafter the moneys of the assessee. They were
the assessee's trading receipts. The balance of these additional sums left
after the refunds, were held to be assessable to tax. The case of Morley v.
Tattersall (supra) was distinguished, by observing "it was never contended
that the amounts when received as price of the constituent's horses sold
were Tattersall's income and the only contention was that they became E
income upon being transferred to the credit of the partners." It was
observed that that case turned on the fact that the moneys received by
Tattersall were never its moneys; they had been received on behalf of
others and that receipt only created a liability towards Tattersall. It was
held, "Now it seems to us quite impossible to say that the amounts with F.
which we are concerned were no( the appellant's moneys in the sense that
the constituents' moneys in the hands of Tattersall were not its own." Later
on, in the judgment, it was pointed out that the moneys were part of the
transactions of sale of liquor which produced the profit and, therefore, they
had a profit-making quality.
G
... In the case of Commissioner of Income Tax, West Bengal-Iv. Sa11der-
so11s and Morga11s, {1970) 75 ITR 433, principle of Morley v. Tattersall
(supra) was applied. In that case, the question was whether interest
received by a solicitor on the amounts belonging to his clients was taxable
as his income. This Court held that amounts received from his clients by a H
792 SUPREMECOURTREPORTS (1996)SUPP.5S.C.R.

A solicitor were not trading receipts, but were in fiduciary capacity. There-
fore, the principles laid down in Tattersa//'s case will apply.

In the case of Pioneer Consolidated Company of India Ltd. v. Com-
missioner of Income Tax, U.P., (1976) 104 ITR 686, the assessee transferred '
B
an amount of Rs. 18,295.00 to its profit and loss account in the previous "
year relevant to the assessment year 1957-58. This amount was mainly
composed of refunds of customs and other duties paid on behalf of its
customers. The unclaimed surplus was treated as income of the assessee
by the Department. It was held that though the amount was not. income
when it was realised, but when it was not claimed by the customers and
c the assessee chose to treat the unclaimed balance as its income and showed
it in its account as such, it could not be said that the income tax authorities
committed an error in accepting the statement of the assessee.

In the case of Commissioner of Income Tax, Tamil Nadu-J v. A. V.M.
Ltd., (1984) 146 ITR 355, the assessee was a distributor of films. It took
D
security deposits from the exhibitors before handing over the films for
exhibition. Sometimes the exhibitors did not send the collections but in-
~
structed the assessee to set off or adjust its security deposits against
overdue collections. Sometimes, the deposits were kept for the purpose of
adjustment either wholly or in part against dues of the exhibitor towards
E payment of collections. It happened that even after adjustment some
balance was still left in deposits with the assessee. No one came forward
to claim these deposits and the assessee after waiting for five years decided
to appropriate the amounts for its own use by making suitable book entries.
It was· held the amount could be treated as chargeable receipts of the
F assessee from trade.

In the case of Commissioner of Income Tax, Bombay City-IV v.
Batliboi and Co. Pvt. Ltd., (1984) 149 ITR 604, the Bombay High Court
dealt with a case where the assessee was a dealer in machinery. The
practice of the assessee company was to take deposits from intending
G purchasers. The deposits were later adjusted towards purchase price of the
~

machinery that were sold. The surplus deposits, if any, were not generally
refunded to the customers. Occasionally, the assessee was unable to refund
some of the excess deposits for various reasons. Such excess deposits were
written off in the books of the assessee by transferring them to the profit
H and loss account. It was held by the Division Bench of the Bombay High
-1

C.l.T. v. T.V. SUNDAl~AM IYENGA!lAND SONS LTD. [SEN,J.] 793

Court that having regard to the nature of the transaction, the receipts in A
question could not be considered as amounts held by the assessee for the
benefit of anybody else. The deposits were in respect of specific transaction
of sale and were adjusted towards the purchase price of the machinery that
;. were sold. It was more in the nature of a trade receipt, especially when the
assessee brought such surplus deposits remaining in hands to its profit and
'"" loss account. Therefore, the amount was taxable as trade receipt in the
B
hands of the assessee.

There is no dispute that the deposits in the case before us were
received from trade parties who had not made any claim for repayment of
o4 the balance. The Income Tax Officer has pointed out that the amount had c
arisen as a result of trading transaction and had a character of income. The
Tribunal has, however, held that the amount received in course of trade
was of capital nature. The Tribunal, thereafter, straightaway applied the
principle of Morley v. Tattersall (supra) and held since it was of a capital
nature at the time of the receipt, it could not become assessee's income
~ D
later on.

.-1 We are unable to uphold the decision of the Tribunal. The amounts
were not in the nature of security deposits held by the assessee for
performance of contract by its constituents. As it appears from the facts of ~

the case, the amounts were depleted by adjustments made from time to c
time. The Commissioner of Income Tax (Appeal) found that the assessee
wrote back the amounts to its profit and loss account because the various
i trading parties did not claim these amounts for a long time. The amounts
1
.. ..' represented credit balances in the name of the trading parties and was
taken to its profit and loss account. The Commissioner of Income Tax F
(Appeal) held that these amounts were not revenue receipts but were of
capital nature. Provisions of Section 41(1) were not attracted in the facts
of this case because the assessee's liability to pay back the amounts to its
customers had not ceased. The Tribunal agreed with this view.

> We fail to sec how these deposits were in any way different from the G
_,..,.
deposits which came for consideration in the case of Punjab Distilling
I11dustlies Ltd. v. Commissioner of l11come Tax, Simla, (1959) 35 ITR 519.
The amounts were not given and retained as security to be retained till the
fulfilment of the contract. There is no finding to that effect. The deposits
~
were taken in course of the trade and adjustments were made against these H
794 SUPREME COURT REPORTS [1996] SUPP. 5 S.C.R.

A deposits in course of trade. The unclaimed surplus retained by the assessee
will be its trade receipt. The assessee itself treated the amount as its trade
receipt by bringing it to its profit and loss account.

The basic fact in Morley v. Tattersall (supra) was that Tattersall was
an auctioneer. He sold horses on behalf of his clients. The sale proceeds
B were not his money but were his clients' money. Tattersall was entitled to
receive only commission out of the sale proceeds. The agreement between
Tattersall and his customers was that the sale proceeds would be returned
to the customers as and when demanded and not earlier. Sometimes the
customers did not demand the payment of the sale proceeds immediately.
C Such amount remained with Tattersall. But important point was that the
amount was not returnable unless and until demanded by the customers. ..
There was no question of the claim of the customers being barred by
limitation in that case. When the amount was taken to the accounts of the
partners, it was held by Lord Greene that character of the receipt did not
D change and the amount did not become a trading receipt in the hand of
Tattersall.

Tattersall's case was explained and distin&ruished in the case of Jay's-
The Jewellers Ltd. v. Commissioners of I11la11d Revenue, 29 Tax Cases 274.
In that case, the assessee company carried on business of Jewellers and
E pawnbrokers. In course of its business of pawnbroking, it received various
articles as pledges on the strength of which it lent money. The pledges were
of three types - (a) pledges pawned for a sum of ten shillings or under; (b)
pledges pawned for a sum exceeding ten shillings and not exceeding ten
pounds; and (c) pledges pawned for a sum exceeding ten pounds. The
F business of pawnbroking was controlled by the Pawnbrokers Act, 1872. It
w1s pointed out in that Act that if a pledge pawned for ten shillings or
under was not redeemed within the year of redemption and days of grace,
the pledged article would become pawnbrokers' absolute property. There
was no dispute that profit arising out of sale of such pledged article would
be the pawnbrokers' income. Under the second type of pledges which were
G pawned for a sum exceeding ten shillings and not exceeding ten pounds,
the pledged article did not become the property of the pawnbrokers. It the
pledges were sold for more than the amount of the loan and interest due
at the time of sale, the excess had to be paid to the pawner on demand
provided the demand was made within three years after the sale. In the
H third type of case, where pledges were pawned for a sum exceeding ten
C.l.T.v. T.V.SUNDARAM IYENGAR AND SONS LTD. [SEN,J.] 795

pounds, there was no time limit for return of the excess amount to the A
pawners after the sale. But limitation set in after six years. It was held in
that case that the surplus receipts in the pawnbrokers' trade became
, assessable profits. The Court agreed with the assessee's contention that
these surpluses were debts owed to the customers and that for three years
~
or si,x years as the case may be, the company could be called upon to pay
B
the amount to the customers. The whole amount was a legal liability. The
Court also agreed with the assessee's contention that the surpluses were
not trading receipts in the year in which they were received. However, the
Court went on to hold :

"The true accountancy view would, I think,, demand that these sums c
should be treated as paid into a suspense account, and should so
appear in the balance sheet. The surpluses should not be brought
into the annual trading account as a- receipt at the time they are
received. Only time will show what their ultimate fate and charac-
ter will be. After three years that fate is such, as to one class of
D
surplus, that in so far as the suspense account has not been reduced
by payments to clients, that part' of it which is remaining becomes
by operation of law a receipt of the Company, and ought to be
transferred from the suspense account and appear in the profit
and loss account for that year as a receipt and profit. That is what
it in fact is. /11 that year Jays become the richer by the amoullt which E
automatically becomes theirs, a11d that asset arises out of a11 ordinary
trade transactio11. It seems to me to be the common-sense way of
dealing with these matters."
--'

The principle laid down by Atkinson, J. applies in full force to the F
facts of this case. If a common sense view of the matter is taken, the
assessee, because of the crading operation, had become richer by the
amount which it transferred to its profit and loss account. The moneys had
arisen out of ordinary trading transactions. Although the amounts received
,. originally was not of income nature, the amounts remained with the asses-
see for a long period unclaimed by the trade parties. By lapse of time, the
G
...
claim of the deposit became time barred and the amount attained a totally
different quality. It became a definite trade surplus. Atkinson, J. pointed
out that in Tattersall's case no trading asset was created. Mere change of
method of book-keeping had taken place. But, where a new asset came into
bring automatically by operation of law, common sense demanded that the H
796 SUPREME COURT REPORTS (1996) SUPP. 5 S.C.R.

A amount should be entered in the profit and loss account for the year and
be treated as taxable income. In other words, the principle appears to be
that if an amount is received in course of trading transaction, even though
it is not taxable in the year of receipt as being of revenue character, the
amount changes its character when the amount becomes the assessee's own
money because of limitation or by any other statutory or contractual right.
B When such a thing happens, common sense demands that the amount
should be treated as income of the assessee.

In the present case, the money was received by the assessee in course
of carrying on his business. Although it was treated as deposit and was of
C capital nature at the point of time it was received, by efflux of time the
money has become the assessee's own money. What remains after adjust-
ment of the deposits has not been claimed by the customers. The claims
of the customers have become barred by limitation. The assessee itself has
treated the money as its own money and taken the amount to its profit and
loss account. There is no explanation from the assessee why the surplus
D 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 the assessee did
was the common-sense way of dealing with the amounts.

Under these circumstances we dispose of the appeals as under :

E The question proposed to be raised is treated as referred under
Section 256(2). The question is answered in the negative and in favour of
the Revenue. There will be no order as to costs.

M.K. Appeals disposed of.