Vimadalal, J.:— This reference relates to the assessment year 1956-57. The assessee is a company carrying on business as civil engineering contractors and dealers in mill stores, and in the course of that business it had dealings with a large number of parties. Various amounts became due to those parties in respect of the trading transactions of the assessee-company, and in cases where those amounts were not claimed within three years of their becoming due, the assessee-company transferred them to an account called the “unclaimed balances account”. Some payments were, however, effected out of that account, as and when claimed by the parties, and the transfer of those amounts to the unclaimed balances account did not, therefore, stand in the way of the assessee making payments therefrom to the extent found necessary. During the financial year ended 31st March, 1956, there was a debit to this unclaimed balances account to the tune of Rs. 65,881-3-9 which represented the total of certain items in the said account. That amount was transferred to the reserve for taxation account. The Income-tax Officer held that inasmuch as the liability under the unclaimed balances account was reduced to the extent of Rs. 65,881-3-9 and the reserves of the company were accumulated in the relevant year, the provisions of section 10(2a) became applicable and hence he added the sum of Rs. 65,881 to the total income of the assessee. On appeal to the Appellate Assistant Commissioner, it was held that the amount could not be taxed in the assessment year because the amount accrued as a benefit to the assessee only when the debts became unenforceable, and he, therefore, deleted the sum of Rs. 65,881. On further appeal to the Tribunal, it was held that the Income-tax Officer had properly treated the said amount as coming within the scope of section 10(2A). On these facts, the following question has been referred to us at the instance of the assessee:
“Whether, on the facts and in the circumstances of the case, the sum of Rs. 65,881 transferred from the unclaimed balances account to the reserve for taxation account was properly assessed by applying section 10(2A) in the assessment for the assessment year 1956-57?”
2. Mr. Munim, on behalf of the assessee, drew our attention to the decisions of this court in the cases of Kohinoor Mills Co. Ltd. v. Commissioner of Income-tax [1963] 49 ITR 578 Bom. and J.K Chemicals Ltd. v. Commissioner Of Income-Tax, Bombay City Ii. [1966] 62 ITR 34 Bom.. In the former case it has been held that the mere fact of the expiry of the period of limitation to enforce a debt does not by itself constitute cessation of liability within section 10(2A). In the J.K Chemical's case it has further been clarified (at pages 41-42) that neither remission nor cessation of liability could take place by a unilateral act on the part of the debtor, and that even if the amount was distributed by the company to its shareholders, it could not get rid of its liability when it was called upon to meet it either by the employees under the Industrial Disputes Act or by the Government under the Bombay Labour Welfare Funds Act. Mr. Joshi on behalf of the Commissioner very fairly stated that the question referred to us is concluded, as far as this court is concerned, by the said two decisions of earlier Benches of the court. It is, therefore, unnecessary for us to consider the matter any further, and I would answer the question referred to us in the negative.
S.K Desai, J.:— I agree.
3. By the Court: Question answered in the negative. No order as to the costs of the reference.