JUDGMENT C.S.P. Singh, J.
1. The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following question for our opinion:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 7,029 was assessable under Section 10(2A) of the Indian Income-tax Act, 1922 ?"
2. The assessment year involved in the present case is 1956-57 and the corresponding account year is from November 1, 1954, to October 23, 1955. The assessee is a registered firm consisting of four brothers and their mother. The business was formerly being carried on by a joint Hindu family, but subsequently a partition took place and the business was converted into a partnership. The partnership firm consisted of Motilal and his four sons, who are still partners in the firm, along with their mother after Motilal's death. Certain amounts stood in the books of the firm in the name of Motilal, and interest was credited by the firm to this account, but the interest credited was disallowed till the assessment year 1954-55. Moti Lal died on February 8, 1952, and, thereafter, ceased to be a partner. Subsequent to the year 1954-55, an amount of Rs. 7,029 was allowed as interest on the deposits standing in the name of Motilal. In the year 1956-57, an amount of Rs. 7,032 was credited to Moti Lal's account and thereafter distributed amongst the partners of the firm and credited to their individual account. The Income-tax Officer included the aforesaid sum of Rs. 7,032 in the assessable income of the firm and also an amount of Rs. 7,029 which had been allowed as a deduction in the earlier years, on the ground that it was an amount received back by the partners and was taxable under Section 10(2A) of the Act. The assessee appealed before the Appellate Assistant Commissioner but the appeal failed. Thereafter, the assessee took out an appeal to the Tribunal. The Tribunal held that the amount of Rs. 7,032 which had been credited to Motilal's account was interest paid to the partners, and as such could not be allowed. In respect of the amount of Rs. 7,029 it held that the amount aforesaid had been rightly included, in view of the provisions of Section 10(2A) of the Act.
3. Inasmuch as the answer to the question referred turns on the interpretation to be put on Section 10(2A) of the Indian Income-tax Act, 1922, the provision may be conveniently quoted at this stage:
"10. (2A) Where for the purpose of computing profits or gains under this section, an allowance or deduction has been made in the assessment for any year in respect of any loss, expenditure or trading liability incurred by the assessee and, subsequently during any previous year, the assessee has received, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or has obtained some benefit in respect of such trading liability by way of remission or cessation thereof, the amount received by him or the value of the benefit accruing to him shall be deemed to be profits and gains of business, profession or vocation and to have accrued or arisen during the previous year."
4. A perusal of this sub-section shows that before resort can be had to the section, it must be shown that an allowance or deduction has been made in the assessment in respect of any loss, expenditure or trading liability and subsequently the assessee has received the amount aforesaid in respect of such loss or expenditure or trading liability. In the present case, one of the conditions is satisfied that an allowance had been made to the firm in respect of the amount of Rs. 7,029 towards the interest paid to Motilal's account but the other conditions of the sub-section are not satisfied. This sub-section applies only where the assessee getting the advantage of the allowance or deduction is the same as receives back the amount. In the present case, the deduction was made in favour of the firm, while the amount in question has been received by the partners. Secondly, the assessee should have received the amount for which the allowance or deduction had been made. In the present case, the amounts standing to the credit of Motilal including interest thereon have been received by the sons and the widow, not in respect of any loss or expenditure for which the allowance or deduction was allowed, but by virtue of their being heirs of the deceased Motilal. Thus, all the conditions necessary for the application of Section 10(2A) of the Act are not satisfied in the present case. Reference in this context may now be made to a decision of the Supreme Court in the case of Commissioner of Income-tax v. Hukumchand Mohanlal, [1971] 82 ITR 624 (SC). The assessee was the sole selling agent of Messrs, Mohan Lal Hargovindas, Jabalpur. The assessee had succeeded to this business on the death of her husband. Messrs. Mohanlal Hargovindas had realized certain amounts towards sales tax from the assessee's husband relating to the period January 26, 1950, to March 31, 1951. Messrs. Mohanlal Hargovindas had subsequently filed an appeal against their assessment made under the Sales Tax Act and this appeal was allowed, and an amount of Rs. 24,341 was remitted. Consequently, Messrs. Mohanlal Hargovindas refunded that amount to the assessee by means of a draft dated October 31, 1961. The Income-tax Officer, sought to include this amount under the provisions of Section 41(1) of the Income-tax Act, 1961, which is in pari materia to Section 10(2A) of the Indian Income-tax Act, 1922. It was held by the Supreme Court that the successor in business or a legal representative of the assessee to whom an allowance had been granted, is not liable to tax under Section 41(1) in respect of an amount remitted and received. This decision squarely applies to the facts of this case.
5. We, accordingly, answer the question referred in the negative and in favour of the assessee. The department shall pay costs to the assessee which we assess at Rs. 200. Counsel's fee is assessed at the same figure.