Unclaimed balances received by a scrap iron dealer from constituents for the purchase of scrap iron are revenue income of the assessee.

GROVER, J.

1. This order will dispose of Income-tax References Nos. 278, 179 and 280 of 1959-60 in which the same questions are involved.

2. The assessee is a limited company and is a dealer in scrap iron. According to the control orders which were in force during the years under consideration (assessment years 1954-55, 1955-56 and 1956-57), the assessee was required to obtain licence for acquiring scrap iron from various mills. That iron could be sold by the assessment of selling scrap iron was to obtain from the permit holder the approximate quantity of scrap iron required by him and after finding out the weight, the calculation of the price of the quantity in round figures was made and the constituent was asked to deposit the amount so calculated by the assessee. The actual quantity of scrap iron which would, in fact, be supplied to the constitutent would be sometimes more or sometimes less that that for which the would be sometimes more or sometimes less than that for which the price had been calculated and for which the deposit had been obtained from the constituent. After the delivery of the scrap iron, it often happened that there remained a small surplus out of the money deposited. In cases where the deposits were slightly more than the amount deposited, the necessary recovery was made by the assessee but in the cases where the deposits were slightly more than the purchase price of the total goods supplied, the constituent in the assessees books. The board of directors of the assessee company passed the following resolution on November 23, 1953 :

"(a) The manager be and is hereby authorised to transfer unclaimed credit balances as became over three years old to the sundry creditors balances written back account.

(b) Claims for refund, if any, out of the above said written back amounts may be referred to the managing committee, who may, if satisfied that the claimant is a rightful claimant, give instructions to the office for refund thereof."

3. The three year old unclaimed balances in this account amounted to Rs. 2,080 in the assessment year 1954-55, Rs. 10,692 in the assessment year 1955-56 and Rs. 1,993 in the assessment year 1956-57. The unclaimed balances were duly transferred by the assessee to the profit and loss account and out of the net profit thus arrived at dividend was distributed. When the returns for the assessment years in question were filed, the assessee claimed to deduct these unclaimed balances on the ground that they did not represent revenue receipts by the assessee.

4. For the two years 1954-55 and 1955-56 the Income-tax officer did not include the unclaimed balances in the income and for the year 1956-57 he treated the unclaimed balance of Rs. 1,993 as a realization by the company on account of trading activity and the amount was included in the revenue receipt of the company. The Commissioner of Income-tax revised the assessment for the years 1954-55 and 1955-56 under section 33B and held that the unclaimed balances during those years represented the revenue income of the assessee. For the year 1956-57 an appeal was taken to the Appellate Assistant Commissioner who held that the same was not assessable. The order passed by the Commissioner of Income-tax was challenged on appeal before the Appellant Tribunal by the assessee and similarly the order passed by the Appellate Assistant Commissioner was taken up on appeal by the Income-tax Officer. The Tribunal decided all the three appeals together and there was difference of opinion between the two Members who constituted the Tribunal. The President of the Tribunal in agreement with the Judicial Member decided against the assessee. That is how the following question of law has been referred to this court :

"Whether the unclaimed balances of Rs. 2,080 in the assessment year 1954-55, Rs. 10,692 in the assessment year 1955-56 and Rs. 1,993 in the assessment year 1956-57 represent the revenue income of the assessee liable to tax under the Indian