Judgment :- 1. This is a reference by the Income-tax Appellate Tribunal, Madras Bench, under S.66(1) of the Indian Income-tax Act, 1922. The assessment year concerned is 1958-59; and the accounting period is the Malayalam year 1132 which commenced on 16-8-1956 and ended on 16-8-1957. 2. Of the three questions referred, the second reads as follows: "Whether the sum of Rs. 35,575/- representing the liability waived by the assessee's constituents is income of the previous year relevant to the assessment year 1958-59?" It is common ground that the assessee was liable to pay his constituents a sum of Rs. 93,572/- realised by his agent in Burma in excess of the invoice prices of the prawns supplied by them. The invoice prices themselves, less the agreed deductions, had already been paid to the constituents and there was no dispute, at any time, as regards the payment of these amounts. 3. The assessee credited the amount due to each of his constituents out of the sum of Rs. 93,572/- in their respective accounts with him; but did not pay them because of the difficulties experienced in remitting money from Burma to Cochin as a result of the restrictions imposed by the Government of Burma. The constituents started clamouring for payment and there were even threats of suits for recovery. Litigation, however was avoided by a compromise under which the assessee liquidated his liabilities to the extent of Rs. 81,390/- out of the total liability of Rs. 93,572/- by paying to his constituents Rs. 45,815/- and his constituents waiving their right to get the balance of Rs. 35,575 from him. It is this sum of Rs. 35,575/- which is mentioned in the question extracted above. 4. Any legally enforceable obligation for payment of money, as pointed out in Commissioner of Income-tax v. Basumal Jagat Narain (1960-38 ITR. 447), is a debt for the purposes of taxation. The real point for determination is whether the amount of Rs. 35,575/- which was part of the debt of the assessee to his constituents and which was waived by them in the accounting period can be considered as an income of the assessee during that period. 5. In British Mexican Petroleum Co. Ltd. v. Jackson (16 Tax Cases 570) Lord Macmillan had to consider the effect of the remission of a debt. 5. In British Mexican Petroleum Co. Ltd. v. Jackson (16 Tax Cases 570) Lord Macmillan had to consider the effect of the remission of a debt. His Lordship said: "I cannot see how the extent to which a debt is forgiven can become a credit item in the trading account for the period within which the concession is made." The decision has been followed in this country in 1948 ITR. 183 and 430,1950 ITR. 28 and (1956) 30 ITR. 191. See also (1959) 37 ITR. 136. 6. The principle, however, has been modified by sub-section (2A) of S.10 of the Indian Income-tax Act, 1922, which was introduced by the Finance Act of 1955. The sub-section expressly makes the amount remitted taxable as the income of the year of remission; but only in cases which satisfy the requirements of that provision. Sub-section (2A) reads as follows: "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 that previous year." 7. There is no doubt that if sub-section (2A) of S.10 of the Indian Income-tax Act, 1922, is attracted by the facts and circumstances of this case, question No. 2 has to be answered in favour of the Department and against the assessee; and that if it is not attracted, the said question has to be answered in favour of the assessee and against the Department. The papers before us, however, are insufficient to decide whether this is a case where for the purpose of computing profits or gains under S.10, an allowance or deduction has been made in the assessment for any prior year in respect of the liability with which we are concerned; and all that we can do is to refer the case back to the Appellate Tribunal under sub-section (4) of S.66 of the Indian Income-tax Act, 1922 We do so. 8. It is agreed that question Nos.1 and 3 need not be answered; and they do not arise for consideration.