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Issues:
- Interpretation of cash incentives scheme for exporters - Accrual of income for assessment year 1967-68 Interpretation of Cash Incentives Scheme for Exporters: The case involved a firm engaged in the sale and export of handloom fabrics, eligible for cash incentives under a government scheme. The scheme allowed exporters to import cotton based on the value of the exported fabrics. The exporters had to surrender import licenses for cash incentives. The cash incentives were initially at 21% but later reduced to 6%. The firm applied for and received cash incentives on different dates totaling Rs. 63,834. The dispute arose regarding the assessment year 1967-68, with the firm contending that only Rs. 18,340 should be considered as income for that year. The Income Tax Officer (ITO) initially assessed the total income at Rs. 1,15,910, including the entire incentive amount. The Appellate Authority and Tribunal later ruled that only Rs. 18,340 should be assessed for the year in question, with the balance attributed to earlier years. Accrual of Income for Assessment Year 1967-68: The key issue was determining when the cash incentives accrued to the firm for the assessment year 1967-68. The firm maintained accounts on a mercantile basis, meaning income accrued when due, not just upon receipt. The Tribunal analyzed the scheme's provisions, indicating that entitlements were granted upon proof of export. Therefore, the cash incentives became due when the necessary proof was submitted, regardless of the actual disbursement date. As the firm had applied and provided proof of exports before the relevant accounting period, the income could not be deemed to accrue during that period. The Tribunal's decision to assess only Rs. 18,340 for the year in question was upheld, as the right to the amount was established at the time of application. The judgment favored the firm, answering the question in the affirmative and awarding costs. This judgment clarifies the interpretation of a cash incentives scheme for exporters and the accrual of income for assessment purposes. It emphasizes that income accrues when entitlements become due, based on the scheme's requirements. The decision highlights the importance of understanding when income is deemed to accrue, especially in cases involving government schemes and incentives for businesses.
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