TMI Blog2006 (4) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld.CIT(A) erred in allowing unrealized export profits of Rs. 19,05,800 contrary to the Hon ble S.C. judgment in the case of State Bank of Travancore 158 ITR 102 holding that ( i )where the Act applies, the concept of real income should not be so read as to defeat the provisions of the Act. ( ii )more improbability of recovery cannot be treated as evidence or the fact income has not resulted or accrued to the assessee. 2. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in allowing the relief of Rs. 19,05,800 on account of unrealized export proceeds relying on S.C. judgment in Godhra Electricity Co. Ltd. 225 ITR 746 ignoring that ( i )the decision is not applicable since facts of the case are not identical ( ii )the assessee has once again claimed it as write off in assessment year 2001-02. 3. On the facts and in the circumstances of the case, the Ld.CIT(A) erred ( i )in reducing taxable profit instead of export turnover which results in excessive relief under section 80HHC not envisaged as per the provisions of that section. ( ii )the Ld. CIT(A) has further failed to appreciate that expenditure debited to P L account for earning such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the said sum should be allowed as business/trading loss of assessment year 1998-99. The learned CIT(A), admitted the two alternative grounds of the assessee after obtaining the report of Assessing Officer. The learned CIT(A) after considering the submissions of the assessee, rejected the claim of business loss/trading loss on the ground that export was made in the year under consideration but the loss was incurred in the year when the assessee choose to treat the same as loss in it s own books of account after efforts for realization failed. The learned CIT(A), however, accepted the plea of the assessee regarding real income with regard to the un-realised amount of export proceeds. Accordingly, the learned CIT(A) worked out the profit embedded in the un-realised export in the proportion of ratio of un-realised exports and computed the same at Rs. 56,83,172 and held that the real profits were to be reduced to Rs. 1,12,64,253 as against Rs. 1,69,47,377. The learned CIT(A) worked out the deduction under section 80HHC at Rs. 74,86,883 and held that as result of the same the taxable income would reduced to Rs. 37,77,370. Thus, the assessee got a relied of Rs. 19,05,800. The revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following decisions in support of real income theory : 1. Godhra Electricity Co. Ltd. v. CIT [1997] 225 ITR 746 (SC) 2. CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC) 3. CIT v. Shoorji Vallabhdas Co. [1962] 46 ITR 144 (SC) 4. CIT v. India Discount Co. Ltd. [1970] 75 ITR 191 (SC) 5. H.M. Kashiparekh Co. Ltd. v. CIT [1960] 39 ITR 706 (Bom.) 6. CIT v. Western India Engg. Co. [1971] 81 ITR 712 (Guj.) 7. CIT v. Kerala State Drugs Pharmaceuticals Ltd. [1991] 192 ITR 1 (Ker.) 8. G.V. Narasa Reddy v. ITO [2002] 125 Taxman 30 (Hyd.) (Mag.) 9. CIT v. Pioneer Engg. Syndicate [1998] Tax L.R. 431 (Mad.) 10. Poysha Oxygen (P.) Ltd. v. Dy. CIT [2004] 91 ITD 616 (Delhi) He further contended that when no income resulted in fact, then, even the presentation of the same in the books of account as income was not material. The learned counsel also contended that in Ground No. 3, the revenue has objected the action of the CIT(A) in reducing the taxable profit instead of export turnover which resulted into excessive relief under section 80HHC was not correct for the reason that the deduction under section 80HHC was based upon the profits a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken benefit, whether ethical or un-ethical/legal or illegal by not making the payment of the goods purchased by them. It is a case of mere non-realisation of sale proceeds. It the contentions of the assessee are accepted, then it would necessarily result into a cash system of accounting for the transactions where sale proceeds not realized and in case of sale proceeds realized, the same would stand on mercantile system of accounting. This accounting system is neither commercially accept- able nor legally permissible in view of the provisions of section 145, of the Act which requires the assessee either to follow accrual system of accounting or cash system of accounting. Further, the concept of real income is an exception to the general concept of recognition of revenue based upon principle of accrual and it cannot be applied merely for non-realisation of sale proceeds. The Legislature has provided for relief in such cases under the provisions of section 36(1)( vii ) r.w.s. 36(2) of the Act. In fact, the assessee has claimed relief under these sections subsequently. Thus, concept of real income is not applicable to the impugned transaction. The assessee has relied on various judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the decision of the learned CIT(A) in including Rs. 5,71,02,628 (FOB value) to the total turnover of the assessee while computing the deduction under section 80HHC of the Act. 15. The learned counsel appearing on behalf of the assessee has mainly contended that the said sum was not realized, hence the same should not form part of the total turnover and placed the reliance on following judicial decisions : 1. ITO v. M.V. Mathew [1993] 47 TTJ (Coch.) 195 2. ITO v. Gokaldas Pragji [1988] 24 ITD 25 (Ahd.) 3. Dy. CIT v. Associated Alcohols Breweries Ltd. [2005] 274 ITR 103 (Kol.) (Mag.) 4. Asia Technology Ltd. v. Dy. CIT [1999] 65 TTJ (Coch.) 148 5. Laxmi Ginning Oils Mills v. CIT [1971] 82 ITR 958 (Punj. Har.) 6. Kerala State Drugs Pharmaceuticals Ltd. s case ( supra ) ( i ) CIT v. Sudarshan Chemical Industries Ltd. [2000] 245 ITR 769 2 (Bom.). Wherein it was held that "Therefore, the turnover should be restricted to such receipts which have an element of profit in it." ( ii ) CIT v. Sundaram Fasteners Ltd. [2005] 272 ITR 652 (Mad.) Wherein it was held that "..............only that part of the receipt for sale consideration is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee an opportunity to obtain the same and then decide the issue. The Competent Authority s approval is the responsibility of the assessee which he should have obtained in the normal course, so that he can claim the deduction under section 80HHC. In any case the assessee can always claim the deduction under section 80HHC if he fulfils the necessary conditions under the provisions of section 155(13) of the Act. Moreover, in the present case, the assessee has not realized the sum ultimately, therefore, the assessee is not at all entitled to claim deduction under section 80HHC in respect of this impugned claim. In this view of the matter, we find no merits in the contention of the assessee and accordingly, reject the same. Thus, this ground of the assessee is also rejected. 19. In ground No. 2.1, the assessee is aggrieved by the decision of the learned CIT(A) in reducing the profit of the assessee only by Rs. 56,83,172 instead of reducing the same by Rs. 6,73,51,645 though the learned CIT(A) accepted the concept of real income. While deciding the revenue s appeal, we have already reversed the decision of learned CIT(A) in this regard and held that the profit accrued to the ass ..... 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