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2013 (3) TMI 440 - HC - Income TaxTDS - Denial of certificate u/s 197 - Admissibility as Income - Whether an amount which was permitted to be withdrawn against a bank guarantee represents income? - Whether when an existing arbitral award which is pending, the amount which has been awarded can be included in the income of the awardee? - Whether income tax can be levied on the right to receive compensation - Whether tax can be deducted at source even if the income has not accrued to the assessee - Petitioner is a Company incorporated in accordance with a scheme for rehabilitation sanctioned by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 - The arbitral tribunal made an award in the amount of Rs. 179 crores. Held that:- Under the Income Tax Act, 1961, income chargeable to tax is income that is received or is deemed to be received in India in the previous year relevant to the year in which assessment is made or the income that accrues or arises or is being accrued in India during such year. As decided in CIT vs. Shoorji Vallabhdas and Co., (1962 (3) TMI 6 - SUPREME Court “the substance of the matter is the income”. Also in Poona Electric Supply Co. Ltd. vs. CIT, (1965 (4) TMI 20 - SUPREME COURT) it was held that “Income-tax is a tax on the real income i.e., the profits arrived at on commercial principles subject to the provisions of the Income Tax Act.”. These principles were followed in the judgment in Godhra Electricity Co.Ltd. vs. CIT [1997 (4) TMI 4 - SUPREME COURT] in holding that even though the assessee was following a mercantile system of accounting and had made entries in its books regarding enhanced charges for the electric supply made to the consumers, no real income had accrued in respect of those enhanced charges in view of the fact that soon thereafter the assessee had been subjected to litigation in a suit filed by the consumers. It would be wholly unreasonable to deduct tax at source on an amount which has not accrued to the Petitioner as income during the financial year in question, the entitlement of the Petitioner being contingent on the outcome of the challenge to the arbitral award. Moreover, it has also not been disputed on behalf of the Petitioner and it is fairly conceded by Counsel for the Petitioner that if the challenge to the arbitral award ends in favour of the Petitioner, the Revenue would be entitled to bring to tax the amount accrued in the corresponding year. The ITO (TDS-I), Nashik was not justified in denying a certificate u/s 197 despite the fact that such a certificate has been issued earlier for three preceding F.Ys. 2009-10, 2010-11 and 2011-12.. No other objection to the grant of a certificate u/s 197 has been asserted on behalf of the Revenue at the hearing First Respondent directed to issue a certificate u/s 197 for financial year 2012-13 - in favour of assessee.
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