Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (6) TMI 436 - AT - Income TaxAccrual of income - taxability of advances received - Addition of advance fee from clients for services – Held that:- Income tax is to be charged at the rate or rates fixed for the year by the annual Finance Act - the subject of charge is the income of the previous year - mere receipt of amount is not taxable unless the same or the part embedded in that receipt partakes the character of income - Section 5 determines the scope of total income depending upon residential status of the assessee - It prescribes the gamut of total income of an assessee – Relying upon ED. Sassoon And Company Limited And Others Versus Commissioner Of Income-Tax, Bombay City [1954 (5) TMI 2 - SUPREME Court] - when the assessee acquired a right to receive that income - Merely because an amount has been entered into in assessee’s book, is not conclusive proof that income has accrued - Section 145 deals with method of accounting and is a procedural section - This section cannot be resorted to for taxing a particular receipt unless the receipts come with section 4 r.w. section 5 partaking character of income - If an assessee may be required to refund the amount then it cannot be treated as assessee’s income in that particular year - unless the assessee can exercise his entire rights over a particular receipt, it cannot be said that income has accrued in his favour - No other person should have any charge over that receipt. The dominion over the amount should be of assessee. The amount will be accrued to the assessee only on rendering of services - receipt by itself is not sufficient to attract tax, but, it is only receipt as “income”, which can attract tax - receipt in advance amount come within the provisions of section 4 or 5 of the IT Act - Every receipt cannot be treated as income in the hands of the assessee, but, it is only when it bears the character of assessee’s income at the time when it reaches the hands of the assessee that it becomes exigible to tax – Relying upon CIT Vs. Tollygunge Club Ltd. [1977 (3) TMI 1 - SUPREME Court] - the assessee received the fee in advance for which no service was rendered in the assessment under consideration and it cannot be held as taxable in the hands of the assessee in the year of receipt even though such income was reflected in the books of the assessee, as not only actual receipt to be seen but constructive receipt to be seen to tax the income in the assessment under consideration - services are not performed in the current assessment year and till the performance of the service by the assessee, the assessee could not be said to be received the amount on accrual as the assessee could not exercise its dominion over the receipt and the impugned amounts should be taxed in the year in which the assessee renders service to the payee. Being so, in our opinion, issue of tax of amount cannot be done in the AY – Decided in favour of Assessee.
|