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2020 (10) TMI 135 - AT - Income TaxDeduction u/s 80HHB - amount credited to the profit and loss account of the year ending 31.03.1995 under the head ‘Compensation from Government of India/ECGC - issuance of bond on assignment of assessee’s due from Government of India as settlement in lieu of foreign exchange loans extended to assessee through Exim Bank and SBI by Government of India to enable assessee to make off with contracts in Iraq following the deferment of its contract under Deferred Payment Agreement (DPA) - whether settlement-cum-compensation can be termed as profit of business activity? - HELD THAT:- Income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. In the present case, the income has not accrued to the assessee, therefore, it cannot be termed as the business income. From the perusal of these case laws and from the submissions of the assessee, it is clear that the settlement received from the Government of India is not coming under the purview of the business income as there was no business during the period. Besides, the contracts between the assessee and the Government of Iraq was not completed due to war situation and UN Sanctions. There was no hope for the assessee to conduct any business, but foreign exchange loans extended to assessee through Exim Bank and SBI by Government of India was a liability to the assessee. Thus, the settlement received in lieu of this will not form the revenue receipt. Thus, the contentions of the assessee that the receipt are not revenue in nature is sustained and Ground Nos. 1 to 4 of assessee’s appeal are allowed. Disallowance of prior period expenses - CIT(A) held that the assessee has not given any evidence as to expenditure was booked in present assessment year? - HELD THAT:- There is no evidence that expenses have been crystallized during the year, even though they pertained to earlier years. Thus, in absence of evidence, the CIT(A) confirmed this addition correctly. Before us as well the assessee could not demonstrate the same as to how the expenditure was booked in present assessment year. Therefore, Ground No. 5 of the assessee’s appeal is dismissed. Interest on fixed deposits with the bank - Income from other sources OR Business income - HELD THAT:- After hearing both the parties, it can be seen that the interest was received on the fixed deposits with the bank and thus it cannot be termed as business income. Ground No. 6 and 7 of the assessee’s appeal is allowed. Expenses on transit accommodation and mess located in remote areas where the benefit of hotel was unavailable - CIT(A) followed the Apex Court decision in case of Britannia India Ltd. [2005 (10) TMI 30 - SUPREME COURT] and upheld the addition - HELD THAT:- CIT(A) was rightly confirmed this addition as there was no evidence shown by the assessee at the time of the assessment proceedings as well as at the time of the Appellate proceedings. - Decided against assessee. Relief u/s 220(7) - Assessee in default for amount non received in India - Compensation received by the assessee company from United Nations Compensation Commission (UNCC) for loss of assets suffered by it due to UN led war against Iraq after the Iraq’s invasion & occupation of Kuwait in the year 1990, by virtue of which assessee company was forced to abandon its assets and leave Iraq to save its human assets - A.Y. 2001-02 - HELD THAT:- The compensation is in respect of the loss incurred by the assessee in respect of the contracts which were unable to be completed since the invasion of Iraq in Kuwait in year 1990. The assessee company treated the said sum as capital receipt, accounted on receipt basis, not exigible to tax, being in the nature of compensation of capital nature and against forced abandoned capital assets due to war. The returned total income included a sum on account of interest accrued on sums receivables from Iraq in terms of deferred payment agreement between Govt. of Iraq & Govt. of India. Thus, the treatment given by the assessee company is just and proper. From the point of view of the commercial aspect of the receipt it can be seen that the assessee received the amount from the United Nations Compensation Commission and not from the Government of Iraq. From the perusal of the records it can be seen that the compensation is not coming under the purview of the business income as there was no business during the period. Thus, compensation received in lieu of the losses of the contract which was supposed to be executed in the year 1991 will not form the receipt of revenue in nature, but capital in nature. Therefore, Ground No. 1 to 3 of the assessee’s appeal are allowed. Employee’s contribution to P.F. - assessee company has deposited sums received from employees towards contribution to provident fund after the due date including grace period of 5 days - HELD THAT:-Assessee company has deposited employer’s contribution to the P.F. after the due date mentioned in schedule but deposited before the due date of filing of return of income. Thus AO was not right in disallowing these expenses claimed by the assessee company for the employer’s contribution to the P.F. as per the provisions of Sec 43B if the same is deposited prior to the due date mentioned in the respective statute as held by the Hon’ble Apex Court in case of CIT v. Vinay Cement Ltd.[2007 (3) TMI 346 - SC ORDER] and CIT v. Alom Extrusions Ltd.[2009 (11) TMI 27 - SUPREME COURT] - Ground No. 7 of the Assessee’s appeal is allowed.
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