TMI Blog2006 (7) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... on of levy sugar price and interest thereon under section 41(1) of the Act. 3. The CIT(A) confirmed the Assessing Officer's action and his order has challenged by the assessee in the present appeal. 4. The grounds of appeal filed with Form No. 36 were subsequently revised/concised. Ground No.1 "1. Guest House Expenses: The Learned Commissioner of Income-tax (Appeals) erred in confirming the addition of Rs. 3,07,072 made by the learned Assessing Officer (AO) on account of expenditure of food and beverages, treating the same as expenditure on maintenance of Guest House." 5. We find that this ground is covered in favour of the assessee by the decision of the ITAT Pune, in the assesses's own case in ITA No. 786-A/PN/2000 for assessment year 1996-97 dated 10-12-2004. We follow the precedent and allow this ground. Ground No.2 "2. The Learned CIT (Appeals) erred in holding the expenditure on presentation articles not intended for advertisement as expenditure in the nature of advertisement, and confirming the disallowance of Rs. 46,825 made under Rule 6B." 6. We find that this ground is covered in favour of the assessee by the decision of Bombay High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . that the Government issued circular dated 14-6-1995 to all the sugar factories informing them the procedure to claim the differential levy sugar price. . that the assessee prepared vide letter dated 14-6-1995 giving full particulars. . that the claim was approved by the Government vide letter dated 29-8-1996. . that the remittance was received vide letter dated 13-9-1996. . that, without prejudice to the above submissions, in the alternative, the position be not disturbed. . that reliance was placed on the decisions in the following cases: (i) CIT v. Punjab Bone Mills [1998] 232 ITR 795 (Punj. Har.) (ii) CIT v. Punjab Bone Mills [2001] 251 ITR 780 (SC) (iii) CIT v. Dhampur Sugar Mills Ltd. (No.1) [2005] 274 ITR 340 (All.) (iv) P. Mariappa Gounder v. CIT [1998] 232 ITR 2 (SC) 10. The ld. DR supported the orders of the Assessing Officer and the CIT(A). He vehemently argued saying that the order of the CIT(A) needed to be upheld. 11. We have considered the rival submissions in the light of material on record and the precedent cited. The additions made by the Assessing Officer are shown in the chart below: ------------------------------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting a mere claim by the assessee in respect of an amount without the right to claim cannot form the basis of taxability. On the other hand, where the assessee follows cash system of accounting, the taxability is to be based on receipt basis and not on accrual basis. 15. The three expressions 'accrues', 'arises' and 'is received' are three distinct terms. The words 'accrue' and 'arise' are not defined in the Act. The two words - 'accrue' and 'arise' are used to contradistinguish the word 'received'. The income is said to be received when it reaches the assessee. But it is said to 'accrue' or 'arise' when the right to receive the income becomes vested in the assessee. It is clear that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed: debitum in praesenti, solvendum in futuro. - CIT v. Shri Goverdhan Ltd. [1968] 69 ITR 675, 681 (SC). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company not on 30-3-1979 i.e., the date on which the Delhi High Court gave the decision, confirming the arbitration award but on 14-9-1979, when the actual compensation money along with interest was received by the assessee-company. The Gauhati High Court held that in order to determine the date of accrual of income under the mercantile system of accounting, the receipt of payment was not the guiding factor; but the date when the amount becomes due. In that case the amount became due on the final decision of the High Court. The Gauhati High Court, while taking the above view placed reliance on the judgment of Supreme Court in the case of Morvi Industries Ltd. v. CIT [1971] 82 ITR 835. 19. In the case of B.P.R. Construction v. CIT [1991] 192 ITR 534, it was held by the Orissa High Court that the claim made before the arbitrator ripened into a right for the first time when the award was made. In that case the arbitrator gave his award on 5-11-1976 and therefore, the High Court held that the compensation payable to the assessee had to be recorded as income for the accoun ting year ending 31-3-1977 and taxed in assessment year 1977-78. 20. In the case of P.V. Jacob v. CWT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becomes vested in the assessee. (vi) that a liability depending upon a contingency is not a debt in praesenti or in futuro till the contingency happens. But if it is a debt, the fact that the amount has to be ascertained does not make it any the less a debt if the liability is certain and what remains is only a quantification of the amount: debitum in praesenti, solvendum in futuro. CIT v. Shri Goverdhan Ltd. [1968] 69 ITR 675,681 (SC). 24. In all the cases relied upon by Shri Inamdar, the ld. A.R, the courts have taken similar view as mentioned above. For instances, in the case of CIT v. Dhampur Sugar Mills Ltd. (No.1) [2005] 274 ITR 340 (All), the assessee-company had collected during the accounting year relevant to assessment year 1974-75, Rs. 12,66,429 as excess levy sugar price under an interim order of the Court. The Tribunal held that the amount collected under the interim order of the court, which was hedged with certain conditions, was not taxable in assessment year 1974-75 as the final order was still awaited. In the present case the facts are entirely different inasmuch as the matter was finally decided by the Supreme Court on 22-9-1993, and consequently the notific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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