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TMI Blog2013 (10) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the imports are made. 4. The facts pertaining to Civil Appeal No. 125 of 2013 (M/s Excel Industries Limited for the Assessment Year 2001-02) are referred to for convenience. 5. The assessee maintains its accounts on a mercantile basis. In its return (revised on 31st March 2003) the assessee claimed a deduction of Rs.12,57,525/- under the head advance licence benefit receivable. The assessee also claimed a deduction in respect of duty entitlement pass book benefit receivable amounting to Rs.4,46,46,976/-. These benefits related to entitlement to import duty free raw material under the relevant import and export policy by way of reduction from raw material consumption. According to the assessee, the amounts were excluded from its total income since they could not be said to have accrued until imports were made and the raw material consumed. 6. During the assessment proceedings, the assessee relied upon a decision of the Income Tax Appellate Tribunal in Jamshri Ranjitsinghji Spinning and Weaving Mills v. Inspecting Assistant Commissioner [1992] 41 ITD 142 (Mum) and also the order of the Commissioner of Income Tax (Appeals) in its own case for the assessment years 1995-96 to 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. It had been held by the Tribunal in the earlier cases that income does not accrue until the imports are made and raw materials are consumed by the assessee. As regards the accounting year under consideration, it was found that there was no dispute that it was only in the subsequent year that the imports were made and the raw materials consumed by the assessee. 11. The Tribunal also took the note of the fact in the assessee's own cases starting from the assessment year 1992-93 onwards these issues had been consistently decided in its favour. It was also noted that for some of the assessment years namely 1993-94, 1996-97 and 1997-98 appeals were filed by the Revenue in the Bombay High Court but they were not admitted. 12. Under the circumstances, the Tribunal affirmed the decision of the Commissioner of Income Tax (Appeals) on the issues raised. 13. The Revenue then preferred an appeal under Section 260-A of the Act in respect of the following substantial question of law: "Whether on facts and in circumstances of the case and in law ITAT is justified in law in holding by following its decision in the case of Jamshri Ranjitsinghji Spinning & Weaving Mills Ltd. (41 ITD 142), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of payment ....... does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately." 19. This Court further held, and in our opinion more importantly, that income accrues when there "arises a corresponding liability of the other party from whom the income becomes due to pay that amount." 20. It follows from these decisions 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. 21. In so far as the present case is concerned, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretary to the Government of Gujarat, to the assessee whereby the assessee was "advised" to maintain status quo in respect of enhanced charges for at least six months. This Court took the view that though the letter had no legal binding effect but "one has to look at things from a practical point of view." (See R.B. Jodha Mal Kuthiala v. Commissioner of Income Tax, [1971] 82 ITR 570 (SC)). This Court took the view that the probability or improbability of realisation has to be considered in a realistic manner and it was held that there was no real accrual of income to the assessee in respect of the disputed enhanced charges for supply of electricity. The decision of the High Court was, accordingly, set aside. 27. Applying the three tests laid down by various decisions of this Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. "On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income Tax in the earlier proceedings, a different and contradictory stand should have been taken." 31. It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it oug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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