TMI Blog2015 (7) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to receive the fee was suspended, the Tribunal was justified in deleting the addition - Decided in favour of the assessee. - I. T. A. No. 478 of 2004 - - - Dated:- 3-7-2015 - Soumitra Pal And Mir Dara Sheko, JJ. For the Petitioner : S. N. Dutta For the Respondent : J. P. Khaitan, S. K. Bhowmik, S. Kejriwal JUDGMENT Soumitra Pal, J. 1. The appeal was admitted on the following substantial questions of law : 1. Whether the Tribunal was justified in deleting the addition of ₹ 63,37,320 on the plea of deferred receipt instead of treating the same as accrued receipt when admittedly the assessee is following mercantile system of accounting and the receipt should have been on accrual basis ? 2. Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and Telelink Nicco for payment of fee payable by Telelink Nicco got modified by an agreement, the income did not accrue during the financial year 1990-91, that is in the assessment year 1991-92. However as fee was receivable from Telelink Nicco, the Assessing Officer treated the income as accrued and added it to the income of the assessee. Aggrieved, appeal was preferred before the Commissioner of Income-tax (Appeals). The assessee succeeded. The Revenue, being aggrieved, preferred appeal before the Income-tax Appellate Tribunal. The Tribunal found that the assessee, a co- promoter of Telelink Nicco and M/s. Nicco Orissa Ltd., had guaranteed loan from financial institutions apart from investing money by way of share capital and loan. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment year 1991-92 and parties agreed not to pay, therefore, it does not come within the ambit of the term income . In support of his submission he has relied on the following judgments : CIT v. Birla Gwalior (P.) Ltd. [1973] 89 ITR 266 (SC), CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC), CIT v. Simplex Concrete Piles India Pvt. Ltd. [1989] 179 ITR 8 (Cal) and CIT v. Shree Export House Ltd. [1992] 194 ITR 695 (Cal). 6. It appears from the order of the Tribunal, that the assessee in view of the modification of the agreement and in view of the letters as mentioned in the order under challenge, had agreed to defer the receipt of payment of fees of ₹ 63,37,320 from Telelink Nicco. The veracity of the agreement and le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear following the respective accounting years. But, in the case of office allowance, the same was given up even before the end of the financial years. On the basis of these facts the Income-tax Officer as well as the Appellate Assistant Commissioner came to the conclusion that the deductions claimed were not allowable. The Income-tax Appellate Tribunal differed from the view taken by the Income-tax Officer and the Appellate Assistant Commissioner. The High Court agreed with the order passed by the Tribunal. Aggrieved, the Revenue preferred appeal and the Supreme Court held as under (page 270 of 89 ITR) : Now turning to the question regarding giving up of the commission, as mentioned earlier, the assessee was maintaining its accounts on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee. 9. In CIT v. Simplex Concrete Piles (India) (P.) Ltd. (supra), as the assessee followed the mercantile system of accounting, question arose whether the Tribunal was right in holding that the retention money in respect of the jobs completed by the assessee during the relevant previous year should not be taken into account in computing the profits and gains of the assessee's business. Having regard to the facts of the case and taking note of the terms and conditions of the contract, which were examined by the Tribunal, the High Court held that since the retention money was legally due to the assessee on completion of work and on the fulfilment of obligations under the contract and as the dates of submission of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of the assessee are maintained on mercantile basis cannot lead to a conclusion that the amount had accrued in the relevant assessment year. Hence, the actual or real accrual of income is the point in issue. 12. In the case in hand, it appears from records that in its best interest the assessee had agreed for deferment of fees. Accordingly the original agreement was modified which was supported by a resolution of the board. The genuineness of such modification is not in question as the financial institution was a party to such modification. Therefore, as the accrual of income was deferred prior to the closing of the accounting year, which as evident from facts was for business expediency, and as the right to receive the fee was susp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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