Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (7) TMI 1085 - CALCUTTA HIGH COURT

2015 (7) TMI 1085 - CALCUTTA HIGH COURT - [2016] 382 ITR 490 - Deferred receipt v/s accrued receipt - nature of receipt - assessee is following mercantile system of accounting - Held that:- 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 par .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

GMENT 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 the Tribunal erred in deleting the said amount by misinterpreting two agreements and the condit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g Officer which proved the assessee is not inclined to pay due taxes on the accrued receipts rather to evade ?" 2. Considering the gravity and importance of the present appeal, we requested Mr. J. P. Khaitan, learned senior advocate to act as amicus curiae to assist the court, which he did willingly and admirably. 3. This Income-tax appeal relates to the Income-tax assessments of the assessee for the assessment years 1989-90, 1990-91 and 1991-92. The assessee, a company, follows the mercant .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that as the assessee had agreed to deferment of fee, the original agreement got modified which were ratified by a resolution of the Board. Since modification of the agreement rendered the amount as not due and as the genuineness of the modifications were not in doubt and was not an afterthought, the Tribunal held that for the assessment year 1991-92 nothing had accrued to the assessee for the purpose of taxation. 4. Mr. S. N. Dutta, learned advocate for the appellant submits that there is no dis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not. The facts surrounding the deferment of income has to be examined. If deferment means postponing the income itself, as deferment was made prior to the close of 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 Conc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ile system of accounting, whether the Tribunal was justified in holding that the receipt of the fee stood deferred and was not due. In CIT v. Birla Gwalior (P.) Ltd. (supra) the facts were the assessee was the managing agent of the National Bearing Co. Ltd. and Gwalior Rayon & Silk Manufacturing Company. As managing agent of the former company it was entitled to receive a commission of 12½ per cent. on the net profits of the managed company together with a sum of ₹ 18,000 as off .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

anies were the financial years. In the agreement entered into between the assessee-company and the managed companies no date for payment of the managing agency commission was stipulated. The commission was given up by the assessee-company after the end of the financial year but before the accounts of the managed companies were made up. The accounts of the managed companies were made up somewhere during the end of September of the year following the respective accounting years. But, in the case o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eme 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 the basis of the mercantile system. Its accounting year was the financial year. It gave up the commission after the end of the financial year. On the basis of these facts it was contended on behalf of the Revenue that the commission had accrued before it was given up. Hence, it cannot be said that the assessee h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mere fact that the assessee-company was maintaining its accounts on the basis of the mercantile system cannot lead to the conclusion that the commission had accrued to it by the end of the relevant accounting year." 8. The question as to when an income becomes due came up for consideration in CIT v. Excel Industries Ltd. (supra) wherein it was held as under (page 301 of 358 ITR) : "It follows from these decisions that income accrues when it becomes due but it must also be accompanied b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r 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 bills were immaterial and as the assessee had no right to clai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the Income-tax Act, 1961, it was held as under (pages 699 and 700 of 194 ITR) : "In the instant case, the assessee is in a strong position. Not only the root or the germ to stop accrual of interest was planted in the relevant year of account, but the root or germ also fructified in the relevant year of account. A request came for giving up of the interest by a letter from the debtor-company within the year of account and the assessee also, in its return, within the year of account and bef .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version