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2016 (11) TMI 1050 - ITAT MUMBAI

2016 (11) TMI 1050 - ITAT MUMBAI - TMI - Addition made under DEPB entitlements - Method of accounting - cash basis or accrual of entitlement - Held that:- In the present case, the assessee had been following the said procedure consistently and has already offered the income for tax in the year of receipt from the sale of DEPB license. Considering the facts of the present case and the fact that system of accounting of DEPB entitlements on cash/ realization basis has been consistently followed yea .....

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year under consideration and therefore the additions made by the AO are hereby deleted. The AO is directed to re-compute the income in the terms of aforementioned decision. Therefore, these grounds raised by the Assessee are allowed. - I.T.A. No. 7118/Mum/2014 - Dated:- 23-9-2016 - SHRI JASON P. BOAZ, AM AND SHRI SANDEEP GOSAIN, JM For The Appellant : Shri Dilip T. Worah For The Respondent : Ms. Anu Krishna Agarwal ORDER Per Sandeep Gosain, J. M.: The Present Appeal has been filed by the Assess .....

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e in to account facts of the case of CIT v/s Excel Industries Ltd (Supreme Court ) ITR-358 (Par t -2) - Page 295 3. Wi thout prejudice to aforesaid the learned Comm. Of Appeals did not consider above case in his order in spite of submission made vide letter dated 01/05/2014. 4. The appellant pleads your honors to give relief and it is prayed that order of ld. Commi s s ioner Of Income Tax Appeal -8, Mumbai be quashed and additions of ₹ 11,09,321/- be deleted. 5. The Appellant craves leaves .....

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ACIT whereby a sum of ₹ 11,09,321/- being the amount of DEPB credit was added back to the total income of the assessee. 3. Aggrieved by the order of the AO, assessee preferred an appeal before CIT(A) and the CIT(A) after considering the case of the assessee dismissed the appeal of the Assessee. 4. Aggrieved by the order of CIT(A), the assessee preferred the present appeal before us on the grounds mentioned hereinabove (paragraphs 1 to 4 of grounds of appeal). 5. Ground Nos. 1 to 4 are int .....

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the company on year to year basis. It is next submitted that the assessee has followed the same procedure in the following year also and have already offered the said amount for tax in the year of receipt from sale of DEPB license. 7. Learned AR in order to strengthen his arguments submitted that the reason for accounting DEPB on cash basis is that premium on DEPB fluctuates by 5% to 10% in the market as per demand/supply gap. The seller may get higher amount on actual sell/realization depending .....

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ided the issue of DEPB entitlements in paragraph 2.3 of its order, the same is reproduced below. 2.3 I have considered the facts of the case, order passed by the AO and the submission made by the appellant. It is seen that the appellant follows the mercantile system of accounting. Therefore, the income out of transfer DEPB by way of sale or otherwise has to be offered as income for the year under the mercantile system of accounting followed by the appellant, which the appellant has failed to do. .....

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the appellant has failed to offer. Therefore, the action of the AO in taxing the DEPB amounting to ₹ 11,09,321/- for the year is justified. Accordingly, the ground of appeal is dismissed. 10. We have analyzed the orders passed by CIT(A) and we have also considered the latest judgment relied upon by learned AR of Hon ble Apex Court in the case of CIT Vs. M/s. Excel Industries Ltd., reported in 358 ITR 295. The operative portion of the same is reproduced below. 32. Thirdly, the real question .....

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the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. 11. From the facts of the case, we found that the assessee accounted the income from sale of DEPB license on cash basis and the same is followed consistently by the assessee on year to year basis. We have als .....

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follows: Income Tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attract, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income , which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances th .....

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