TMI Blog1956 (2) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... in paying excise duty both to the Government of India and to the Travancore State, the Government of India issued certain executive instructions to its subordinates. On 29th December, 1944, the Government directed the excise authorities not to enforce the system of voluntary payment of excise duties by the dealers on goods imported from Travancore after 14th November, 1944, the date on which the Travancore State notified the imposition of excise duty on arecanuts (see annexure A). Under annexure A-1, dated 2nd June, 1945, the excise authorities were directed to refund to the traders the excise duty they had voluntarily paid to the Government of India on nuts imported from the Travancore State, if any trader applied for refund. Neither of these orders was communicated to the assessee or to any of the dealers. They were only executive instructions to the departmental authorities issued by the Government of India. The assessee continued the payments of excise duty up to 31st December, 1944. On 11th January, 1945, he applied to the Collector of Excise for repayment of the excise duty the assessee had paid on nuts imported from Travancore subsequent to 14th November, 1944 (annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is view, the date of recovery of this advance is immaterial. The amount recovered from the Government is not in the nature of damages for some wrongful act done to the assessee by the Government, but an amount recovered by the Government in extortion which they agreed to refund of their own accord. We fail to understand how a levy of excise duty under a valid enactment can amount to extortion by the Government. The Tribunal, in our opinion, was also wrong in viewing the amount as a debt due to the assessee from the Government. Apart from the fact, that no notification as such, as that expression is normally understood, was issued by the Government of India as we pointed out, they only issued executive instructions to their subordinates without communicating them directly or even indirectly to the traders concerned-there was no question of the assessee acquiring any rights, any legally enforceable rights, against the Government even under the letters marked annexures A and A-1, which apparently the Tribunal regarded as notifications issued by the Government of India. Whether it was a case of an inclination to refund, which was the interpretation placed upon annexure A-1 by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the normal course of maintaining his accounts, credited himself with that amount? In our opinion, the answer to that question must be in the negative. In E.D. Sassoon Co. Ltd. v. Commissioner of Income-tax [1954] 26 I.T.R. 27 at p. 51, the Supreme Court observed: It is clear therefore 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;..................Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he has acquired a right to receive the income or that income has accrued to him. Judged by that test, we have to hold that the amount of ₹ 36,094 did not represent the income that accrued to the assessee in the year of account in question. Mr. Rama Rao Sahib relied on the decision of the House of Lords in Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, as a licensed flour miller, was entitled to certain rebates. He was what was called a non-pool miller. The pool millers were entitled to certain further sums by way of compensation payable by the Ministry of Food. These amounts were comprehensively called remuneration. The concession given to the pool millers was extended to non-pool millers, of whom Mr. Dadswell was one, and he eventually received a further sum of ₹ 3,289. That payment was in December, 1949. Mr. Dadswell had meanwhile ceased to trade on 30th September, 1945. Roxburgh, J., pointed out at page 656: It is common ground that when Mr. Dadswell ceased to trade on 30th September, 1945, he had no legal or equitable right to any further payment from the Ministry, and that he had no asset which could then have been properly entered in a final account as a book debt........the relevant question is not whether at the date of retirement there was any outstanding book debt or any contingent or deferred legal or equitable right, but whether any work had been done in the course of trade in respect of which the reward had not been finally settled, or, in other words, anything outstanding in the nature of, or analog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant year of account. In our opinion it is the principle laid down by the House of Lords in British Mexican Petroleum Co. Ltd. v. Jackson [1932] 16 Tax Cas. 570 that should apply to the case of the assessee. In that case by 30th June, 1921, the assessee company owed a sum of ₹ 1,073,281 to Huasteca Company for the purchase of petrol etc. Subsequently the Huasteca Company remitted a sum of ₹ 9,45,232. The question was whether this sum of ₹ 9,45,232 had to be brought into account for purposes of computing the profits of the assessee company. Lord Thankerton observed at page 591: The main argument for the appellant was that the amount of Rs. 1,073,281 owing to the Huasteca Company had been treated as an expense of the trade deductible from gross receipts in the trading account to 30th June, 1921, but that, to the extent to which it was subsequently released, it was in fact never expended; that the original price for the goods having been reduced by agreement, the price actually paid and not the original price was the amount of the deduction allowable for income- tax purposes ; and that the account to 30th June, 1921, should be opened up and the ded ..... 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