TMI Blog2004 (8) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ive, i.e., in favour of the Revenue - IT REFERENCE NO. 18 OF 1983 - - - Dated:- 25-8-2004 - Judge(s) : R. K. AGARWAL., K. N. OJHA. JUDGMENT The judgment of the court was delivered by R.K. Agarwal J.- The Income-tax Appellate Tribunal, Delhi, has referred the following questions of law under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this court: "1. Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in holding that the amount of Rs. 12,66,429 being excess levy sugar price was not taxable in the hands of the assessee-company in the year under consideration? 2. Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in deleting the interest of Rs. 2,89,026 and also in confirming the deletion of interest of Rs. 1,43,282 on the amount of excess levy sugar price claimed by the assessee-company?" The present reference relates to the assessment year 1974-75 for which the relevant previous year ended on September 30, 1973. The assessee is a public limited company engaged in the manufacture and sale of crystal sugar. The Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment had created Levy Sugar Price Equalisation Fund. Under section 3 of the Levy Act, the assessee was required to transfer the excess sugar price to the fund along with interest at 12.5 per cent, per annum from the date of realisation of the amount to the date of its transfer. It was urged before the Income-tax Officer that in view of the aforesaid provisions the amount was to be transferred to the Levy Sugar Price Equalisation Fund with interest at 12.5 per cent per annum from the date of realization to the date of transfer and, therefore, the amount of Rs. 12,66,429 did not belong to the assessee. It was further claimed before the Income-tax Officer that the assessee was also entitled to the deduction of interest on the above amount which was payable to the aforesaid fund. It was also stated before the Income-tax Officer that in the assessment year 1972-73, a similar amount was taxed by the Income-tax Officer but the addition was deleted by the Appellate Assistant Commissioner and his order was upheld by the Tribunal. In the assessment year 1973-74, the Income-tax Officer himself did not tax it. The Income-tax Officer rejected the assessee's contention. He observed that in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to the allowance of interest amount to Rs. 1,43,282. The assessee, on the other hand, challenged the disallowance of interest of Rs. 2,89,026. The Tribunal upheld the deletion of the amount of Rs. 12,66,429 on the ground that it was not taxable in the hands of the assessee as its income. It further held that interest of Rs. 2,89,026 and Rs. 1,43,282 is allowable as deduction in view of the provisions of section 3 of the Levy Act. We have heard Shri A.N. Mahajan, the learned counsel for the Revenue, and Shri Rakesh Ranjan Agrawal, learned counsel for the respondent. Learned counsel for the Revenue submitted that as the amount of Rs. 12,66,429 has been realized towards excess levy sugar price, it was a trading receipt at the hands of the respondent-assessee and, therefore, ought to have been included while computing the income. He further submitted that the liability to pay interest did not accrue during the assessment year in question as the Levy Act came into force on April 1, 1976. He relied upon a decision of the apex court in the case of K.C.P. Ltd. v. CIT [2000] 245 ITR 421. Learned counsel for the respondent-assessee, however, submitted that the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the interim order passed by this court on July 27, 1972, the respondent-assessee has realized the excess levy sugar price. The interim order passed by this court is reproduced below: "Issue notice. Notices have been accepted on behalf of respondents Nos. 1 and 3, by Shri G.K. Sahai, on behalf of respondent No. 3 by Shri S.S. Bhatnagar. Heard counsel for the parties. The respondents are restrained from giving effect to the impugned order dated June 15, 1972, issued in exercise of the powers given under section 3 of the Essential Commodities Act, 1955, on condition that the petitioner furnishes bank guarantee before the Registrar of this court in respect of the difference between the price fixed by the Government and the price at which the sugar is actually sold. The bank guarantee shall be furnished to the satisfaction of the Registrar of this court every month in respect of the transaction in that month within four weeks of the actual sale. It will be open to this court to deal with the bank guarantee and pass orders as to how that amount is to be distributed at the time of final orders on the writ petition." Subsequently, the writ petition preferred by the respondent i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee at an enhanced rate, is an inchoate right as this extra amount did not accrue to the assessee until the finalisation of the dispute pending before one court or the other. It is only on the final determination of the amount that the right to such income in the nature of levy price would arise or accrue, until then there is no liability in praesenti in respect of the additional amount of price claimed by it. The Karnataka High Court had applied the principles laid down in the first class of cases noticed by the hon'ble Supreme Court in Hindustan Housing and Land Development Trust Ltd.'s case [1986] 161 ITR 524 where it was held that where the right to receive the payment is in dispute and it is not merely a question of quantifying the amount to be received, no income would arise or accrue till the price is finally fixed. In the case of Seksaria Biswan Sugar Factory Pvt. Ltd. [1992] 195 ITR 778, the Bombay High Court has agreed with the view taken by the Karnataka High Court in the aforementioned case. In the case of Janta Co-operative Sugar Mills Ltd. [1998] 233 ITR 635, the Punjab and Haryana High Court has agreed with the aforementioned decisions of the Andhra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 420, of the Karnataka High Court in the case of Mysore Sugar Co. Ltd. [1990] 183 ITR 113 and of the Bombay High Court in the case of Seksaria Biswan Sugar Factory Pvt. Ltd. [1992] 195 ITR 778 were considered and were distinguished by the apex court on the ground that one common feature of all the orders is that the realisation of excess levy sugar price of the respective assessee was hedged by certain conditions. The apex court has held as follows: "The decisions so relied on are: CIT v. Mysore Sugar Co. Ltd. [1990] 183 ITR 113 (Karn) ; CIT v. Seksaria Biswan Sugar Factory Pvt. Ltd. [1992] 195 ITR 778 (Bom) and CIT v. Chodavaram Cooperative Sugars Ltd. [1987] 163 ITR 420 (AP). We have carefully perused the decisions. It is clear from the facts stated by the High Courts that in each of the cases the assessee's right to realise the excess price was the subject-matter of dispute pending in the High Court and the High Courts had passed different interim orders pursuant to which the respective assessees were collecting the excess price. Though the interim orders of the High Courts are differently worded in the three cases, one common feature of all the orders is that the realisat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in our opinion, the Tribunal was right in coming to the conclusion that the amounts in question were not assessable in the hands of the assessee in the assessment years under consideration." Similar view has been taken in the case of Walchandnagar Industries Ltd. [2003] 262 ITR 212 (Bom). Applying the principles laid down by the apex court in the cases of K.C.P. Ltd. [2000] 245 ITR 421 and Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524 (SC) to the facts of the present case, we find that here also the right to collect/realise extra levy sugar price was on account of the interim order dated July 27, 1972, passed by this court, which was hedged with certain conditions. Thus, the right to receive the payment had been in dispute. It, therefore, did not form part of the trading receipt of the respondent-assessee. We are in respectful agreement with the earlier decision of this court, which is inter partes relating to the previous assessment year 1972-73. In this view of the matter, we answer the first question of law in the affirmative, i.e., in favour of the assessee and against the Revenue. So far as the question as to whether the amount of interest of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability so incurred has got to be allowed as a revenue expense, as held by the apex court in the case of Haji Lal Mohd. Biri Works v. CIT [1997] 224 ITR 591. It is also well-settled that in the case of a statutory liability, the accrual depends upon the term of the statute. The quantification or ascertainment cannot postpone its accrual to the extent of admitted liability, as held in the cases of CIT v. L. H. Sugar Factory and Oil Mills P. Ltd. [1978] CTR 211 (All); CIT v. Swadeshi Mining and Manufacturing Co. Ltd. [1978] 112 ITR 276 (Cal); CIT v. Swadeshi Mining and Manufacturing Co. Ltd. [1979] 118 ITR 975 (Cal); CIT v. Shri Sarvaraya Sugars Ltd. [1987] 163 ITR 429 (AP); CIT v. Aggarwal Rice and General Mills [1989] 180 ITR 29, 31 (P H); CIT v. Ram Chand Kanshi Ram [1989] 180 ITR 114, 116 (P H). Where a statute imposes liability with retrospective effect, such liability, even for past years, accrues in the accounting year wherein the statute first comes into operation, as held by the Calcutta High Court in the case of CIT v. West Chusick Coal Co. Ltd. [1981] 129 ITR 62. Further it is not in all cases correct to say that a statutory liability created in a particular year, beco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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