TMI Blog1999 (9) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... by the applicant without any encumbrance and that the appeal is still pending before the Supreme Court?" (By the Revenue): "(1) Whether, the Appellate Tribunal is right in law and on facts in allowing the assessee to raise additional claim under section 80HH? (2) Whether, the Appellate Tribunal is right in law and on facts in permitting the assessee to file audit report for the purpose of claiming deduction under section 80HHC?" We have also considered the facts as mentioned in Special Civil Application No. 6082 of 1999. From the record it transpires that the assessee received refund of Rs. 1,18,05,960 from the Central Excise Department during the year 1991-92. It is the case of the Revenue that the assessee is maintaining accounts on cash basis and during the examination of the books of account, it was found that the refund received has been placed under sub-head "liability" under the head "Other liabilities". In view of this, the assessee was asked to show cause is to why excise duty refund should not be treated as its income under section 41(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). It transpires that, before the excise authorities, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, despite the fact that the matter was pending before the court and there was no final adjudication. The Assessing Officer held that the amount of refund is required to be added to the total income. Aggrieved by the order passed by the Assessing Officer, an appeal was preferred. However, the same was rejected and ultimately the assessee moved the Tribunal by preferring ITA No. 2805 of 1995. The Tribunal rejected the appeal preferred by the assessee and thus confirmed the finding recorded by the Assessing Officer as well as of the Appellate Officer. Against this order, the reference is at the instance of the assessee. So far as deduction under section 80HHC of the Act is concerned, the Appellate Officer held that the Assessing Officer was justified in not allowing any deduction under section 80HHC. Before the Tribunal, the assessee contended that the excise duty refund was not taxable as business income of the year and it had no occasion or opportunity to file the audit report. The Tribunal was of the view that the income should be included in the year, i.e., 1991-92, under section 41(1) of the Act which is deemed business income and held that the assessee should be perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution of India before the High Court of Delhi, challenging the order of the Collector of Central Excise demanding duty on polymer chips. The learned single judge hearing the petition allowed the same on August 28, 1970. On the basis of this judgment, the Income-tax Officer disallowed the deduction claimed by the company in respect of the current liability and also treated the sum of Rs. 2,87,60,109 on account of the past liability as income under section 41 of the Act and, thus, a total sum of Rs. 4,95,89,595 came to be added by way of income. The High Court pointed out as under: "Now, admittedly, in the instant case deductions were allowed to the assessee on account of excise duty in the years 1964-65 to 1970-71. If the liability of the assessee can be said to have ceased in the relevant previous year the assessee would clearly be liable to be assessed in respect of such liability. But the question is whether the liability can be said to have ceased in the instant case. It is not disputed that the decision of the Delhi High Court has not been accepted by the excise department. It has preferred a Letters Patent Appeal which has been admitted and is pending. In our opinion, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty to which the company objected. The company preferred appeal before the Appellate Collector, who allowed the appeal with a direction that the assessee would be entitled to the consequential relief. The Assistant Collector despite the Appellate Collector's order and requests made by the assessee to refund the excise duty did not respond and hence a writ petition was filed before this court seeking a direction for refund of the excise duty alleged to have been illegally recovered. The assessee filed a return of income in the year 1974-75 in August, 1974. On December 28, 1974, the Joint Secretary to the Government of India issued a notice to the assessee under section 36(2) of the Central Excises and Salt Act, 1944, calling upon it to show cause as to why the order of the Appellate Collector of Central Excise, Bombay, allowing the claim of refund should not be set aside. The assessee resisted the review or revision of the order of the Appellate Collector by its letter dated February 26, 1975. During the pendency of the review or revisional proceedings before the Central Government, excise duty of Rs. 1,81,427 was refunded to the assessee on August 8, 1975, and the proceeding under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revisional proceedings were dropped. The year of account of the assessee is the financial year and, therefore, the refund of excise duty of Rs. 1,81,427 became includible in the assessee's total income for the assessment year 1976-77 under section 41(1) of the Act. In our opinion, the Tribunal was right in holding that the said amount of Rs. 1,81,427 was not chargeable to income-tax in the assessment year 1974-75." Thus, even during the pendency of the proceedings if the amount of refund is received, the provisions contained in section 41(1) of the Act cannot be invoked as there is no final decision on the question whether or not the assessee is entitled to claim the refund of excise duty. In the case of CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524, the apex court considered an almost identical situation. The Full Bench in the case of CIT v. Bharat Iron and Steel Industries [1993] 199 ITR 67 (Guj), considered the facts of that case and observed: "Certain lands belonging to the respondent-company which carried on the business of dealing in land and maintained its accounts on the mercantile system, were first requisitioned and then compulsorily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78] 114 ITR 237 (Guj) and Addl. CIT v. New Jehangir Vakil Mills Co. Ltd. [1979] 117 ITR 849 (Guj)." In view of this decision, it is contended before us that mere receipt of refund would not attract the provisions contained in section 41(1) of the Act as the proceedings were pending with regard to the refund. This court in the case of Topandas Kundanmal v. CIT [1978] 114 ITR 237, has held that, if an assessee has got an inchoate right and has not acquired any vested right to enhanced or additional compensation over and above what has been offered to him by the Land Acquisition Officer, it cannot be said that he has a vested and complete right as to the interest on such amount. It is only when the amount of compensation is adjudicated upon by the court and it is only when the court awards interest on such enhanced amount of compensation that the assessee has an enforceable right to the principal amount of compensation as well as interest. In the instant case, after the apex court disposed of the matter raising real and substantial questions, it can be said that the adjudication attained finality. Before us a submission was made with regard to mercantile accounting system and ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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