TMI Blog1994 (12) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ered firm. The assessment year involved is 1982-83 for which the accounting year ended on October 27, 1981. The Assessing Officer found that during the year the assessee received a sum of Rs. 40,315 as interest on refund of income-tax under section 244 of the Income-tax Act, 1961. The refund voucher was received on April 22, 1981. The entire amount of interest was assessed under the head "Other sources" by the Assessing Officer in the assessment year 1982-83. The assessee appealed to the Deputy Commissioner of Income-tax (Appeals) against the inclusion of the interest of Rs. 40,315 to the total income. His submission was that the interest though received on April 22, 1981, related to the period from 1957-58 to 1973-74. Since the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstance in the assessee's contention to spread over the interest received on refund of the income-tax. Therefore, the view taken by the Appellate Assistant Commissioner was upheld, but the reasoning was not given by the Income-tax Appellate Tribunal in affirming the view taken by the Assistant Appellate Commissioner. Shri A. K. Ray, learned standing counsel appearing for the Income-tax Department, submits that the assessee could not know and has no reason or basis to know as to whether he was entitled to the refund of the amount and the interest thereon. It is only when the assessment came to be final, that it was determined that the income of the assessee in that year was that particular amount and that he was entitled to the refund of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to actually when the right to receive the interest accrued to the assessee. Whether it accrued in the year of assessment for which the refund and interest was made or the date on which the interest was actually received by the assessee? In CIT v. A. Gajapathy Naidu [1964] 53 ITR 114, the apex court has decided the question as to when an Income-tax Officer proceeds to include a particular income in the assessment. For that, the Income-tax Officer should ask himself, inter alia, two questions, namely: (i) what is the system of accountancy adopted by the assessee, and (ii) if it is the mercantile system, subject to the deeming provisions, when has the right to receive accrued? If he comes to the conclusion that such a right accrued or ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1947 in terms of an award made on January 13, 1949, under the Industrial Disputes Act. It debited this amount in its profit and loss account for the year 1948, but in fact paid it to the employees in the calendar year 1949. It was held that it was only in 1949 that the claim to profit bonus was settled by an award of the Industrial Tribunal and the only year to which the liability under the award could be properly attributed was 1949 and that therefore the sum had to be deducted in the calendar year 1949 relevant to the assessment year 1950-51. A similar question arose in CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524 (SC). There in a case of compulsory acquisition of land additional compensation fixed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount accrued to the assessee only when his income-tax return was finally assessed even by the appellate authority, has much force because at the time the returns were submitted and the advance tax was paid, nobody was sure about the figure on which the assessee in fact is to be assessed. Though learned counsel for the assessee says that he was sure about that, his assertion cannot be accepted. If he was sure, he would not have deposited the excess amount of advance tax. That means, the amount was yet to be determined and the determination was finalised later on. It was only as per section 240 where, as a result of the order passed in appeal or other proceedings, the refund of amount becomes due to the assessee which is to be paid to him ..... X X X X Extracts X X X X X X X X Extracts X X X X
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