TMI Blog1990 (11) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... om the business of distribution and marketing of petroleum products in India. As per the Burmah-Shell (Acquisition of Undertakings in India) Act, 1976, the undertaking of Burmah-Shell in India vested in the fully-owned Government company Burmah-Shell Refineries Ltd. with effect from January 24, 1976. The name of the Government company was subsequently changed to Bharat Petroleum Corporation Ltd. on August 1, 1977. The balance-sheet of the assessee-company for the calendar year 1974, disclosed an item on the liabilities side " Balance of crude price adjustments and crude price equalisation account Rs. 68,75,654 " under the main head " sundry creditors ". The assessee gave bifurcation initially at Rs. 42,23,864 which was termed as additional claim and another amount of Rs. 26,51,792 being liability to the Government. It was explained before the Inspecting Assistant Commissioner during the course of assessment proceedings that, for the purpose of fixing the price of petroleum products, the f.o.b. cost of crude oil was determined at a weighted average price by taking into account the prices of various types of crude imported from different countries as well as the price payable on crud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting period corresponding to the assessment year 1978-79. (iv) That, in 1974, calendar year (the accounting year in question), there was no actual liability for the above sum. (v) the amount could at best be called a contingent liability, i.e., in anticipation of what the Government might claim in future. As regards Rs. 44,47,482 it was explained that this sum represented the additional claim of the assessee under the " COPE Scheme " disregarding the first in and first out principle. This amount had been credited to sundry creditors by debiting the COPE A/c. Under the "'COPE Scheme " the assessee got the excess of the approved f.o.b. cost of crude over the cost of crude taken into account by the Government for product pricing per barrel. In para 9(1) of the MOP's Circular dated June 24, 1964, it was confirmed that f.o.b. cost of crude oil for the production of bulk refined petroleum products should be on the basis of the " first in first out " (FIFO) principle. That is, if there was opening stock as on a particular date purchased earlier at lower approved price, a claim under the " COPE Scheme " could not be made on the basis of the increased approved price as on that partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the matter was argued, the assessee-company submitted a paper book containing 41 pages which contained the various circulars of the Ministry of Petroleum on which the Tribunal itself had relied and which are relevant for the decision of the present case. The Tribunal referred to the said fact in paragraphs 7, 8 and 10 of the order. Hence, in deciding the issues, reference can be made to the materials in the paper book which was filed before the Tribunal at the time of hearing. It is now well-settled that if the documents are relied upon by the Tribunal, the court can look into such documents even though such documents have not been included in the paper book (Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723 (Bom) at pages 737 and 738). The question is whether the sum of Rs. 44,47,482 being the amount claimed by the assessee in excess of the amount which is payable to it on the basis of the scheme known as the Crude Oil Price Equalisation Account ( in short to be styled as " the COPE " ) Scheme is assessable for the accounting year 1975-76. The circumstances under which the said scheme was made are as follows: The Scheme known as the COPE Scheme was introduced by the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r book by a directive that " it is confirmed that the f.o.b. cost of crude oil used for the production of bulk refined petroleum products during a particular period shall be on the basis of the 'first in first out' principle ". The effect of this directive is that, if the opening stock as on a particular date includes stock which was purchased earlier at a lower price, in considering the amount which is payable to or by the Government in terms of the COPE account, the approved purchase price of the earlier date when the said stock was purchased has to be taken into account and not the approved purchase price of the later date when the refined product is being sold. If the increased approved purchase price is applicable to the entire stock, i.e., the stock purchased earlier, the question of applying the first in first out method would not have arisen at all. The assessee, however, without following the clear directive of the Ministry of Petroleum contained in the Circular dated June 24, 1974, made an excess or additional claim for Rs. 44,47,482 on the footing that the approved purchase price as on the day when such crude oil was sold should be applicable to the entire stock-in-hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal's paper book), where the Government itself had pointed out that these pool accounts are yet to be scrutinised and cleared. It will appear that, even in April, 1976, i.e., after the close of the accounting year, the Government has not yet cleared the said account. Therefore, the claim until settled and cleared was a mere claim and does not give rise to any right to receive the said additional claim. The said claim apparently was in clear violation of the directive of the Ministry of Petroleum as pointed out earlier in this submission. It was not even open to the company to bring the said amount to its profit and loss account. Hence, the company has debited to the COPE account and shown the amount as repayable to the Government by crediting the sundry creditors account on the liabilities side of the balance-sheet. As the assessee was maintaining its accounts on the mercantile basis, until and unless the assessee has acquired a right to receive the said amount which it has claimed before the Government in clear violation of the directive of the Ministry of Petroleum, the said amount cannot be said to have accrued to the assessee or to have resulted in an accrual of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be included in the assessment year 1975-76. But it appears from the assessment order for the assessment year 1978-79 that the assessee, by letter dated January 30, 1981, has offered that the aforesaid sum be taxed. The said letter is as follows: " Further to our letter of even reference dated 29th January, 1981, we enclose a copy of the orders passed by the Commissioner of Income-tax (Appeals) in respect of our appeal against assessment order passed by the Inspecting Assistant Commissioner of Income-tax, Calcutta, for the assessment year 1975-76 in respect of Burmah-Shell Oil Storage and Distributing Co. of India Ltd. Out of provision of Rs. 68,75,654 disallowed by the Inspecting Assistant Commissioner of Income-tax, the Commissioner of Income-tax (Appeals) has deleted the addition of Rs. 44,47,482. He has upheld the addition of Rs. 24,28,172. We, therefore, offer for tax a sum of Rs. 44,47,482 and only a sum of Rs. 24,28,172 is not liable for tax. We request you to kindly make this correction. This is without prejudice to our contention that if on a later date the sum of Rs. 44,47,482 is held to be taxable, a rectification order is to be passed for the assessment year, ex ..... 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