TMI Blog1984 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... -65 1965-66 Rs. Rs. Rs. Sugarcane cess 2,46,837 2,26,383 1,34,355 Purchase tax 53,294 36,844 1,097 3,00,131 2,63,27 1,35,452 3. Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction of the sums of Rs. 5,030 and Rs. 1,244, respectively, for the assessment years 1963-64 and 1964-65 paid by it by way of demurrage to the Railways in the computation of its business income for the assessment years in question ? 4. Whether, on the facts and in the circumstances of the case, any part of the compensation of Rs. 2,75,610 awarded to the assessee in respect of its properties taken over by the Pepsu Government is assessable to income-tax for the assessment year 1963-64 ? " Questions Nos. 1, 3 and 4 have been referred at the instance of the Commissioner of Income-tax and question No. 2 at the instance of the assessee. The assessee is a public limited company and is engaged in the business of manufacture and sale of sugar. The assessee appointed the Sugar Marketing Syndicate, Amritsar, as its sole selling agent. It was in 1947. This firm was reappointed as sole selling agent for the sale of the assessee's products of sugar and mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears, the following two questions were referred to this court: Assessment year 1961-62 (I.T.R. No. 25 of 1971) : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the payment of commission of Rs. 83,207 was not incurred for the purpose of the assessee's business and was inadmissible as a deduction? " Assessment year 1962-63 (LT.Rs. Nos. 15 and 16 of 1972): " Whether, on the facts and in the circumstances of the case, the amount of Rs. 98,407 was allowable as a deduction for determining the assessee's business for the assessment year in question ? " The amounts mentioned in these two questions had been paid by the assessee as commission to its sole selling agent, M/s. Sugar Marketing Syndicate. Both these questions were answered in favour of the assessee by a Bench of this court on January 14, 1981. In respect of the assessment years in question, the ITO disallowed the commission payment. The Appellate Assistant Commissioner, however, allowed the same. The appeal of the Department to the Tribunal failed. At the instance of the Department, question No. 1 was referred to this court. As will be seen, the facts in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se tax are similar to those relating to payment of interest in respect of late payment of cess under the U.P. Sugarcane Cess Act, 1956. As noticed above, the Supreme Court in the case of this very assessee in Mahalakshmi Sugar Mills Co.'s case [1980] 123 ITR 429, held that the interest paid under the U.P. Sugarcane Cess Act, 1956, was not penalty paid for an infringement of the law and was an allowable deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922. Applying the same principles, it has to be held that interest paid for late payment of purchase tax is also allowable deduction for computing the business income of the assessee. We find support from a decision of the Calcutta High Court in Balrampur Sugar Co. Ltd. v. CIT [1982] 135 ITR 227 and a Full Bench decision of the Allahabad High Court in Triveni Engineering Works Ltd. v. CIT [1983] 144 ITR 732, decided on October 6, 1983. Thus, we answer question No. 2 in the affirmative, i.e., in favour of the assessee and against the Department. Question No. 3 is common for the assessment years 1963-64 and 1964-65 and relates to the deductibility of the demurrage paid by the assessee company to the Railways. For the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is entitled to deduction of sums of Rs. 5,030 and Rs. 1,244, respectively, for the assessment years 1963-64 and 1964-65 paid by it by way of demurrage to the Railways in the computation of its business income for the assessment years in question. This brings us to the last question which is relevant only for 1963-64. The assessee had established its factory for manufacture of sugar at Hamira in the then State of Kapurthala in 1950. As the assessee could not get adequate supply of sugarcane of quality, the assessee decided to shift its factory to Iqbalpur in District Saharanpur, U.P. The process of dismantling the factory started at the end of 1953-54 season. The request of the assessee to instal a small sugar factory at Hamira was rejected by the Government and instead a licence to set up a sugar factory at Hamira was granted to another party. The Deputy Commissioner, Kapurthala, acting under the PEPSU Requisitioning and Acquisition of Immovable Property Act, 1954 (for short " the PEPSU Act "), after notice to the assessee, passed orders for requisitioning of the assessee's property at Hamira for the benefit of the new party to whom the licence was granted. In pursuance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey are applicable; (f) where there is any dispute as to the person or persons who are entitled to the compensation, the arbitrator shall decide such dispute and if the arbitrator finds that more persons than one are entitled to compensation, he shall apportion the amount thereof amongst such persons; (g) nothing in the Arbitration Act, 1940 (X of 1940), shall apply to arbitrations under this section. (2) The amount of compensation payable for the requisitioning of any property shall consist of (a) a recurring payment, in respect of the period of requisition, of sum equal to the rent which would have been payable for the use and occupation of the property, if it had been taken on lease for that period; and (b) such sum or sums, if any, as may be found necessary to compensate the person interested for all or any of the following matters, namely: . (i) pecuniary loss due to requisitioning; (ii) expenses on account of vacating the requisitioned premises; (iii) expenses on account of reoccupying the premises upon release from requisition; and (iv) damage (other than normal wear and tear) caused to the property during the period of requisition, including the expenses t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63, directing payment of compensation awarded to the assessee on its furnishing security to the satisfaction of the court. The assessee received the payment on January 7, 1964, after the assessee had furnished the requisite security. The amount of Rs. 2,31,682 which was finally determined by the High Court was adjusted by the assessee in its books of account for the year ending June 30, 1966, relevant to the assessment year 1967-68. The Income-tax Officer took the view that the assessee became entitled to the amount of Rs. 2,75,610 when the award was made on June 7, 1962, and held this amount to be assessable in the assessment year 1963-64. On appeal by the assessee, the Appellate Assistant Commissioner held that the amount of compensation was finally determined in 1965 and could be considered only in the assessment year 1967-68, and the Appellate Assistant Commissioner did not go into the question as to whether the whole or any part of the compensation was not liable to tax. The Department appealed to the Tribunal. During the hearing of the appeal before the Tribunal, it was noticed that the Income-tax Officer also included the amount of Rs. 2,31,682 determined by the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There are various judgments under the Requisitioning Act of various High Courts where it is said that the standard rent should be the basis for fixation of compensation (of course, where rent legislation would be in force) which has to be the recurring payment for the use and occupation of the requisitioned property. In Humayun Mirza v. All India Radio, AIR 1975 Kar 124, it was held that section 8 of the Requisitioning Act, which is similar to section 8 of the Pepsu Act, contemplates payment of different amounts of compensation for different periods. The language of section 8 also clearly shows that a recurring payment is to be made which is to be equal to the amount of rent if the requisitioned property had been taken on lease for the period of requisition. Then, as mentioned above, the arbitrator his to take into account the expenses for vacating and reoccupying the property, etc. All these amounts will have to be differently calculated and differently dealt with. As a matter of fact, the arbitrator has determined the recurring payment on the basis of the rent payable each month during the period of requisition in respect of the properties requisitioned under the Pepsu Act. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. In Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, the Supreme Court held that the liability to pay sales tax accrued on the basis of the statute and the existence of a dispute regarding the liability could not postpone the same. In the instant case, a liability to pay compensation on the part of the Government had accrued immediately on taking over the possession of the requisitioned property and correspondingly there accrued a right of the assessee to receive compensation. In Sassoon Co. Ltd.'s case [1954] 26 ITR 27 (SC), it was held by the Supreme Court that income accrued at the time when a right to receive income arose to the assessee and the accrual was not held in abeyance merely because the quantification was postponed. In Morvi Industries Ltd. v. CIT [1971] 82 ITR 835, the Supreme Court held that the income accrued when, it became due. The postponement of the date of payment did not affect the accrual of income. The fact that the amount of income is not subsequently received by the assessee would not also detract from or efface the accrual of income although non-receipt may, in appropriate cases, be a valid ground for claiming deductions. In CIT v. Chuni Lal V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Rs.. 2,31,682 finally determined by the, High Court was adjusted by the assessee in its books of account for the year ending June 30, 1966, relevant to the assessment year 1967-68. The Income-tax Officer held that as the right to receive the compensation accrued to the assessee on the making of the award by the District judge on June 7, 1962 (assessment year 1963-64), it was a legally enforceable right and he assessed the compensation in the assessment year 1963-64. The Appellate Assistant Commissioner was, however, of the view that it was only when the matter was finally settled by the High Court that the amount paid to the assessee was finally determined and as this happened on November 24, 1965, it was only on this date that the liability crystallised so far as the Government was concerned and the same income finally accrued to the assessee. According to the Appellate Assistant Commissioner, the amount was to be considered in the assessment year 1967-68. He held that the inclusion of this amount in the assessment year 1963-64 by the Income-tax Officer was not justified and he deleted the addition. The Tribunal was of the view as already noticed above that the amount of c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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