1999 (10) TMI 20 - HC - Income Tax

High Court: Enhanced fertilizer prices not taxable income for 1976-77 assessment year

Commissioner Of Income-Tax Versus Purshottam Das Govind Das

Commissioner Of Income-Tax Versus Purshottam Das Govind Das - [2000] 245 ITR 45, 164 CTR 350, 129 TAXMANN 838 Issues:Interpretation of the Income-tax Act, 1961 regarding treatment of price difference between enhanced and old prices of fertilisers as income for assessment year 1976-77.Analysis:The High Court of Allahabad was approached to provide an opinion on whether the amount of Rs. 44,777, representing the difference between enhanced and old prices of fertilisers, should be considered as the assessee's income for the assessment year 1976-77. This issue stemmed from a Tribunal order dated June 10, 1981, in I. T. A. No. 975 (All) of 1980. The case involved a registered firm dealing in fertilisers, where the Government of U. P. had ordered that existing stocks on May 31, 1974, be sold at old rates despite a price increase. This directive was challenged in court, leading to interim orders allowing dealers to charge enhanced prices but deposit the difference in a separate account. The Income-tax Officer added the deposited amount to the assessee's business income, prompting an appeal.The Appellate Assistant Commissioner upheld the Income-tax Officer's decision, prompting the assessee to appeal to the Appellate Tribunal. The Tribunal, citing precedents like Govind Prasad Prabhu Nath, held that until the Supreme Court provided a final judgment, the deposited amount should be considered a mere deposit with the District Magistrate and not the assessee's income for that year. The Court referred to a similar case involving levy sugar prices in Dhampur Sugar Mills Ltd. v. CIT, where it was established that such price differences were taxable only when actually realized, not when initially deposited.In line with the precedent set by the Dhampur Sugar Mills case, the High Court ruled in favor of the assessee, stating that the amount in question could not be treated as income for the assessment year 1976-77. This decision was based on the fact that the assessee's right to retain the money as income had not been perfected, as it was deposited in accordance with court orders and subject to further legal proceedings. The Court's interpretation aligned with the principles of realizing income when actually received, as established in relevant tax laws and previous judgments.This judgment provides clarity on the treatment of price differences in specific circumstances, emphasizing the importance of legal directives and finality in determining taxable income. The decision underscores the need for income realization and legal finality before categorizing certain amounts as taxable income, ensuring consistency with tax laws and judicial precedents.