1999 (11) TMI 46 - HC - Income Tax

Timing of Income Accrual: High Court Disagrees with Tribunal

The High Court ruled against the assessee, holding that the income accrued to the assessee by retrospective operation as indicated in the IATA approval. ... Income, Accrual Of Income Issues:1. Whether the Tribunal was justified in holding that certain amounts were not liable to be assessed during specific years and deleting them from the assessmentsRs.2. Whether the Tribunal was justified in holding that the assessee became entitled to commission only from a certain date and not earlierRs.Issue 1:The case involved the assessment of commission income on ticket sales of international airlines for the assessment years 1981-82 and 1982-83. The Assessing Officer added amounts to the returned income, which the assessee disputed. The Commissioner of Income-tax (Appeals) upheld the additions, stating that the right to receive such commission arose earlier than claimed by the assessee. The Tribunal, however, held that the income had already been assessed for the subsequent year, and thus, could not be reassessed for the previous years. The Tribunal's decision was based on the accrual system of accounting, stating that income accrues when the right to such income arises, irrespective of when it is received. The Tribunal rejected the Revenue's applications, concluding that the income accrued to the assessee by retrospective operation.Issue 2:The second issue revolved around the date from which the assessee became entitled to the commission. The Tribunal held that the assessee's right to the commission accrued with retrospective effect from a specific date, as per the approval granted by the International Air Transport Association (IATA). The Tribunal found that the right to receive the commission was established prior to the date of approval, and thus, the income accrued to the assessee earlier than claimed. The Tribunal's decision was supported by the Travel Agent's Handbook provisions on retroactive commission. The Tribunal rejected the assessee's argument that the income accrued only upon approval, emphasizing that the right to receive income is crucial, even if the actual receipt is delayed.In conclusion, the High Court, in line with the Revenue's arguments, ruled against the assessee, stating that the income accrued to the assessee by retrospective operation, as clearly indicated in the IATA approval. The Court disagreed with the Tribunal's view that the income accrued only upon approval, emphasizing that the right to receive income is pivotal.