https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=761111 https://www.taxtmi.com/caselaws?id=761111 Accrual of income - Nature of receipt - excise duty refund - capital receipt and claimed as exemption u/s 10 or revenue receipt and taxed accordingly - hypothetical income or real income - addition as hypothetical income which has not actually accrued - Assessee had been following the mercantile system of accounting - HELD THAT:- In the mercantile system of accountancy, the book profits are taken for the purpose of assessment of tax, though the credit amount is not realized or the debit amount is not actually disbursed; meaning thereby, in the present case, the impugned amounts as brought to tax by the Income Tax Officer did not represent the income which had really accrued to the assessee-respondent herein during the relevant assessment year. It is settled law that income tax cannot be levied on hypothetical income and only real income can be taxed. Therefore, recording of entries in the books of accounts is not conclusive to determine the income under the provisions of law. As such, we are in full agreement with the learned regional Income Tax Tribunal, that whether an amount is to be considered as income or not is to be determined on the basis of the Income Tax Law and not on the basis of the entries made in the books of accounts; that no tax can be charged on an amount which is not actually earned and that the learned Tribunal was right, in deleting the addition as hypothetical income which has not actually accrued, which was otherwise 64% of the excise duty recognized by the assessee in its books of accounts. In view of insertion of Clause (xviii) to Section 2 (24) introduced by the Finance Act, 2015, any subsidy, grant, cash incentive, duty drawback, waiver, concession and reimbursement referred to in the said clause is considered as income and only because the word exemption is not mentioned therein, it is not open for the tax payers to interpret the same as per their own convenience - Admittedly, as per Black s Law Dictionary (Sixth Edition) exemption means freedom from a general duty or service; immunity from a general burden, tax, or charge, immunity from service of process or from certain legal obligations, as jury duty, military service, or the payment of taxes. Whereas, subsidy means a grant of money made by government in aid of the promoters of any enterprise, work, or improvement in which the government desires to participate, or which is considered a proper subject for government aid, because such purpose is likely to be of benefit to the public. In the present case, the assessee is exempted from making payment of excise duty to the extent of 36% of the total excise duty collected, meaning thereby the same is not subsidy given to meet the cost of the project. Therefore, we are also in full agreement with the learned Tribunal that exemption from excise duty does not fall in the definition of income as envisaged u/s 2 (24) (xviii) of the Act and that the amount is not an income but a capital receipt not taxable under the provisions of the Income Tax Act. Case-Laws Income Tax Thu, 31 Oct 2024 00:00:00 +0530