TaxTMI 
TaxTMI 
2006 (7) TMI 295
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....n of levy sugar price and interest thereon under section 41(1) of the Act. 3. The CIT(A) confirmed the Assessing Officer's action and his order has challenged by the assessee in the present appeal. 4. The grounds of appeal filed with Form No. 36 were subsequently revised/concised. Ground No.1 "1. Guest House Expenses: The Learned Commissioner of Income-tax (Appeals) erred in confirming the addition of Rs. 3,07,072 made by the learned Assessing Officer (AO) on account of expenditure of food and beverages, treating the same as expenditure on maintenance of Guest House." 5. We find that this ground is covered in favour of the assessee by the decision of the ITAT Pune, in the assesses's own case in ITA No. 786-A/PN/2000 for assessment year 1996-97 dated 10-12-2004. We follow the precedent and allow this ground. Ground No.2 "2. The Learned CIT (Appeals) erred in holding the expenditure on presentation articles not intended for advertisement as expenditure in the nature of advertisement, and confirming the disallowance of Rs. 46,825 made under Rule 6B." 6. We find that this ground is covered in favour of the assessee by the decision of Bombay High Court in the case of CIT v. All....
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....ernment issued circular dated 14-6-1995 to all the sugar factories informing them the procedure to claim the differential levy sugar price. . that the assessee prepared vide letter dated 14-6-1995 giving full particulars. . that the claim was approved by the Government vide letter dated 29-8-1996. . that the remittance was received vide letter dated 13-9-1996. . that, without prejudice to the above submissions, in the alternative, the position be not disturbed. . that reliance was placed on the decisions in the following cases: (i) CIT v. Punjab Bone Mills [1998] 232 ITR 795 (Punj. & Har.) (ii) CIT v. Punjab Bone Mills [2001] 251 ITR 780 (SC) (iii) CIT v. Dhampur Sugar Mills Ltd. (No.1) [2005] 274 ITR 340 (All.) (iv) P. Mariappa Gounder v. CIT [1998] 232 ITR 2 (SC) 10. The ld. DR supported the orders of the Assessing Officer and the CIT(A). He vehemently argued saying that the order of the CIT(A) needed to be upheld. 11. We have considered the rival submissions in the light of material on record and the precedent cited. The additions made by the Assessing Officer are shown in the chart below: ------------------------------------------------ &nbs....
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....;Total 3,61,78,204 ------------------------------------------------ 12. The assessee had collected excess levy sugar price in terms of the interim order of the Karnataka High Court, which was shown, along with interest payable thereon, as a liability, in the balance sheet. The short question for adjudication in this appeal is as to the date when the excess levy sugar price, which was finally determined vide notifications issued by the Government of India, Ministry of Food dated 22-2-1995, in compliance with the judgment of the Supreme Court dated 22-9-1993, accrued as income in the case of the assessee. 13. Before proceeding to examine the facts of the case for deciding the issue involved, we consider it necessary to enunciate the legal position in this regard in the following paragraphs. 14. The section 5 of the Act brings within the fold of chargeable total income, all income which is 'received' or is deemed to be received or which 'accrues' or 'arises' or is deemed to accrue or arise to the assessee in a particular previous year. Except in the case where specific provisions in that regard exist, the taxability normally depends upon the system of accounting observed by ....
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....le under section 28 cannot, in the case of an assessee following mercantile system of accounting, be taken to have accrued on the date of the order of the court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession till the date of last order. [Read CIT v. Mysore Sugar Co. Ltd. [1990] 183 ITR 113 (Kar.) and Dhampur Sugar Mills Ltd. v. CIT [1991] 188 ITR 787 (All.)]. 18. In the case of CIT v. Highway Construction Co. (P.) Ltd. [1997] 223 ITR 324 (Gauhati), the assessee undertook contract work for the Military Engineering Service and maintained its accounts on mercantile system. In terms of this contract certain goods were to be supplied to the assessee by the Military Department and on failure of the Military Department the assessee-company had to get them incurring certain expenditure. When the amount was claimed by the assessee-company it was disputed by the department and this lead to a reference to arbitration in terms of the contract. The arbitration-award was confirmed by the Delhi High Court and the decree was given by the Court on 30-3-1979. The assessee contended that the amount accrued to it on 30-3-19....
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.... that the words 'arising' or 'accruing' describe right to receive profits and that there must be a debt owed by somebody. Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he had accrued the right to receive income or that the income had accrued to him. 23. The legal position with regard to the accrual of income as laid down by the courts in the above cases can be summarized as under: (1) that in order to determine the date of accrual of income under the mercantile system of accounting, the guiding factor is the date when the amount becomes due and not its receipt. (ii) that the words 'arising' or 'accruing' describe the right to receive profits and that there must be a debt owed by somebody. (iii) that the additional compensation awarded by a court in respect of acquisition of land, etc., accrues when such order is passed by the court. The postponement of the date of payment does not affect the accrual of the income. (iv) that in the case of compulsory acquisition of land, the right to enhanced compensation, being an inchoate right, remains in a flux till the enhanced compensation is finally determined by the court, and ....