TaxTMI 
TaxTMI 
2006 (1) TMI 465
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....le in the year in which it was received by the assessee. On the other hand, the Tribunal Benches at Mumbai in the case of Shrusti Trading Pvt. Ltd. and in the case of Swarna Trading Pvt. Ltd. has held that right to receive interest under section 244A is contingent till the assessment is made under section 143(3) of the Act or the period when limitation for taking action under section 143(2) is expired. In view of such difference of opinion, the reference was made to the Hon'ble President. Hence, the Hon'ble President referred the issue mentioned above for the consideration of the Special Bench. 3. The contention on behalf of assessee is that right to interest under section 244A(1) is inchoate/contingent inasmuch as quantification of the same is dependent on the final outcome of assessment under section 143(3). So, till the assessment is made under section 143(3), such right remains contingent. It was also argued that in case the Assessing Officer does not choose to make assessment, then such right would become absolute only when the time for issue of notice under section 143(2) expires. In support of his contention, he relied on the Tribunal decisions which are mentioned in the ....
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....tment to abuse the process of judicial proceedings. When Mr. Ray was personally informed by the assessee then it became his duty either to appear before the Bench or to ensure that case was represented by some other DR. We hope that the department would be careful in future. 7. Rival contentions have been considered carefully. The question for consideration is whether interest under section 244A granted to assessee in the proceedings under section 143(1)(a) of the Act is taxable in the year of its receipt or in the year in which proceedings under section 143(1)(a) attains finality. According to the charging provisions of sections 4 and 5 of the Act, the income is chargeable in the year in which it is either accrued or received as the case may be. The issue regarding accrual of income is concluded by the judgment of the Hon'ble Supreme Court in the case of E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27 , wherein it has been held that income accrues when right to receive is acquired and such right can be said to have been acquired when an enforceable debt is created in favour of the assessee. This legal position has been applied by the Courts including the Apex Court in various c....
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....fund calculated in the manner provided in clauses (a) and (b) of such provisions. Therefore, the moment the refund is granted, as enforceable debt is created in favour of assessee in respect of interest due on such refund. Consequently, income can be said to accrue on the date of refund itself. Therefore, when such interest is actually granted along with the refund then, in our opinion, the requirement of sections 4 and 5 of the Act are fully satisfied and the same can be taxed in the year of receipt. 9. The main contention of the assessee's counsel is that such right is contingent as the interest so received can be varied or withdrawn after the assessment under section 143(3). We are unable to accept such contention of assessee for the reasons given hereafter. According to the dictionary meaning, a right or an obligation can be said to be contingent when such right or obligation is dependent on something not yet certain. According to section 244A, the only condition for grant of interest is that there must be a refund due to assessee under any provision of the Act. There is no other condition in the said provision affecting such right. Therefore, the moment a refund becomes due....
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....r retard the efficacy of the liability which had been imposed upon him by the competent Excise authority." [Emphasis supplied] 11. The Hon'ble Supreme Court in the case mentioned in the earlier para, had to consider a case where sales tax authority had served a demand notice on assessee on 21-11-1957 for payment of sales tax of Rs. 1,49,776 in respect of sale effected during the financial year ended 31-12-1954 relevant to assessment year 1955-56 without claiming any deduction on account of such liability. However, subsequently revised return was filed on 9-11-1959 claiming the aforesaid deduction even though the said demand was objected to by the assessee before the higher authority. The ITO computed the assessment on 11-3-1960 denying the claim of assessee when appeal before the Sales Tax authority was pending. The claim of the assessee was also rejected by Income-tax Tribunal as well as High Court. On further appeal, the Hon'ble Supreme Court held that the moment a dealer makes either purchases or sales which are subject to taxation, the obligation to pay the tax arises and taxability is attracted. Although that liability cannot be enforced till quantification is effected by a....
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.... for assessment year 1956-57, this amount was considered as business profits and consequently the Assessing Officer assessed the same in that year. The assessee challenged the same before the appellate authority on the ground that compensation became due to assessee in the year 1951 when its services were terminated and, therefore, could not be assessed in the assessment year 1956-57. The matter reached the Apex Court. The Hon'ble Supreme Court rejected the appeal of the revenue by observing as under : "It was urged on behalf of the department that, as the assessee disputed the quantum of compensation to which it was entitled, we must hold that its right to get the amount arose when the dispute was determined by the Hon'ble High Court. We are unable to accede to this contention. As mentioned earlier, the right of the assessee to get compensation for unlawful termination of its services and the quantum of compensation to which it was entitled were clearly prescribed in the agreement. It was also so held by the High Court in the suit between the assessee and the managed company. The fact that the assessee was claiming an exorbitant sum to which it was not entitled will not convert....