TaxTMI 
TaxTMI 
2008 (3) TMI 715
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....1st March, 1993 to 28th Feb., 2001. The licensee GGL had taken a loan from IDBI. As per the terms of the loan agreement, the IDBI had put a condition that GGL shall not make payment of royalty to the assessee during any time/till such time payment of instalments of principal, interest and any other moneys to the financial institution is outstanding. However, due to insufficient accrual of cash and default in payment of institutional dues, GGL could not pay any royalty to the assessee from 1st March, 1993 to 31st March, 1999. Thereafter, vide its letter dt. 26th Nov., 1999, IDBI allowed payment of royalty from 1st April, 1999 to 28th Feb., 2001. As regards, past royalty upto 31st March, 1999, IDBI vide its letter dt. 26th April, 2001 gave approval for payment of past unpaid royalty of Rs. 284.8 millions for the period of 1st March, 1993 to 31st March, 1999 to the assessee, in instalments commencing from 1st Oct., 2001 till 1st April, 2004. This approval was given subject to the availability of adequate cash flow and that there are no old dues payable by the GGL to any institution/bank at the time of making payment of any royalty instalments. The letter of approval dt. 26th April, 20....
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....letter dt. 26th April, 2001. 2. That the CIT(A) erred on facts and in law in not appreciating that the royalty amounting to Rs. 10,17,21,990 relating to asst. yr. 2003-04 and Rs. 11,36,32,950 relating to the asst. yr. 2004-05 did not accrue to the appellant during the relevant previous year. 3. Without prejudice, the CIT(A) erred on facts and in law in observing that the dates of deposit of TDS pertaining to receipts aggregating to Rs. 21,53,54,940 shall have to be kept in view while computing the interest payable under ss. 234B and 234C. The appellant craves leave to add, alter, amend, or vary the above grounds of appeal at or before the time of hearing." 4. The learned Authorised Representative reiterated the contentions raised before the CIT(A) and submitted that during the year under consideration, due to restriction put by the IDBI, the right to receive the entire royalty income did not accrue in favour of the assessee, therefore, the lower authorities were not justified in bringing the entire amount of royalty income to the tax net in the year under consideration, on the plea of royalty income having accrued as per the mercantile system of accounting being followed....
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....and gains were being computed and, therefore, the Tribunal was not right in law in restricting the deduction in respect of the commission to the amount of actual remitted during the relevant year". 6. We have considered the rival contentions, gone through the orders of authorities below. The case law cited by learned Authorised Representative and Departmental Representative have also been deliberated in the context of factual matrix of the instant case. As per our considered view income can be brought to tax in the year the assessee gets the right to receive such income notwithstanding the method of accounting being followed by the assessee. Meaning thereby the income for which the assessee does not get the right to receive due to certain terms and conditions subject to which such income is receivable by the assessee, notwithstanding the mercantile or cash system of accounting being followed by the assessee, such income cannot be brought to tax. In the absence of there being any debt due for payment of any income by the payer and there being no right to receive the same in favour of the assessee, the said income cannot be said to have accrued to the assessee, merely on the ground....
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....until that is credited in favour of the assessee due by somebody, it cannot be said that he had acquired a right to receive the income or that income has accrued to him. Hon'ble jurisdictional High Court in case of Amar Nath Khandelwal vs. CIT (1980) 17 CTR (Del) 243: (1980) 126 ITR 322(Del) observed that where the assessee was to receive certain commission income from the principal, in terms of the agreement, the agent had no right, claim or title to any payment until the principal finally decided to make such payment. In this case, the assessee was succeeded by a firm which received money from the principal subsequently, the contention of the assessee that amount was assessable in the hands of the assessee firm as he was following the cash basis of accounting was held to be justified. The action of the AO who added the commission in the hands of the individual assessee on the ground that income had already accrued to the assessee on rendering of services, was held to be not correct, by the Hon'ble High Court. In the case law reported at (2002) 178 CTR (Del) 1: (2003) 259 ITR 33(Del) (supra) relied on by the learned Departmental Representative, the assessee had claimed ded....