2004 (8) TMI 30

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....e machinery, etc. The assessee also exports the goods manufactured by it. In respect of exports made by the assessee, it is granted benefit by way of duty free imports. Prior to the previous year ending March 31, 1997, the assessee qualified for the said benefits by way of duty free imports. As and when it accrued to the assessee, the same was shown in its accounts. Based on the quantum of exports made during the previous year ending on March 31, 1997, the assessee, in its accounts for the said previous year, passed a book entry debiting export benefit receivable account and crediting miscellaneous income account for the amount of customs duty benefits of Rs. 228.34 lakhs which would have accrued to the assessee on the import of the mate....

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....e using the said duty-free import licence nor the same was sold resulting in actual income of the assessee. The entries in the profit and loss account were made on the notional income based on the quantum of import made during the previous year concerned and appropriate note was furnished indicating the said fact. In the return of income for the concerned year, the notional income was shown under a separate heading on a probabte future sale of import entitlement licence and, therefore, there were no reason for not allowing the deduction to the assessee concerned in respect of the said amount of notional income. The argument on behalf of the assessee is that the tax can be imposed only on actual income but not on notional income. It is not a....

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....atory. Considering the aforesaid contentions of the parties, it appears that the sum of Rs. 228.34 lakhs was not actual receipt but was a notional income allegedly shown by the appellant to give a rosy picture about the condition of the company. It appears to us that the return was filed for the concerned year by the assessee after deducting the said notional income of Rs. 228.34 lakhs from the profit as per the profit and loss account. The respondents have proceeded on the basis that the said account depicts the accrual of income and therefore, differing with the contentions of the appellant assessment was made under section 143(1)(a) treating the same as an accrued income. In this respect, we find that the scope of section 143(1)(a), a....