1997 (12) TMI 51

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....ration ?" It is not in dispute that in terms of the agreement between the assessee and the Sri Lankan company Rs. 5 lakhs was to be paid by the Sri Lankan company to the assessee company. The claim of the assessee that due to stipulation by Indian Bank as a term of the loan and deferred payment Government facility extended by them laying down a covenant, the royalty and consultancy fees due to the assessee-company stood modified to the extent was not accepted by the Assessing Officer and the Assessing Officer held that at best such remittance may be held back but would never the less remain income accrued in the hands of the assessee-company as the accounts are maintained on the mercantile basis. Before the Commissioner of Income-tax ....

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....ivable as per the terms of the agreement was not actually received due to the stipulation of its restriction laid down by the Indian Bank vide their letter dated December 7, 1982. According to the Commissioner of Income-tax (Appeals) as the assessee had passed a resolution vide board's resolution dated May 20, 1982, to treat the income receivable from Sri Lanka on cash basis, such amounts could not be included in the income as no amount has been received by the assessee. He also observed that it is not the assessee's ground that the amount in question is not receivable or could not be included even if the mercantile system of accounting was followed. According to the Commissioner of Income-tax (Appeals) till December 7, 1982, the assessee d....

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....me receivable from Sri Lanka on cash basis on May 20, 1982. The resolution indicates clearly that the board of directors long before the foreign company came into existence resolved to account for the income of the company from the agreement on cash basis. It is also observed that no income had accrued even on the date of resolution. The assessee has furnished a copy of the resolution passed by the board as well as a copy of the Indian Bank's sanctioned letter of December 7, 1982, placed at page 12 of the paper book No. 2, in order to prove its contention. On a perusal of these facts, the Tribunal found that the observation of the Commissioner of Income-' 'ax (Appeals) in his order quoted as under is not correct : "It is also surprising ....