TaxTMI 
TaxTMI 
1997 (8) TMI 60
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....same assessee for the subsequent two different years (1981-82 and 1982-83), one common question has been referred in each reference and that common question is identical to question No. 2 referred in the asst. yr. 1978-79. Question No. 1 in IT Ref. No. 37 of 1984 3. The assessee-firm was dealing in crushing bones and the manufacture and sale of its bye -products. Return of income for the asst. yr. 1978-79 was filed, declaring income of Rs. 67,963. The assessee had claimed weighted deduction under s. 35B of the Act on the total expenditure of Rs. 2,22,267. The AO allowed weighted deduction on commission and trade discount of Rs. 9,257 only. In appeal, the CIT agreed with the assessee that expenditures, other than those covered under sub-cl. (iii) of cl. (b) of s. 35B(1), are not to be excluded on the ground that those were incurred in India. The CIT(A) also agreed for allowing weighted deduction on salaries (Rs. 66,101), printing and stationeries (Rs. 7,727/-), gratuity (Rs. 4,313/-) electricity (Rs. 2,599), postage and telegrams (Rs. 1,252) and travelling expenses (Rs. 4,688). The assessee had shown total exports at Rs. 51,42,000 against total turnover of Rs. 81,55,000. Th....
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....ployee of gratuity on retirement, death etc. was a matter of contract or practice. With the bringing into force of the aforesaid Act, w.e.f. 10th Sept., 1972, the payment is a statutory liability in case of employers. The said Act has subsequently been amended several times. 5. There is no dispute to the fact that payment of gratuity is an allowable deduction under s. 37(1) of the Act. Gratuity is paid to a retiring employee in lieu of his past services. The plea put forward by Shri Gupta, learned senior counsel for the Department, is that the amount paid by way of gratuity was not an expenditure for the service rendered by an employee during the current year. Since it was not paid in lieu of the service rendered during the current year, it was not admissible for the purpose of weighted deduction inasmuch as it was not relatable to the development of export market during the year. 6. As has been seen earlier, weighted deduction was allowed by the CIT(A) as well as the Tribunal on various establishment expenditures including salary. Gratuity is paid to an employee by way of remuneration in lieu of his past services. Therefore, it would be difficult to say that it was different....
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....; (Rs.) i. 18.1.1978 19.4.1978 1,35,779 ii. 1.4.1978 30.9.1978 1,04,304 The assessee's plea before the AO was that accrual of income would occur only when the amount was sanctioned and not when the export was made or application, claiming the cash incentive, was filed by the assessee. The basis of the plea was that the right was not settled during the year and, if there was a disputed right, it could not form part of the income of the year. 8. None of the two amounts mentioned above, was stated to have accrued during the accounting year ending on 31st March, 1978 inasmuch as those were received after the said date. Even the second amount of Rs. 1,04,304 had not accrued as the applicati....
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.... up. 4. To collect". It would be thus manifest that, in order that an income or profit may accrue to a person, it is necessary that he must have acquired a right to receive the same or a right to the income or profit had become vested in him though its valuation may be postponed. If accounts are maintained according to the Mercantile System, whenever the right to receive money in the course of trading transaction accrues or arises even though income is not realised, income embedded in the receipts is deemed to accrue or arise. Where the accounts are maintained on cash basis, receipt of money and not the accrual of the right to receive is the determining factor. 10. 'Accrue' means to increase, to augment, to be added as an increase, to arise or spring as a natural growth or result. The words 'accrue' and ;arise' have not been defined in the Act but they appear to be synonymous and have been used for bringing in a natural result. Strictly speaking, the word 'accrue' may not be synonymous with 'arise'; the former would be connoting the idea of growth or accumulation and the latter, of the growth or accumulation with a tangible shape so as to be receivable. It is clear that....
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.... (1984) 42 CTR (Kar) 265 : (1986) 157 ITR 697 (Kar) : TC 39R.704, has held that income is liable to be taxed on the basis of its accruing or arising to the assessee or on the basis of its receipt. Ordinarily, income is said to have accrued to a person when he has acquired an enforceable right to that income though actual quantification and receipt may follow in due course. 14. The Patna High Court has also examined a question about the accrual of income and the method of accounting in CIT vs. Bihar State Agro Industries Development Corporation (1985) 49 CTR (Pat) 356 : (1986) 158 ITR 96 (Pat). The assessee in that case, had sold tractors and other agricultural implements on cash-payment basis as also on hire-purchase basis. In respect of the sales effected on hire -purchase basis, the buyers were liable to pay interest on the price remaining due. The assessee credited the amount of interest in part to the "Interest suspense account". A certain portion of the interest was taken to the P&L a/c. It was held that the entire income had accrued to the assessee and the transfer of part of the interest to a suspense account was indicative of the fact that the assessee treated the income....
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....t received on the basis of one application made during the relevant accounting year was liable to be included for assessment. 17. The distinction between the words 'accruing', 'arising' and 'received', was examined by the Privy Council in CIT vs. Diwan Bahadur, S.L. Mathias (1939) 7 ITR 48 (PC). It was observed (at page 56) as under: "If, on a question as to the exact meaning of "accruing", it were to be suggested that this only means "received", it would be reasonable to object that this can hardly be correct even though the difficulty of distinguishing between "accruing" and "arising" may be great. In this sense, perhaps not a very important sense, the expressions are antithetical. But it is very plain that there is here no question of a complete disjunction or of the presentation of three mutually exclusive qualifications. No one would go about to prove that income was not received in British India by establishing that it arose or accrued there". 18. The Supreme Court in CIT vs. Ashokbhai Chimanbhai, (1965) 56 ITR 42 (SC): TC 39R.904, has held that the words "accrue" and "arise" are used to contra-distinguish the word "receive". Income is said to be received when it rea....