TaxTMI 
TaxTMI 
1986 (6) TMI 14
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....ain raw material required for the manufacture of sleepers. The assessee claimed escalation in price in respect of the sleepers supplied during the assessment years 1966-67 and 1967-68, the accounting years ending on the Ram Navami day of the financial years 1966 and 1967. The claim of the assessee was accepted by the Railways and the escalation in price for the sleepers supplied was fixed for the said two assessment years. The Railway Board asked the assessee to submit supplementary bills in respect of the escalation in price as fixed. During the assessment year 1968-69, the relevant accounting period ending on April 6, 1968, the assessee bad submitted its supplementary bills for its additional claim on account of escalation in price agg....
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....he assessee received payments from the Railways of Rs. 56,120 on January 16, 1969, Rs. 72,486 on March 26, 1969, and the balance Rs. 71,637 on December 16, 1970. The assessee was assessed to income-tax in the assessment year 1968-69. In its return for the said year, the assessee did not include any income in respect of its claim on account of escalation in price as contained in its supplementary bills on the ground that the said amounts had been shown on receipt basis in the subsequent assessment years. The Income-tax Officer held that as the assessee followed the mercantile system of accounting and had submitted its bills in respect of escalation of price during the relevant accounting year, the entire amount of Rs. 2,02,309 was exigibl....
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....real income of the assessee was assessable. The Tribunal accepted the case of the assessee and upheld the decision of the Appellate Assistant Commissioner. The Tribunal held that both the bills for escalation and the claim of the Railway Board on account of late supply of sleepers pertained to the same agreement and both the issues should be considered together. The Tribunal noted that unless the assessee accepted its liability arising out of late supply of sleepers, the Railway Board refused to pay anything to the assessee. The Tribunal held that the assessee had adopted the proper course and had disclosed its income on this account on actual receipt basis though the assessee was following the mercantile system of accounting. On an a....
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....the said bills. In support of his contentions, the learned advocate for the Revenue cited the following decisions. (a) E. M. Muthappa Chettiar v. ITO [1961] 41 ITR 1. In this case, one of the questions before the Supreme Court was whether the assessee was liable to pay excess profits tax in respect of its business income arising out of a managing agency. Under an agreement with another limited company, the assessee became entitled to remuneration for acting as managing agents of the former. The managed company had debited its account for such remuneration but did not disburse the same in cash and raised a dispute that the managing agents had not fulfilled certain obligations undertaken by them on account of which the managed company clai....
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....for damages for breach of contract was not sufficient to make the claim an enforceable one. (c) James Finlay & Co. v. CIT [1982] 137 ITR 698. In this case, Division Bench of this court held that though there was difficulty on the part of the assessee to realise interest in the year of account, there was no material to show that there was an agreement with the debtors to waive the interest or to keep it in a suspense account. It was held that the assessee had not given up its claim for interest and the amounts of interest were includible in the total income of the assessee in the relevant assessment year and the amounts were assessable on accrual basis. No one appeared on behalf of the assessee. In the facts and circumstances, it ap....