TaxTMI 
TaxTMI 
2022 (5) TMI 93
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....ssee is as regards to the order of CIT(A) confirming the action of AO in treating the Special Additional Duty [payment of custom duty] as income of the assessee on receipt basis, whereas the receipts were in the nature of contingent receipt and actually the assessee has offered for taxation in subsequent year, as and when actually sanctioned by the Customs Department and received by the assessee. 3. Brief facts are that the assessee claimed deduction of Rs. 1,40,28,289/- on account of Special Additional Duty (SAD) receipts in its computation of income as under:- SAD receivables being contingent receipt - Rs.1,39,77,719/- Profit on sale on fixed assets - Rs. 50,570/- Total - Rs.1,40,28,289/- The AO required the assessee to explain as to why the SAD receipts should not be taxed in this very year amounting to Rs. 1,40,28,289/-. The assessee replied before the AO that the deduction claimed is on account of SAD receipts which are not received in the year and the same was offered to tax in subsequent year. The AO noted that the assessee is maintaining its accounts on mercantile system of accounting and furnished details in audit report and return of income, the assessee must comp....
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.... The Ld. counsel for the assessee stated that the assessee consistently following this system of accounting and disclosing the receipts of SAD as and when the customs authorities finalized the claim. The Ld. counsel for the assessee filed a certificate from the Chartered Accountant of the assessee company which explained that the assessee is claiming exclusion and thereafter inclusion of the same amount in subsequent years in the return of income. The relevant certificate issued by Chartered Accountant dated 22.03.2022 reads as under:- "For assessment year 2015/16 to 2021/22 following is the Amount of Special Additional Duty (SAD) provided in the accounts of George Maijo Industries (P) Limited, 2B Apex Plaza, Nungambakkam High Road, Chennai - 34 and actually received by the Company Financial year Assessment year Amount excluded from Total income as in computation Amount offered to taxation in computation towards this account 31/3/2015 2015/16 13,97,771.00 Nil 31/3/2016 2016/17 1,12,03,110.00 1,07,60,600.00 31/3/2017 2017/18 71,47,791.00 95,99,623.00 31/3/2018 2018/19 7,05,543.00 53,47,433.00 31/3/2019 2019/20 Nil 18,03,998.00 31/3/2020 20....
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....ssessee. We noted that the Hon'ble Supreme Court in the case of Excel Industries Ltd., supra, has considered this issue in detail vide para 17 to 32 as under: 17. First of all, it is now well settled that income tax cannot be levied on hypothetical income. In Commissioner of Income Tax v. Shoorji Vallabhdas and Co., [1962] 46 ITR 144 (SC) it was held as follows:- "Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account.....
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....ommissioner of Income Tax v. Birla Gwalior (P.) Ltd., [1973] 89 ITR 266 (SC) wherein it was held, after referring to Morvi Industries that real accrual of income and not a hypothetical accrual of income ought to be taken into consideration. For a similar conclusion, reference was made to Poona Electric Supply Co. Ltd. v. Commissioner of Income Tax, [1965] 57 ITR 521 (SC) wherein it was held that income tax is a tax on real income. 25. Finally a reference was made to State Bank of Travancore v. Commissioner of Income Tax, [1986] 158 ITR 102 (SC) wherein the majority view was that accrual of income must be real, taking into account the actuality of the situation; whether the accrual had taken place or not must, in appropriate cases, be judged on the principles of real income theory. The majority opinion went on to say: "What has really accrued to the assessee has to be found out and what has accrued must be considered from the point of view of real income taking the probability or improbability of realisation in a realistic manner and dovetailing of these factors together but once the accrual takes place, on the conduct of the parties subsequent to the year of closing an income w....
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.... 321 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same "fundamental aspect" permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said: "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true ....