TaxTMI 
TaxTMI 
2004 (11) TMI 274
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....dering the decision of the Hon'ble Gauhati High Court in the case of Dhansiram Agarwalla v. CIT [1993] 201 ITR 192 (Gauhati) and the dismissal of SLP against this judgment vide [1993] 204 ITR 45 (St.), came to hold that these amounts should have been offered for taxation. Accordingly, a sum of Rs. 1.25 crores and odd was added to the income of the assessee. In the first appeal, the ld. CIT(A), for the reasons stated in his order, overturned the action of the Assessing Officer in this regard. 2.2 Before us, the ld. D.R. strongly relied on the assessment order to contend that once a particular sum was credited by the assessee to its profit and loss account, it was not open to it to come back from that stand and claim that income as non-taxable. 2.3 In the opposition, the ld. Counsel of the assessee reiterated the submissions advanced before the first appellate authority and on the basis of his reasoning urged that his order be maintained on this score. 2.4 We have considered the rival submissions in the light of material placed before us and the precedents relied upon. It is an admitted position that the assessee was maintaining its accounts on mercantile basis and it was op....
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....e provision of law relating thereto and not on the view which the assessee might take of his rights; nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter. The ld. D.R. has urged with great vehemence that the aforesaid decisions rendered by the Summit Court are no longer valid in view of its subsequent decision in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102 (SC). In that case, the question for consideration was the taxability of interest on sticky advances accruing under the mercantile system of accounting where the assessee had debited the respective parties with the interest. It was noted that after the close of the accounting year, the appellant, without giving up the interest, which it could have, as a bad debt, did not offer it for taxation but carried to it to the "Interest Suspense Account". While upholding the taxability of such interest on sticky advances, it was held that the concept of real income could not be so read as to defeat the object and the provision of the statutory enactment. From the narration of facts of this case, we arc really at loss to appreciate as to how the aforenoted two judgmen....
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....ives by way of cash compensatory support, drawback of duty and import entitlements licenses etc. The taxation of the abovesaid items was a subject-matter of severe litigation. Whereas the assessees were claiming these items to be in the nature of capital receipts and hence immune upon taxation, the departmental authorities were holding it to be revenue. A similar controversy also came up in the case of O.K. Industries v. CIT [1987] 163 ITR 51 (Ker.) where the assessee carrying on business of export of commodities obtained Import Entitlements as a result of export, which was sold and the receipt was claimed as capital. The department held it to be revenue receipt assessable as income from business. When the matter travelled to the Hon'ble High Court, the view of the department was upheld and the amount realised on the sale of import entitlement was held to be taxable as business income. A contrary view was expressed by certain authorities holding such amount to be a capital receipt and hence not chargeable to tax. Thereafter, the Legislature inserted clauses (iiia), (iiib) and (iiic) to section 28 by the Finance Act, 1990 with retrospective effect. Consequently the definition of inc....
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.... Rs. 125.08 lakhs ---------------- Break-up of this amount has been appended at page 41 of the paper book which shows that Rs. 45.08 lakhs is the estimated value of material import entitlement in the shape of advance licence, whereas the other item, namely Rs. 80 lakhs is the amount of special import licence. At this stage, it would be appropriate to appreciate the concept of "Material import entitlements". In simple terms, it is an authorization to import goods at concessional custom duty or make duty-free import. Whereas the Special import licence is issued pursuant to the making of act....
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....icer proceeded to tax the estimated profit on the import entitlements in the hands of the assessee at the year end. 2.9 In Jamshri Rajitsinghji Spg. & Wvg. Mills Ltd. v. IAC [1992] 41 ITD 142 (Bom.), the assessee exported goods and as a result of it was entitled to import goods under Duty Exemption Scheme. Though no imports were actually effected during the year but estimated benefit from such imports was accounted for in assessee's books which was claimed to be a notional profit not exigible to tax. The IAC rejected the assessee's claim, which order was upheld in the first appeal. The Tribunal held that the value of material import entitlement receivable by the appellant did not constitute the income of the appellant for the year under appeal since it had neither accrued nor arisen during year of account. It is pertinent to note that the Tribunal came to this conclusion even without considering the provisions of section 28(iiia). 2.10 The Legislature by inserting section 28(iiia) has settled the position by providing that profit on sale of a licence granted under Import (Control) Order would be charged to Income-tax. The expression "profit on sale" is employed in this sub-se....
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.... order on this issue by relying on the decision of the jurisdictional High Court in the case of CIT v. Punjab Bone Mills [1998] 232 ITR 795 (Punj. & Har.). 3.2 After considering the rival submissions and perusing the relevant material on record, it is manifest that the duty drawback claim was actually lodged in the succeeding year and it was duly offered for taxation in that year. The Assessing Officer held the amount to be taxable only on the ground that it was credited to the profit and loss Recount of this year and was relatable to export made in this year. We note that taxability of duty drawback claim is governed by section 28(iiic) which provides for charging to tax any duty of customs or excise "repaid or repayable" as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971. There is no dispute about the fact that the claim was actually filed, approved and received by the assessee in the succeeding year. As the assessee had employed mercantile system of accounting, it was liable to offer income on accrual basis. The question for determination is the time of accrual of the claim for duty drawback. An income is said to accrue ....
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....ii) Material import entitlements in hand as on 31-3-1996: Value of material import entitlements permissible - Rs. 178 lakhs. Expected future benefit on utilization of Import entitlements Rs. 45.08 lakhs ---------------- Rs. 12....
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....urance Company, the assessee reversed the entries in the succeeding year. We, therefore, hold that the ld. CIT(A) was not justified in deleting the addition of Rs. 5 lakhs. The other amount of Rs. 1,67,180 was rightly deleted. This ground is, therefore, partly allowed. 5. The last effective ground of the departmental appeal is with reference to the claim for advertisement expenditure at Rs. 1,06,84,762. 5.1 During the year, the assessee spent a sum of Rs. 1,60,27,142 on account of advertisement by way of hoarding charges, production of advertisements films, advertisements on Zee TV, News papers and installation of glow signs etc. In the books of account, the assessee treated 2/3rd of the total expenditure as deferred revenue expenditure and did not debit the same to the profit and loss account. This amount of Rs. 1.06 crores was accordingly included in the balance sheet under the head "Miscellaneous expenditure" to be written off in future over a period of two years. In computing the total income, the assessee claimed deduction for the amount of Rs. 1.60 crores and odd, being the total amount spent in this year. The Assessing Officer, however, came to the conclusion that the ....