1992 (1) TMI 44 - HC - Income Tax

Summary

Issues:
1. Whether the amount received by the assessee constitutes its income for the assessment year in question?

Analysis:
The case involved a reference under section 256(1) of the Income Tax Act, 1961, where the assessee, a partnership firm, had received an amount under protest from the Rourkela Steel Plant. The Income-tax Officer treated this amount as the assessee's income, which was disputed by the assessee. The Commissioner of Income-tax (Appeals) accepted the assessee's stand and deleted the addition. However, the Revenue appealed to the Tribunal, which allowed the appeal, stating that the receipt of money by the assessee made it liable for taxation as part of its trading receipts.

The High Court, in its judgment, disagreed with the Tribunal's approach. It highlighted that the assessee had received the money under protest and treated it as a loan from the Rourkela Steel Plant. The amount was reflected in the assessee's books as part of amounts due to sundry creditors, indicating that the assessee was acting as a custodian of the money. The Court emphasized that not all receipts constitute income and that there must be a right to receive the income or the income must have accrued to the assessee. Since the assessee had no right to receive the amount and was disputing the liability, the Court held that the amount in question did not constitute the income of the assessee.

The Court's decision was in favor of the assessee and against the Revenue, ruling that the amount received did not qualify as the assessee's income for the assessment year. Additionally, the Court addressed a submission by the Revenue regarding subsequent periods, clarifying that if any allowance had been granted based on the Tribunal's direction, it should be withdrawn in light of the Court's decision.

In conclusion, the High Court answered the reference in the negative, supporting the assessee's position that the amount received did not form part of its income for the assessment year. The judgment emphasized the distinction between mere receipts and taxable income, highlighting the importance of the right to receive income for taxation purposes.