1982 (6) TMI 49 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of the refund of excise duty amounting to Rs. 3,71,136.
2. Taxability of the recovery of export losses amounting to Rs. 46,711.

Detailed Analysis:

1. Taxability of the Refund of Excise Duty (Rs. 3,71,136):

Facts and Background:
The assessee, a private limited company engaged in the manufacture and sale of sugar, claimed a refund of excise duty amounting to Rs. 3,71,136 for the period November 1, 1960, to October 5, 1961. This refund was initially rejected as time-barred under Rule 11 of the Central Excise Rules, 1944, but was later granted after the Central Board of Revenue (CBR) relaxed the rule.

ITO's Position:
The Income Tax Officer (ITO) included this amount as a revenue receipt for the assessment year 1964-65, arguing that the right to the refund accrued only when the CBR relaxed the rule and the refund was actually granted.

Assessee's Position:
The assessee contended that the right to the refund accrued when the application for the refund was made on December 2, 1961, and not when the refund was actually granted.

AAC and Tribunal's Decision:
Both the Assistant Appellate Commissioner (AAC) and the Tribunal upheld the assessee's position, stating that the right to the refund accrued in the previous accounting year when the application was made.

Court's Analysis:
The court examined whether the right to the refund accrued when the application was made or when the refund was actually granted after the relaxation of Rule 11. The court referenced the mandatory nature of Rule 11, which stipulates that no refund shall be made unless claimed within three months from the date of payment. Since the application was made after the prescribed period, the right to the refund did not accrue until the CBR relaxed the rule and the refund was granted.

Conclusion:
The court concluded that the right to the refund accrued only when the CBR relaxed the rule and the refund was actually granted, not when the application was made. Thus, the amount of Rs. 3,71,136 should be considered a revenue receipt in the year it was granted.

2. Taxability of the Recovery of Export Losses (Rs. 46,711):

Facts and Background:
The assessee received an additional payment of Rs. 4.49 per quintal for sugar exported in the previous year, amounting to Rs. 46,711. The initial payment for the exported sugar was Rs. 60 per quintal, which was considered an "on account payment."

ITO's Position:
The ITO included this amount as a revenue receipt for the assessment year 1964-65, arguing that it constituted the balance of the sale consideration for the sugar exported in the previous year.

Assessee's Position:
The assessee argued that this additional payment should reduce the loss claimed in the previous year and should not be considered a revenue receipt for the current year.

AAC and Tribunal's Decision:
The AAC and the Tribunal upheld the assessee's position, stating that the additional payment was not a revenue receipt for the current year.

Court's Analysis:
The court examined whether the additional payment constituted part of the sale price for the goods exported in the previous year. The court noted that the initial payment of Rs. 60 per quintal was an "on account payment," indicating that the final sale price had not been settled. The additional payment of Rs. 4.49 per quintal was part of the final sale price agreed upon during the current year.

Conclusion:
The court concluded that the additional payment of Rs. 4.49 per quintal, amounting to Rs. 46,711, constituted the balance of the sale price for the goods exported in the previous year and should be considered a revenue receipt for the current year.

Final Judgment:
The court answered the questions in the negative, in favor of the Revenue. Both the refund of excise duty (Rs. 3,71,136) and the recovery of export losses (Rs. 46,711) were held to be chargeable to income-tax for the assessment year 1964-65. The Revenue was awarded costs fixed at Rs. 500.