1984 (3) TMI 81 - AT - Income Tax

Summary

Issues:
- Whether the subsidy amount claimed by the assessee is taxable in the assessment year under consideration.
- Whether the income accrued to the assessee in relation to the subsidy claimed.

Analysis:
1. The appeals were filed by the assessee against the orders of the Commissioner (Appeals) for the assessment years 1974-75, 1976-77, and 1977-78. The main issue in the appeal for the assessment year 1974-75 was whether the sum of Rs. 5,79,777 claimed as subsidy by the assessee had become due in the relevant previous year. The assessee had run Wadas under a government scheme to provide fodder to cattle during a famine in Gujarat. The Government refused to pay the subsidy, claiming the Wadas were not run as per directions. The Commissioner (Appeals) upheld the decision of the ITO, relying on a Madras High Court decision.

2. The counsel for the assessee argued that the subsidy amount did not accrue to the assessee as the Government was not satisfied with the Wadas' operation. The matter was in dispute, with a civil suit filed by the assessee against the Government. The counsel cited relevant case laws to support the argument that income accrual is contingent on acceptance by the other party. The departmental representative argued that income had accrued when the assessee rendered services by running the Wadas, relying on various court decisions.

3. The Tribunal considered the facts and legal precedents cited by both parties. It noted that the subsidy was subject to conditions set by the Government, and the Government had not accepted the claim in full. The Tribunal referred to a Bombay High Court case where income accrued only upon acceptance of the claim by the other party. It distinguished the case cited by the departmental representative, emphasizing that the issue in the present case was the disputed subsidy amount, not trading receipts.

4. The Tribunal further analyzed other cases cited by the departmental representative, noting the differences in facts from the present case. It concluded that until a final decision on the subsidy dispute was reached, income could not be said to have accrued to the assessee in the relevant assessment year. Income can only be taxed in the year of accrual, when the issue is resolved, and the amount is received by the assessee. Therefore, the Tribunal allowed the appeal for the assessment year 1974-75 while dismissing the appeals for the subsequent years.