1997 (12) TMI 145 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of shortage cover for the assessment years 1992-93 and 1993-94.
2. Deletion of disallowance of payment to provident fund for the assessment years 1992-93 and 1993-94.
3. Deduction under section 80HHC of the Income-tax Act for the assessment year 1993-94.

Detailed Analysis:

1. Deletion of Shortage Cover:
Facts and Arguments:
- The assessee-company had an agreement with the Tamil Nadu Electricity Board to transport coal, with a stipulated notional shortage cover of 1.5%.
- The assessee claimed Rs. 5,09,56,178 for 1992-93 and Rs. 13,40,36,950 for 1993-94 as not includible in its income, arguing that the shortage cover should be determined at the end of the contract on 31-10-1994.
- The Assessing Officer rejected this claim, stating the amount should be included in the income for the respective years.

Tribunal's Findings:
- The Tribunal acknowledged the assessee's mercantile system of accounting but noted the contract's terms required the shortage cover to be determined at the contract's end.
- It was held that the amount received as shortage cover was with an encumbrance to be settled on 31-10-1994, and thus, it was correct not to include it in the income for the years 1992-93 and 1993-94.
- The Tribunal cited various case laws supporting the principle that income should only be taxed when it is real and not contingent.

Conclusion:
- The Tribunal concluded that the assessee's approach to defer the inclusion of the shortage cover in its income until the contract's completion was justified and upheld the deletion of the shortage cover for both years.

2. Deletion of Disallowance of Payment to Provident Fund:
Facts and Arguments:
- The department contended that the assessee was not entitled to the deduction as the payment was not made on the due date as per section 36(1)(va) of the Income-tax Act.
- The CIT(A) had followed a previous Tribunal decision in the assessee's own case, allowing the deduction.

Tribunal's Findings:
- The Tribunal noted that the CIT(A) had correctly followed the Tribunal's earlier decision and found no reason to deviate from this precedent.

Conclusion:
- The Tribunal sustained the CIT(A)'s finding and upheld the deletion of the disallowance under section 43B for both assessment years.

3. Deduction Under Section 80HHC:
Facts and Arguments:
- The department's grievance was that the claim for deduction under section 80HHC was made after the completion of the assessment.
- The CIT(A) had directed the Assessing Officer to report on the eligibility of the claim, which was confirmed as eligible.

Tribunal's Findings:
- The Tribunal found no infirmity in the CIT(A)'s order to allow the deduction under section 80HHC, as the eligibility was confirmed by the Assessing Officer.

Conclusion:
- The Tribunal upheld the CIT(A)'s direction to allow the deduction under section 80HHC for the assessment year 1993-94.

Final Judgment:
- Both appeals filed by the Revenue were dismissed, and the Tribunal upheld the CIT(A)'s orders on all counts.