2024 (11) TMI 33 - HC - Income Tax

Accrual of income - cash incentive accrues to the assessee on the date when the application for claim is made to the Competent Authority as held by ITAT - HELD THAT - As it would be for the concerned officer to examine as to what are the cash incentives allowed in each quarter, but so far as the question is concerned, we confirm and take the same view as already taken by this Court in the earlier case of the respondent 1997 (8) TMI 60 - PUNJAB AND HARYANA HIGH COURT and hold that it is on the date of submission of claim that the accrual of cash incentive would be recognized and not from the date of submission or receipt of cash incentive. The reference is accordingly answered in favour of the assessee-respondent and against the Revenue.

Summary

Issues:
1. Interpretation of the accrual of income in relation to cash incentives for exports.

Detailed Analysis:

1. The High Court considered a reference filed by the Commissioner of Income Tax regarding the accrual of cash incentives to an assessee. The main question was whether cash incentives accrue to the assessee at the time of making the claim to the Competent Authority. The Court referred to a previous decision in a similar case involving Punjab Bone Mills to guide its interpretation.

2. The Court analyzed the law related to the accrual of income concerning cash incentives for exports. It emphasized that the right to receive cash incentives accrues to the assessee upon filing the claim, not at the date of export. The Court highlighted that unless a claim is filed, no right to receive income can be said to have arisen. The timing of the application for the cash incentive is crucial in determining the accrual of income.

3. The Supreme Court had previously dismissed an appeal related to a similar case, stating that the relevant material concerning the cash incentives for exports was not adequately presented before the Tribunal. As a result, the High Court needed to independently assess the aspects related to cash incentives provided over various years to reach a conclusion.

4. The Court reviewed the decision of the Income Tax Appellate Tribunal (ITAT) regarding the assessment year 1978-79, which involved the accrual of cash incentives. The ITAT found that the cash incentives should be recognized as income based on the date of application for the claim, not on the date of receipt. The Court upheld this view and reduced the addition made by the assessing officer accordingly.

5. For the assessment year 1979-80, the Tribunal remanded the matter to the Income-tax Appellate Commissioner for a fresh decision based on the approved basis for the previous year. The Court confirmed that the accrual of cash incentives should be recognized at the time of claim submission, consistent with its previous decision.

6. Ultimately, the High Court answered the reference in favor of the assessee, emphasizing that the accrual of cash incentives should be acknowledged at the time of submitting the claim and not at the time of receipt. The Court disposed of the Income Tax Reference and all pending applications accordingly.