9911796707
TMI Blog1987 (4) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... e on which the conductors were offered for inspection. The assessee was requesting for extension of time for the supply of the materials, but the contractee had not granted such extension and, as per its letter dated 4-7-1980, had directed the assessee to charge the bill at the rate of Rs. 1,717.57 per Km. (Rs. 1,880.06 per Km. inclusive of taxes and duties) based on the aluminium rate of Rs. 13,390.15 per MT prevailing in May 1979. But, the assessee submitted 10 sales bills dated between 17-4-1980 to 28-7-1980 in respect of the supply of a total quantity of 461.860 Km. Weasel conductors for a total amount of Rs. 10,17,279.10 at the rate of Rs. 1,921.37 per Km. inclusive of taxes and duties, as against a total sum of Rs. 8,68,324.51 computed at the agreed rate of Rs. 1,880.06 per Km. (inclusive of taxes and duties). These bills were negotiated through bank and honoured by the customer. 2. Before the Income-tax Officer, the assessee claimed that a sum of Rs. 1,48,955, being the difference between the agreed rate and the rate charged by the assessee, did not accrue to the assessee even though received by it and, therefore, it did not form part of its income. The Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the invoices should be raised only at the old rate. He further held that there was absolutely no evidence regarding any refusal of extension of time limit by UPSEB. In this view of the matter, he upheld the addition made by the Income-tax Officer. 4. Sri Sharma, the learned representative of the assessee, submitted that as per the terms of the order of the Superintending Engineer, UPSEB, delivery of the materials should have been completed by June 1979. As the supplies in question were made during the year ending on 31-3-1981, long after the scheduled date of delivery, the assessee was not eligible for any price increase which occurred after June 1979. He referred us to letter No. 3726/ ESPC-II/AE-IV/II/VBK-63/78, (Deccan), dated 4-7-1980 (page 23 of the paper book) of the Superintending Engineer, UPSEB, who is the purchasing officer, In support of his contention. Notwithstanding that letter, the assessee was billing at a higher rate taking into consideration the rate of aluminium prevailing at the time of delivery and this was also objected to immediately by the customer as can be seen from its letter No. 3808/ESDA/Deccan/ VBK-63/78, dated 31-7-1980 (page 26 of the pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of accounting. The income is chargeable on the basis that it accrues or arises or is received. In this case, all the bills raised by the assessee at higher rate were fully honoured by the UPSEB when negotiated through bank and thus the entire sale proceeds were realised. Mercantile system of accounting does not rule out the income emanating from actual receipt of such income pertaining to the relevant previous year. This is what has happened in this case. May be, the customer had lodged its claim against the assessee to encash the bank guarantees to recover the amount of excess billing, but it was only a lodgment of the claims which were never enforced during the previous year. In fact, encashment took place after more than three years. The Income-tax Officer was fair enough to state that as and when the excess billed amount is refunded to the customer, it will be allowed as a deduction. Therefore, the assessee's claim is premature and in this connection, he relied on the order of the Commissioner of Income-tax (Appeals). 6. We have heard rival submissions and perused the materials on record. Before we proceed to deal with rival submissions, we would prefer to set out the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk guarantee for 10% value of each consignment from a scheduled bank of India duly executed on stamp paper worth Rs. 37.75, which will be valid for three months from the date of despatch. This bank guarantee should accompany the despatch advice. For purposes of calculation of price variation, the rate of raw material viz. EC grade aluminium and HTGS wire shall be taken as prevailing one month prior to the date of offering the conductors for inspection. The assessee had to make the supplies before June 1979 and thus complete the contract, which it did not do. The initial rate agreed to was Rs. 1,717.57 per Km. exclusive of taxes and duties; if taxes and duties were taken into account, the rate per Km. would work out to Rs. 1,880.06. This rate was based on aluminium rate of Rs. 13,390.15 per MT prevailing in May 1979. But, the assessee had submitted 10 sale bills between 17-4-1980 to 28-10-1980 in respect of the supply of total quantity of 461.860 Kms. (Weasel conductors) at a rate of Rs. 1,921.37 (inclusive of taxes and duties). The difference between the agreed rate and the rate charged worked out to Rs. 1,48,954.59 on the entire consignments consisting of 10 sale bills. UPSEB duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -81 28-7-80 8,586.30 3,148.30 34/PC/CR/80-81 28-7-80 8,211.26 3,010.90 35/PC/CR/80-81 28-7-80 7,992.54 2,930.69 ----------------------- ------------------------ 24,790.10 + 9,089.89 = 33,879.99 ---------------------------------------------------------------------------------------------------------------------------------------------- The above claim was lodged by the Executive Engineer with the Manager, State Bank of Hyderabad, Habsiguda Branch, Hyderabad, against the bank guarantees provided by the assessee. As this happened before the end of the previous year, in our opinion, the assessee is entitled to exclude this sum of Rs. 33,879.99 from the income of the previous year. 8. In respect of invoices at Sl. Nos. 1, 2 and 3, there was only a letter from the Executive Engineer dated 31-7-1980 complaining about excess billing and requesting the assessee to either send copy of (letter granting) extension of delivery time or otherwise send a bank draft for Rs. 58,937.92. Thus, there was only a claim in respect of these invoices. There is another letter from the Executive Engineer dated 25-1-1985 stating that he had no alternative except to encash the bank guarantees amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... negotiated through the bank, it will not necessarily lead to the conclusion that income has accrued. All depends upon the facts and circumstances of each case. Thus, we have analysed the case of 10 invoices as detailed in para 6 into three distinct categories viz., (a) Invoices in respect of which price reduction clause was invoked and claim lodged with the banker for encashment of bank guarantees within the previous year ; (b) Invoices in respect of which price reduction clause was not invoked and lodgment of claims and encashment of guarantees took place only long after the expiry of the previous year ; and (c) Invoices in respect of which there is no material to classify them either under (a) or (b) above. 11. The assessee relies on the decision of the Allahabad High Court in L.H. Sugar Factories Oil Mills (P.) Ltd.'s case and the Bombay High Court in R.D. Sharma Co.'s case. The case decided by the Allahabad High Court was one concerning the statutory liability under the Uttar Pradesh Industrial Disputes Act, 1947. That was about gratuity payable which was ascertained on actuarial basis. The court held that the increase in liability towards payment of gratuity accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book) on which the assessee places reliance is as follows : " In this connection, the rates of ACSR Weasel have been fixed by them @ Rs. 1,717.57 till such time of delivery extension is considered. You have charged the rates of ACSR Weasel @ Rs. 1,921.57 against the undernoted Invoices." (Refer to invoices against Sl. Nos. 1, 2 and 3) " In the end, it is requested to please send the copy of extension in delivery, otherwise send a Bank Draft for Rs. 58,937.92 in favour of the undersigned or clarify if there is any amendment in the order." From this communication, it is apparent that the customer himself is not aware of the fact whether any extension of time limit was granted or whether there was any amendment to the order etc. It is also significant that unlike the case of invoices against Sl. Nos. 8, 9 and 10, in respect of these invoices the customer had not chosen to invoke clause 3(ii) of the order read with clause 27 of form ' B ' cited supra. The decision of the Bombay High Court will be of no avail in respect of these invoices. As for the invoices against Sl. Nos. 4, 5, 6 and 7, we have already indicated that there is no correspondence placed before us and, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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