9911796707
TMI Blog1998 (5) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... he words "electricity charges" are to be substituted in question No. 1. So also, in question No. 3, the words "capable of being used" are to be read as "capable of being obtained". The questions are therefore reframed as follows : "1. Was the Appellate Tribunal justified in holding that the amount of Rs. 5,58,697 received by the assessee by way of refund of electricity charges in the subsequent year is taxable in the year under consideration under section 41(1) of the Income-tax Act, 1961 ? 2. Was the Appellate Tribunal justified in its view that the Supreme Court decision rendered during the accounting period relevant to the assessment year under consideration created a vested right in the assessee to claim refund and as per the system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for refund of the amount by virtue of the judgment of the Supreme Court dated November 21, 1975, and therefore, the amount has to be assessed as income of the assessee for the assessment year 1977-78. On appeal, the first appellate authority confirmed the above view, but addition was limited to Rs. 5,58,597. The Tribunal affirmed the above order. The assessee filed a reference Application No. 179/Coch. of 1982 before this court and this court remanded the matter back to the Tribunal for considering the contention raised by the assessee that the receipt could be assessed only under section 41(1) of the Income-tax Act and not as a trading receipt. Thereafter, the matter was decided by the Tribunal by its order dated December 30, 1992. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not." A Division Bench of the Gujarat High Court took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession of". Webster's Comprehensive Dictionary (International Edition) gives the meaning as "to gain possession of". Shorter Oxford Dictionary gives the meaning as "to possess". Therefore, according to learned counsel, since the words used in section 41(1) are "has obtained" the element of physical possession is necessary. It is not enough that a vested right is accrued in the assessee to obtain the amount. The amount should have been actually received by the assessee. Learned standing counsel for the Revenue would submit that in the case of an assessee following the mercantile system, the moment it incurs the liability, it is entitled to claim deduction. The same principle should apply for the purpose of addition also. The Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em of accounting and the expression cannot be understood as "receivable". The Supreme Court proceeded to observe that section 13 of the Indian Income-tax Act, 1922, is concerned only with the computation of profits of the business of an assessee on the principles of accountancy adopted by him. The profit and loss of a business concern is ascertained on commercial principles. Section 13 imposes a duty on the revenue to compute the profits of a business in accordance with the method of accounting adopted by the assessee. The concept of assessable income under the Act is different from profit and loss in a commercial sense. Allowances, deductions and deemed profits should be ascertained in terms of the statutory provisions unless the statute i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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