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TMI Blog1989 (7) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-company, but are only by way of reduction of expenditure and hence not taxable ?" The reference is at the instance of the Commissioner of Income-tax, Trivandrum. The assessee-respondent is a State Government undertaking engaged in the cultivation of sugarcane. The sugarcane so cultivated will have to be cut and removed for supply to the sugar factories. The assessee gets these operations transacted through contractors. All the contracts entered into by the assessee-company with the contractors contained clause to ensure that the work is carried on according to the time schedule. If the harvested sugarcane is not transported expeditiously, the recovery of sugar will be affected Therefore, with a view to avoiding loss, in ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hoorji Vallabhdas and Co. [1962] 46 ITR 144, 148 (SC) brought to our notice by counsel reads as under: "Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt ; but the substance of the matter is the income . . . where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable ; where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income . . ." The question, therefore, is whether there was accrual of income in the hands of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It was held that the portion of the commission retained by the manufacturer was income of assessee, as it was the application of the income after accrual. Where income is not applied but diverted by an overriding title from the assessee who would otherwise have received it, it cannot be considered as income of the assessee at all. (See P. C. Mullick v. CIT [1938] 6 ITR 206 (PC), Navnitlal C. Javery v. CIT [1962] 46 ITR 550 (Bom) and CIT v. L. Bansi Dhar [1968] 67 ITR 374 (Delhi)). But it will be otherwise, if the income accrues and the assessee only applies the income. It is the latter principle that was applied in the decision reported in M. K. Brothers P. Ltd. v. CIT [1967] 63 ITR 28 (All) referred to by counsel for the Revenue. That d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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