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TMI Blog2022 (5) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... was approved, the income accrued in that year only. This is a matter of verification by the AO. Even the AO will verify whether the assessee in subsequent year has declared the corresponding income or not. As the issue is clear that income will accrue when the corresponding liability of the other party to pay the amount and on this principle we remand the matter back to the file of the AO for verification. The appeal of the assessee is allowed subject to verification of facts. - ITA Nos. 2958 & 2959/CHNY/2019 - - - Dated:- 6-4-2022 - SHRI MAHAVIR SINGH , VICE PRESIDENT AND SHRI MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER Appellant by : Shri Vikram Vijayaraghavan , Advocate Respondent by : Shri G. Johnson , Addl. CIT ORDER Per Mahavir Singh , VP These appeals by assessee are arising out of different orders of the learned Commissioner of Income Tax (Appeals)-6, Chennai in ITA No. 126/CIT(A)-6/2017-18 85/CIT(A)-6/2018-10 dated 03.09.2019 06.09.2019. The assessments were framed by the ACIT, Corporate Range-2, Chennai for the assessment years 2015-16 2016-17 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act') vide orders dated 18.12.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the disallowance made by the AO. Aggrieved against the order of CIT(A) confirming the order of AO, the assessee came in appeal before the Tribunal. 5. Before us, the Ld. counsel for the assessee explained that the assessee company is crediting the SAD portion to cost of goods sold i.e., material consumption account instead of taking it to separate head under income group. The SAD portion comes as a deduction from material consumption rather than capturing the same under any head of income. The assessee claimed that in the financial year 2014-15 relevant to assessment year 2015-16, the assessee company has accounted SAD receipts of Rs. 139 lakhs and by this amount, the profit of the assessee is increased. The assessee claimed that these SAD receipts were never received and it is pending adjudication before the Customs authority. The assessee claimed that these are contingent receipts and a mere provision and actually it has not accrued to the assessee nor received. The Ld. counsel for the assessee explained that the assessee company has claimed SAD refund and the value of import purchases from July 2014 to March 2015 amounting to Rs. 1,39,77,719/- as on 31.03.2015. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The Ld. counsel for the assessee also relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Excel Industries Ltd., (2013) 358 ITR 0295. 6. On the other hand, the Ld. Senior DR heavily relied on the order of AO as well as the CIT(A). He argued that once the assessee is following mercantile system of accounting and whatever is accrued to the assessee, he should disclose in the return of income and cannot claim any deduction on the plea that the particular receipt is contingent or a mere provision. 7. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee admits that whatever SAD receipts are taxable but only question is year of taxability. The assessee's claim is that a particular claim of SAD receipts is not settled by the Customs Authorities and it is pending verification before the customs authorities. The assessee claimed that in regard to this amount of Rs. 1,39,77,719/- claim of deduction made of SAD receipts in this year is already been offered for tax in subsequent years. The Ld. counsel for the assessee before us filed complete chart, year-wise, as and when these SAD receipts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be said to accrue when it becomes due. It was then observed that: ........the date of payment....... does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately. 19. This Court further held, and in our opinion more importantly, that income accrues when there arises a corresponding liability of the other party from whom the income becomes due to pay that amount. 20. It follows from these decisions that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. 21. In so far as the present case is concerned, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enhanced charges for a variety of reasons. One of the reasons so considered was a letter addressed by the Under Secretary to the Government of Gujarat, to the assessee whereby the assessee was advised to maintain status quo in respect of enhanced charges for at least six months. This Court took the view that though the letter had no legal binding effect but one has to look at things from a practical point of view. (See R.B. Jodha Mal Kuthiala v. Commissioner of Income Tax, [1971] 82 ITR 570 (SC)). This Court took the view that the probability or improbability of realisation has to be considered in a realistic manner and it was held that there was no real accrual of income to the assessee in respect of the disputed enhanced charges for supply of electricity. The decision of the High Court was, accordingly, set aside. 27. Applying the three tests laid down by various decisions of this Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of reali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) and then it was held: We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter -- and if there was no change it was in support of the assessee -- we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income Tax in the earlier proceedings, a different and contradictory stand should have been taken. 31. It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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