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TMI Blog2024 (11) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... bit amount is not actually disbursed; meaning thereby, in the present case, the impugned amounts as brought to tax by the Income Tax Officer did not represent the income which had really accrued to the assessee-respondent herein during the relevant assessment year. It is settled law that income tax cannot be levied on hypothetical income and only real income can be taxed. Therefore, recording of entries in the books of accounts is not conclusive to determine the income under the provisions of law. As such, we are in full agreement with the learned regional Income Tax Tribunal, that whether an amount is to be considered as income or not is to be determined on the basis of the Income Tax Law and not on the basis of the entries made in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are also in full agreement with the learned Tribunal that exemption from excise duty does not fall in the definition of income as envisaged u/s 2 (24) (xviii) of the Act and that the amount is not an income but a capital receipt not taxable under the provisions of the Income Tax Act. - HON BLE THE CHIEF JUSTICE TASHI RABSTAN AND HON BLE MR. JUSTICE M.A. CHOWDHARY, JUDGE For the Appellant Through: Mr. Suraj Singh Wazir, Advocate. For the Respondent Through: Mr. Pranav Kohli, Sr. Advocate, with Mr. Saquib Mehmood, Advocate. JUDGMENT TASHI RABSTAN CJ 1. This appeal is directed against the order dated 15.06.2023 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar for the assessment year 2016-17, whereby the appeal filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for accounting purposes and quantification before the Supreme Court, the notional amount was booked. 4. However, the appellant-department being not satisfied with the reply of assessee-respondent herein, vide assessment order dated 21.12.2018 held that the assessee had furnished inaccurate particulars of income by claiming Rs. 5,15,25,900/- as capital receipt corresponding to the excise duty refund instead of revenue receipt as per amended section 2 (24) (xviii) of the I.T. Act. Accordingly, penalty proceedings were also initiated against the assessee for furnishing inaccurate particulars of income. 5. Against the said assessment order dated 21.12.2018 the assessee-respondent herein filed an appeal before the Commissioner of Income Tax (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee-respondent herein had been following the mercantile system of accounting and this has also been admitted by the Income Tax Department in its assessment order dated 21.12.2018. In this system, incomes and expenses are recorded in the books of accounts, as and when they are earned or incurred, irrespective of the fact whether they are actually received or paid. Therefore, where accounts are kept on mercantile basis, the profits or gains are credited, though they are not actually realized, and, the entries thus made really show nothing more than an accrual or arising of the said profits at the material time. In the mercantile system of accountancy, the book profits are taken for the purpose of assessment of tax, though the credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to interpret the same as per their own convenience. 11. Admittedly, as per Black s Law Dictionary (Sixth Edition) exemption means freedom from a general duty or service; immunity from a general burden, tax, or charge, immunity from service of process or from certain legal obligations, as jury duty, military service, or the payment of taxes. Whereas, subsidy means a grant of money made by government in aid of the promoters of any enterprise, work, or improvement in which the government desires to participate, or which is considered a proper subject for government aid, because such purpose is likely to be of benefit to the public. 12. In the present case, the assessee is exempted from making payment of excise duty to the extent of 36% of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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