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TMI Blog2025 (2) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... nhanced charges in view of the representative suits filed by the consumers which were decreed by the court and ultimately, after various proceedings which took place, the assessee- company had not been able to realize the enhanced charges. Since no real income having accrued, it was held that the amount due on enhancement was not assessable to Income Tax. In a subsequent decision rendered in CIT v. Bokaro Steel Ltd. [1998 (12) TMI 4 - SUPREME COURT] following its earlier decision in Godhra Electricity Co. Ltd.'s case [1997 (4) TMI 4 - SUPREME COURT] affirmed the decision of the Patna High Court wherein it was held that the entry in the books of account shown as income from Hindustan Steel Ltd. for the 8 locomotives supplied by the assessee-company to them could not be brought to tax as income since this entry reflected 'hypothetical income' and only the real income could be brought to tax. In CIT v. Modi Rubber Ltd [1997 (9) TMI 92 - DELHI HIGH COURT] held that a mere unilateral act of the assessee debiting the books of account, the liability for payment whereof was not accepted or agreed to by the debtor, did not amount to income accrued to the assessee. No infirmity in the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 are applicable to the appellant and as per the said agreement, the appellant was to receive Rs. 3,14,86,877/- and out of the same the appellant had only offered Rs. 1,13,09,208/- the AO made the addition on accrual basis of the balance amount of Rs. 2,01,77,597/-. The AO further held that the appellant had even raised the invoice on LN for the entire amount of Rs. 3,14,86,877/- as per the agreement. 8.2 On the other hand, the contention of the appellant is that the payment during the impugned AY by the LN to the appellant was on the basis of review and acceptance of data portion of the licensed material. In AY 2012-13, the appellant had raised an invoice of Rs. 8,40,10,500/- on 14.06.2011 which was duly accounted in the books of the appellant and even TDS was deducted on the said amount u/s.194J of the Act. However, in the impugned AY it was pleaded that the appellant raised invoice on the basis of number of judgments which were inspected and accepted by LN. 47,122 Judgments submitted by the appellant were inspected and accepted by LN and the appellant raised invoice for only those judgments at the rate of Rs. 240 per judgment and total amount of invoice came to Rs. 1,31,59, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SNEXIS INDIA, on 19.05.2011 for providing/ sale of copies of judgments rendered by various Courts/Tribunal. As per the said agreement, according to the AO, the total compensation receivable is Rs. 10,49,86,877 + applicable taxes. However, he noted that the actual compensation (Sale Consideration) paid for First Year (Financial Year 2011-12) was to the tune of Rs. 7,35,00,000/- and for second Year (Financial Year 2012-13) was only Rs. 1,13,09,208/-, thus total was only Rs. 8.48,09,208/-. According to the AO, the balance sale- consideration of Rs. 2,01,77,597 (10,49,86,877- 8,48,09,208) has not been offered for taxation by the assessee in relation to the AY2013-14 (FY 2012-13). When confronted by the AO, the assessee submitted that the balance amount of sale consideration of Rs,2,01,77,597/- neither accrued nor received or receivable, as the contract has been terminated already and the assessee had delivered all the judgments to the satisfaction of the customer M/s Lexis Nexis only to the extent of amount credited in the profit and loss account i.e. Rs. 1,13,09,208/-. However, the AO didn't agree and was of the view that (i) the entire balance consideration of Rs. 3,14,86,877/- accru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted by LN) and related taxes, pay the amount so invoiced. Payment shall be sent to Licensor via electronic funds transfer at its account set forth under Banking Information specified above. (b) Upon LN's completion of its review of the Subsequent Data portion of the Licensed Materials under Section 2 above and related acceptance of such Subsequent Data portion of the Licensed Materials as provided in that Section, Licensor will - using the form of invoice set out on Schedule C invoice LN for a portion of the One-Time Fee equal to INR 240 (two Hundred forty Indian Rupees) per judgment delivered plus applicable Service Tax (10.3%) and VAT (4%). LN shall, within two weeks after its receipt of such invoice from Licensor (issued as provided in Section 2.6 above) for fees due from LN for Licensed Materials (that have been accepted by LN) and related taxes, pay the amount so invoiced. Payment shall be sent to Licensor via electronic funds transfer at its account set forth under Banking Information specified above. (c) The total aggregate amount payable by LN under Sections 4.2(a) and 4.2(b) above before taxes shall not exceed the amount specified in Section 4.1 regardless of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eon for LN to retain as it may determine and send to LN immediately on receipt of LN's notice of Acceptance by electronic transmission via FTP to such server, FTP Site or URL as specified by LN a complete second copy of such portion of Licensed Materials The compensation or consideration for the grant of perpetual license to LN and its affiliates for the use of licensed materials and for Licensor's obligations under the Agreement dated 19.05.2011 is one-time fee of Rs. 10,49,86,877/- plus applicable taxes payable as follows- a) For enhanced data portion of the licensed materials payable on completion of review and acceptance by LN- Rs. 7,35,00,000+taxes b) For Subsequent Data Portion of the Licensed materials payable on completion of review and acceptance by LN- Rs. 240 per judgment + taxes. 10. And it is noted that the assessee has raised an Invoice for Rs. 8,40,10,500 on 14.06.2011 which was duly paid and accounted in relation to the earlier Assessment Year 2012-13 and accordingly, M/s. Lexis Nexis has also deducted tax at source under section 194J from the payment made to the assessee. In the relevant AY 2013-14, the assessee raised Invoice during the financial ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ashok Bhai-56 ITR 42 (SC)] and such accrual may depend on the agreements which may give rise to such rights. The Ld. AR cited the decision in Godhra Electricity Co. Ltd. v. CIT [1997] 225 ITR 7461 wherein the Hon'ble Supreme Court reiterated the concept of 'real income', emphasizing that even under the mercantile system, a mere claim by the assessee is not sufficient to make income accrue on the basis of 'hypothetical income' - the income must actually become due. In the said case the Hon'ble Supreme Court inter alia examined the cash system and mercantile system of accounting in the context of 'hypothetical income'. Considering the facts before it, the Court said that although the assessee company was following the mercantile system of accounting and had made entries in the books regarding enhanced charges for the supply of electricity made to its consumers, no real income had accrued to the assessee-company in respect of those enhanced charges in view of the representative suits filed by the consumers which were decreed by the court and ultimately, after various proceedings which took place, the assessee- company had not been able to realize the enhanced charges. Since no real in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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