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TMI Blog1991 (11) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... ners engaged for this purpose. The assessee, therefore, due to this heavy expenditure incurred by it on transportation raised bills between September 1982 and December 1982 bearing Nos. BCCL/99/82 to BCCL/124/82 to Rs. 9,08,787. These bills though were made out and raised were not entered into its accounts and this was noticed by the various officers during the course of search under section 132 on the assessee. It was explained by the assessee to the ITO during the course of assessment proceedings that as per the contract entered into on 23-12-1981 the assessee is only entitled to claim freight charges from BCCL as per rate contract basis though it had incurred more expenses for transportation of the goods of BCCL due to the floods and damaged roads and taking the goods through alternative longer routes to its destination. In order to cover up these additional expenses it has raised the aforestated bills from September 1982 to December 1982. These additional bills raised by the assessee were not accepted by BCCL and not passed, though the assessee has been insisting repeatedly that the same should be paid owing to the above mentioned reasons. The ITO did not accept this explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been made by the ITO. The assessee had received a sum of Rs. 16,75,000 on account in the year 1982 and the balance amount payable to the assessee was Rs. 1,47,990. The CIT(Appeals) relying on the decision of the Supreme Court in the case of CIT v. Shoorji Vallabhdas Co. [1962] 46 ITR 144 and in the case of State Bank of India v. CIT [1986] 157 ITR 67 deleted the addition on the ground that the said amount of Rs. 9,08,787 did neither accrue to the assessee nor was received by it during the previous year relevant to the year under consideration. It is pertinent to mention here that the CIT(Appeals) also gave an opportunity of hearing to the ITO and placed before him the letter received by him from the Chief Officer of CIL, Calcutta and the zerox copies of the various documents sent to the CIT(Appeals) on the basis of his request. It is mentioned by the CIT(Appeals) that the ITO did not make any particular comment in this regard. The CIT(Appeals), therefore, deleted the entire addition of Rs. 9,08,787 with a further direction to the ITO that he will be justified to consider the excess payment of Rs. 1,47,990 in the year of receipt. 5. It is submitted by the learned departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) was correct in deleting the addition. 7. We have heard both the parties and also perused the material placed before us in the paper book and also referred to the various case law cited by the rival parties. We see much force in the submissions of the learned counsel for the assessee. Admittedly the assessee raised several bills in respect of transportation work from September to December 1982 over and above the agreed contract rate as the assessee had to engage more lorries and take alternate longer routes for carrying the goods of BCCL to the destination. The purpose, it appears to us, was to have a good bargain for settlement at higher rate with the BCCL over the agreed contract rate for transportation in view of the above factors. Thus, the assessee raised those bills aggregating to Rs. 9,08,787 in respect of the transportation work from September to December 1982. Though the assessee maintains the accounts on mercantile system it cannot be said that the said amount accrued to the assessee for being assessed to tax during the relevant previous year. Under the provisions of the Income-tax Act income-tax is a levy on income and it takes into account two points of time at which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [1954] 26 ITR 27 considered the question as to the point at which income could be said to accrue or arise to an assessee for the purpose of the Income-tax Act. In the majority judgment delivered by their Lordships N.H. Bhagwati, J. (as he then was) explained that the words " arising or accruing " described a right to receive profits and that there must be a debt owed by somebody. Unless an actual " debt due " by somebody is created in favour of the assessee it cannot be said that he had acquired a right to receive the income or that the income has accrued to it. It, therefore, follows that mere making of a claim without any corresponding right either as per contract or as per law is not a debt due to the assessee by the other party on whom a claim is made and, therefore, there is no income accrued or arose to the assessee at all and, therefore, not liable to tax. Thus there must be something tangible, something in the nature of a debt or something in the nature of an obligation to pay an ascertained amount to an assessee and till then we are of the opinion that it cannot be said that the income had accrued or arisen to a person. Indeed, it would be harsh and inequitable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k place. " The principle of real income was also reiterated by the Supreme Court in its subsequent decision in the case of State Bank of India which has been relied by the CIT(Appeals) also and also in the case of State Bank of Travancore. The learned senior departmental representative also relied on this very decision of the Supreme Court. But on the facts of the case this decision squarely supports the case of the assessee rather than that of the department. We have perused the Supreme Court decision in the case of Morvi Industries as Chunnilal v. Mehta Sons (P.) Ltd.'s case relied on by the learned departmental representative and we find that the same does not apply to the present controversy. The decision of Madras High Court in the case of G. Padmanabha Chettiar Sons v. CIT [1990] 182 ITR 1 also does not support the case of the revenue as the facts therein were in respect of adoption of basis for receipt and payment of interest having regard to the mercantile system of accounting employed by the assessee during the assessment year in question where the assessee wanted to adopt mercantile basis for payment of interest by it and claimed the benefit of the cash system in re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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