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TMI Blog1991 (9) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... leted the sum in question on the ground that the subsidy did not accrue or arise during the accounting year relevant to the assessment year 1981-82, and has also held that the receipt is of capital nature and is not assessable under section 41(1). The department has come in appeal to the Tribunal against the said decision of the CIT(A). 2. The only ground of the department in this appeal is that the CIT(A) is not correct in deleting the addition on the ground that the subsidy did not accrue or arise during the assessment year 1981-82, and also effed in holding that the same was of capital receipt and hence not liable to tax under section 41(1) of the IT Act. 3. The facts involved in brief in this appeal are that in 1978, the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified. In support of its contention it is stated by the Departmental Representative that the assessee applied for subsidy grant to the District Industrial Centre, Suri, Birbhum and when the Government did not pay the subsidy, then the assessee filed a Writ petition and received Rs. 10 lakhs as a result of High Court's order dated 22-7-1980 in C.R. No. 4289(W) of 1980. According to the Departmental Representative, the sum in question has accrued, arose and received by the assessee during the accounting year relevant to the assessment year 1981-82. Therefore, it is contended that the CIT(A)'s finding that the sum in question did no accrue or arise in the accounting year relevant to the assessment year 1981-82 is not correct. As regards C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue receipt. This cannot be taxed. It is further contended that it is also not a remission or refund of sales-tax and cannot also be taxed under section 41(1) of the IT Act. In support of the contention it is stated that the sum in question is not received from the sales-tax authorities, but received after putting an application to the General Manager, District Industrial Centre, Suri. When the payment was not made and its application for subsidy was not disposed of, the assessee filed a writ petition in Calcutta High Court and the Hon'ble Calcutta High Court by an interim order dated 22-7-1980 C.R. No. 4289(W) of 1980 directed the State Government to pay Rs. 10 lakhs pending decision of the Writ petition and without prejudice to the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 991] 188 ITR 187 (MP). 5. We have considered the submission of both the parties and proceed to decide the first issue, i.e., the year of taxability of Rs. 10 lakhs. The departmental stand is that the sum in question is rightly taxed in 1981-82, as the same was received as a result of an interim order dated 22-7-1980. But on this point we are inclined to agree with the learned authorised representative of the assessee and hold that the sum of Rs. 10 lakhs cannot be taxed in the assessment year 1981-82, as the assessee had no legally enforceable right by the order dated 22-7-1980, which was an interim one. In order to appreciate the issues involved here we would like to narrate the background to the case in brief. In 1978, the Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide the assessee's right to receive the amount but only directed the West Bengal Government to pay the amount of Rs. 10 lakhs to the assessee as an interim measure. The order dated 12-5-1981 of the Hon'ble High Court of Calcutta is the only order which really adjudicated upon and decided the assessee's legal right to receive this amount under the scheme in its favour. In other words, the assessee's right to receive this amount as subsidy accrued or arose only as a result of this order on 12-5-1981 and not earlier. In this connection it is necessary to mention that the accounting year of the assessee ended on 5-5-1981, for the assessment year 1981-82. Further the matter is not yet finally decided and the Government of West Bengal's appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that ' Taxability is attracted not merely when income is actually received, but also when it is accrued ", and it is also true, as has been explained by the Supreme Court in CIT v. K.R.M.T.T. Thiagaraja Chetty Co. [1953] 24 ITR 525 (SC), and Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC) that income accrues when it ' falls due ', that is to say, when it becomes legally recoverable irrespective of whether it is actually received or not and ' accrued income ' is that income which the assessee has a legal right to receive. 8. So, in view of these pronouncements, we hold in the case before us that as the Government of West Bengal has filed an appeal before the division Bench against the judgment in civil rule No. 4289(W) of 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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