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Deputy Commissioner Of Income-Tax, ... vs Deccan Mechanical And Chemical ... on 29 June, 2005 cites

Ipca Laboratory Ltd vs Deputy Commissioner Of Income Tax, ... on 11 March, 2004

Ltd. v. Dy. CIT [1999] 70 ITD 109. The Hon'ble Tribunal pointed out that the accrual of income has to be determined with reference to contract between the parties. On the particular facts of that case, it was pointed out that there was no dispute raised by the revenue about terms and conditions of agreement between the parties. In terms of the contract, it was held that retention money did not accrue as income and this amount could not be assessed merely on the view which the assessee had taken inadvertently or otherwise.
Supreme Court of India Cites 32 - Cited by 314 - S N Variava - Full Document

Commissioner Of Income-Tax vs Hindusthan Housing And Land ... on 9 January, 1973

5.2 The Learned Counsel relied on the decision of Hon'ble Supreme Court in the case of CIT v. Hindustan Housing and Land Development Trust Ltd. . The facts of the case are that certain lands belonging to the assessee were compulsorily acquired by the State Government. The Land Acquisition Officer awarded a sum of Rs. 24,97,249 as compensation. On appeal, the compensation was enhanced to Rs. 30,10,873, on which interest at the rate of 5 per cent was also ordered to be paid from the date of acquisition. The State Government filed an appeal to the High Court. Pending decision in appeal, the Government deposited a sum of Rs. 7,36,691, the additional amount payable, with the Court on 25-4-1956. The assessee was allowed to withdraw this amount on 9-5-1956 after furnishing a security bond for refunding the amount in case the Government's appeal was allowed. The assessee credited this amount in suspense account. The question was whether the amount received by the assessee could be taxed as income for assessment year 1956-57 as income received in pursuance of the enhancement of compensation. The Tribunal decided the matter against the department. The decision was affirmed by the High Court in its order, in which it was pointed out that the compensation was enhanced on 29-7-1955. The enhanced amount was disputed in appeal. The assessee was allowed to withdraw the amount only on furnishing a security bond. Therefore, there was no absolute right vested in the assessee to receive the amount till that stage. Thus, the extra compensation did not accrue as income of the assessee in the previous year relevant to assessment year 1956-57.
Calcutta High Court Cites 21 - Cited by 268 - A N Sen - Full Document

New Victoria Mills Co. Ltd vs Commissioner Of Income-Tax, U. P. on 20 March, 1965

5.3 The learned Counsel of the assessee relied on the decision of Hon'ble Allahabad High Court in the case of New Victoria Mills Co. Ltd. v. CIT [1966] 61 ITR 395. The assessee was maintaining its books of account on mercantile method. It made a provision of Rs. 4.5 lakhs in the books, representing bonus payable for the previous year and claimed the amount as deduction from its income, even though the bonus was actually paid in the succeeding year. The Hon'ble Court pointed out that when provision for bonus was made because of an amicable settlement or by an industrial adjudication, the liability was incurred by the employer on mercantile method of accounting notwithstanding the fact that it was paid in the subsequent year. It was explained that under the aforesaid method all credit items are brought in as income immediately when they become legally due, whether received or not, and all expenditure are brought into the debit for which a legal liability has been incurred, whether or not the liability has been disbursed. It will be clear from the judgment that once a legal right gets vested in the assessee to receive a sum, the income accrues notwithstanding the fact whether the corresponding amount is received or not. However, if no such legal right gets vested in the assessee, no income can be said to accrue to him.
Allahabad High Court Cites 8 - Cited by 37 - Full Document

Commissioner Of Income-Tax vs Kerala State Drugs And Pharmaceuticals ... on 25 March, 1991

5.4 The learned Counsel relied on the decision of Hon'ble Kerala High Court in the case of CIT v. Kerala State Drugs and Pharmaceuticals Ltd. . The facts of the case were that the assessee was engaged in manufacture and sale of pharmaceutical products, and sales were made entirely to the Government of Kerala. The agreement between the assessee and the State Government provided that if the price fixed by the State Government was lower than the price fixed by the assessee, the excess payment would be adjusted against the future supplies. However, if the price fixed was higher, the assessee could prefer a claim to receive balance amount. In the previous year relevant to assessment year 1978-79, the assessee made a claim for Rs. 41,86,349. The claim was not accepted by the Government. The amount had been shown in the profit and loss account as amount receivable. During the pendency of proceedings under Section 144B, the assessee filed a revised return, excluding the impugned amount. By this time, the State Government had negated the claim of the assessee. The claim of the assessee regarding the exclusion of aforesaid amount from the income was not accepted by the Assessing Officer. However, the Tribunal accepted the assessee's claim. The Hon'ble Court pointed out that the price entered in the books was merely a tentative price, which did not represent the income accrued or income received. Therefore, the said amount could not be treated as income. The Hon'ble Court pointed out, on review of various cases, that in order to tax an amount as income, we have to see whether it is real income and whether income has materialized. The amount could not be some kind of hypothetical income but it has to be real income. When income has not resulted at all, there is neither accrual nor receipt of income even though entries were made to the effect in the books of account. Accordingly, on the facts of this case, the Tribunal was right in holding that expectation to receive income cannot be taken as income.
Kerala High Court Cites 18 - Cited by 27 - K S Paripoornan - Full Document

Commissioner Of Income-Tax vs Chanchani Brothers (Contractors) Pvt. ... on 26 February, 1986

5.6 The learned Counsel relied on the decision of Hon'ble Patna High Court in the case of CIT v. Chanchani Bros. Contractors (P.) Ltd. . The assessee carried on the contract work for the irrigation department of Government of Bihar. The ITO found that the assessee had not included a sum of Rs. 1,64,428 in the bills for assessment year 1970-71, which was shown as bills receivable. It was explained to him that the irrigation department has withheld the bill for verification of satisfactory completion of work. The ITO also added a sum of Rs. 23,06,079, which was in respect of amount claimed by the assessee for the work done beyond the contract. The assessee claimed deduction for the expenditure incurred in the extra work, which was disallowed. The AAC allowed a relief of Rs. 84,243 from the total sum of Rs. 1,64,428. He also deleted the addition of Rs. 23,06,06,079. The Tribunal upheld the order of AAC. The Hon'ble High Court pointed out that the irrigation department had kept the bill pending for verification of the work and this position had been accepted by the Assessing Officer. The assessee had no right to claim this amount and, accordingly, it was not includible in the income of assessment year 1970-71. In respect of extra work, the Tribunal found as a matter of fact that the claims were not based on a prior undertaking or agreement. The final decision about the claim had not even been made before the closure of the accounting period. Therefore, this amount also could not be included in the income. The Hon'ble Court observed that it cannot be doubted that in mercantile method of accounting, business expenses are allowable as and when the expenses are incurred. An allowance cannot be postponed as a contract work is one whole work and so the expenses incurred in a particular year have to be allowed on mercantile method of accounting. The learned Counsel laid special emphasis on this part of the judgment to canvass his case that receipts and expenditure cannot be linked, as has been argued by the learned DR. The receipts have to be taxed when right to receive amount has income into existence. The expenses are to be allowed as and when incurred because the contract work is one whole work.
Patna High Court Cites 17 - Cited by 27 - Full Document

Commissioner Of Income-Tax vs Simplex Concrete Piles (India) Pvt. ... on 5 December, 1988

5.7 The learned Counsel relied on the decision of Hon'ble Calcutta High Court in the case of CIT v. Simplex Concrete Piles (India) (P.) Ltd. . The facts of the case were that the assessee carried on the business of concrete piling for buildings. For and upto assessment year 1964-65, 100 per cent of the job value was credited to profit and loss account. However, in the previous year relevant to assessment year 1965-66, it credited 90 per cent of the amount to the profit and loss account deducting the retention money, which resulted into the reduction of income. The ITO treated this action of the assessee as change in method of accounting, which was not bona fide according to him. Therefore, the change was not accepted. This led to addition of Rs. 20,77,161 in the assessment for assessment year 1965-66. The AAC deleted the addition on the ground that retention money did not accrue as income of the assessee in the year in which job was executed. It accrued in a later year depending upon the completion of the contract work and its certification by the engineer to the effect that the work had been satisfactorily completed. The Tribunal upheld the decision of the AAC and in doing so, it pointed out that under mercantile method of accounting what could be brought to tax is the amount which has accrued as income to the assessee. Prima facie, it appeared that retention money did not accrue as income of the assessee, which will accrue as income as per terms of the contract. The Tribunal remanded the matter to the Assessing Officer to examine the contract regarding accrual of retention money as income. The Hon'ble Court upheld the decision of the Tribunal. While doing so, it was pointed out that the retention money did not become legally due to the assessee on completion of work. This money becomes legally due to the assessee on fulfilment of obligations and only thereafter the money would be realized by the assessee. Till that date, the assessee had no right to claim any part of the retention money, till the verification of the satisfactorily execution of the contract. The facts of the case are very similar to the facts of our case and, therefore, it is clear that it will have to be seen when the right to receive retention money arose in this case with reference to its agreement with the contractee.
Calcutta High Court Cites 5 - Cited by 87 - Full Document

Anup Engineering Ltd. vs Commissioner Of Income-Tax on 6 July, 2000

5.9 The learned Counsel relied on the decision of Hon'ble Gujarat High Court in the case of Anup Engineering Ltd. v. CIT [2001] 247 ITR 457 114 Taxman 584. The facts of the case are that the assessee was manufacturing vessels used by chemical industries. It entered contract with "G" for supply and erection of spray drying plant for synthetic detergent plant for a consideration of Rs. 40 lakhs. The contract provided for retention of 10 per cent of amount of each invoice, which was payable to the assessee after finding out that the plant was handed over in perfect condition and in satisfying "G" regarding its performance in all respects. The question was whether the right to receive this amount accrued to the assessee before satisfaction of the condition and on raising the invoice. The Hon'ble Court held that entries in the books of account of the assessee were not conclusive of the matter and the said amount could not be treated as income at all. In coming to this conclusion, the Hon'ble Court pointed out that it is crystal clear that the amount of Rs. 3 lakhs deducted from sales account was rightly claimed by the assessee by way of deduction, as this income had not accrued at all to the assessee. In the alternative, the Court pointed out that if the amount was taken as income, the assessee's liability with regard to the repairs of the plant as per the terms of contract had also arisen in the same previous year. Therefore, the said liability ought to have been deducted while computing the income.
Gujarat High Court Cites 10 - Cited by 11 - A R Dave - Full Document

Commissioner Of Income-Tax vs Punjab Tractors Co-Operative ... on 19 August, 1997

5.10 The learned Counsel relied on the decision of Hon'ble Punjab and Haryana High Court in the case of CIT v. Punjab Tractors Cooperative Multi-Purpose Society Ltd. . In this case, the assessee engaged in the business of purchase and sale of tractors, motor cycles and their parts. In the assessment year 1978-79, the assessee made provision of Rs. 2,01,236 for "post warranty service advances". It was explained that the assessee was liable to provide free service in the warranty period of one year, The Hon'ble Court held that the assessee did not become owner of the amount and could not appropriate till the service was rendered in lieu of which the advance was received. The assessee could legally claim the amount after rendering the services. Part of the amount could be treated as income in the year under assessment on the basis of right to appropriate the money. However, as the receipt was relatable to a particular period in future, it would fructify and mature into income in the period and not in the earlier period.
Punjab-Haryana High Court Cites 8 - Cited by 13 - A Bhan - Full Document

The Mahalaxmi Mills Ltd vs The Commissioner Of ... on 8 April, 1960

5.11 The learned Counsel relied on the decision of ITAT, Pune Bench in the case of G.H. Ajwani Construction (P.) Ltd. v. Jt. CIT [IT Appeal No. 581 (Pune) of 1999, dated 31-10-2001]. The Hon'ble Tribunal, in the light of the facts of the case, held that the assessee had no right to claim any part of retention money till the verification of satisfactory execution of contracts. The learned Counsel also relied on the decision of ITAT, Mumbai "D" Bench in the case of Corrosion Control Services (Bombay) (P.)
Supreme Court of India Cites 17 - Cited by 69 - Full Document
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