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Housing And Urban Development ... vs Additional Commissioner Of Income Tax ... on 6 February, 2020
cites
The Companies Act, 1956
Section 145 in The Income Tax Act, 1961 [Entire Act]
Commissioner Of Income Tax Vi vs Virtual Soft Systems Ltd. on 24 April, 2018
28. The Court in the above noted case was considering the question
regarding the overdue charges payable by parties concerned to the assessee
when they make defaults in paying the installment as per the schedule of
payments. It was held that the Clause in the agreement which allows the
assessee to demand such charges is only an enabling Clause, and does not
guarantee the collection of the overdue charges and when the installment
itself is overdue and not collected/ realised, there is no basis for making out
a case that the additional overdue charges payable by the parties would be
collectable with certainty. Similarly, the Supreme Court in its decision in
Commissioner of Income Tax vs. Virtual Soft System Limited (supra),
considered the question as to whether the deduction on account of lease
equalization charges from the leasing rental income can be allowed under
Income Tax Act on the basis of guidance note issued by the ICAI.
Answering this question, it was held that the Court may take help of external
ITA 541/2019 Page 26 of 33
aids such as the ICAI guidelines and standards if the Act is silent, and there
exists no internal aid for the interpretation of the same. The relevant portion
of the decision reads as under:
Commissioner Of Income Tax vs Bharat Heavy Electrical Limited on 11 September, 2012
13. Having noted the facts of the case, we now turn to the judgments relied
upon by the parties. Appellant has relied upon Bharat Heavy Electrical
Limited (supra), which is squarely applicable to the facts of the present case.
The relevant paragraph is reproduced as under:
Bharat Earth Movers vs Commissioner Of Income Tax, Karnataka on 9 August, 2000
15. A similar view was also expressed by the Kerala High Court in the case
of Commissioner of Income-tax vs. Kerala State Financial Enterprises
Ltd.[2009] 178 Taxman 449 (Ker), where, while dealing with a similar
provision made on account of wage revision, the High Court followed the
decision of the Supreme Court in the case of Bharat Earth Movers (supra).
Continental Construction Ltd vs Commissioner Of Income-Tax, Central-1 on 15 January, 1992
Ltd. v. CIT[2003] 263 ITR 129 (Cal.),the
Revenue suffered any loss or such a change of
methodology attracts tax evasion. Concededly, there is
no finding to that effect in the assessment order or in
the order of the Commissioner of Income-tax (Appeals).
The change of method of accounting of overdue
charges from the mercantile basis to cash system,
method of accounting, as followed by an assessee, does
not create any income; but the method of accounting
only recognizes income. Therefore, either to apply the
accrual system or cash system, recognition of income is
a paramount factor. In the present case, the disputed
amount is the overdue charges receivable by the
assessee from various parties on the basis of hire-
purchase and lease agreements. As per the terms of the
agreements, overdue charges are payable by the parties
concerned to the assessee when they make defaults in
paying the installments as per the schedule of payments.
When the installment itself is overdue is not collected,
ITA 541/2019 Page 25 of 33
there is no basis for making out a case that the
additional overdue charges payable by the parties would
be collectible with certainty. The terms of the
agreements which enable the assessee-company to
demand overdue charges is only an enabling provision
and that enabling provision does not guarantee the
collection of overdue charges. It only gives a cause of
action to the assessee. In such cases it is very difficult to
recognize income against overdue charges.
Section 263 in The Income Tax Act, 1961 [Entire Act]
Commissioner Of Income Tax vs M/S.Annamalai Finance Ltd on 5 October, 2004
"4. The assessee had submitted that in respect of
overdue charges, the assessee-company, keeping in line
with the norms of the Reserve Bank of India as well as the
credit rating agency, has been recognizing income by
way of overdue charges only to the extent of actual
collection i.e., the assessee is admitting income only on
cash basis. The assessee-company has also placed
reliance upon the Accounting Standard 9 of ICAI which
lays down that when uncertainties exist regarding
determination of the amount or its collectability, the
revenue shall not be treated as accrued and hence shall
not be recognised until collection.
Commissioner Of Income-Tax vs Matchwell Electricals (I) Ltd. on 11 December, 2002
XXXX
In the instant case, learned counsel for the Revenue is
not in a position to demonstrate or satisfy us that due to
the change of accounting method adopted by the
respondent/assessee, which is permissible in law as per
the ratio laid down in (i) CIT v. Matchwell Electricals
(I.) Ltd.[2003] 263 ITR 227 (Bom.) and (ii) Hela
Holdings (P.)