Itr No. 99 of 1984 · Punjab Arh Chandigarh Njab And Haryana High Court · 2024

this Court in Commissioner of Incom ills, ncome-tax vs. Punjab Bone Mills, reported rted in [1998] 96 Taxman 555 (P 55 (Punjab & Haryana) wherein identical ntical question was referred vide ref g to de reference No.37/1984 relating to the asses assessment year 1978-79. MOHIT GOYAL 2024.10.23 17:22 I attest to the accuracy and integrity of this document ITR-99-1984 (O& (O&M)

4. The ques e question No.2 in the said reference No.1 erence is the same as question No.1 referred h erred herein which is as under: “ 1. Whether on the facts an s and in the circumstances of the case, the ITAT is right in law law in holding that cash incentive accrues to the assessee o see on the date when the application for claim is made the Competent Authority?” Au

5. The Cou e Court after examining the law relatin ld as relating to accrual of income held as under: “26. It would appear from t om the facts of the case at hand before us that the right to r to receive cash incentive accrued to the assessee on filing th g the claim. The plea put forward by Shri Gupta that the dat date of the export would give rise to a right in favour of t of the assessee, does not appear to be appropriate because th se the assessee did not lay a claim ascertaining his right. Unles a c nless the claim is filed, no right to receive the income can be n be said to have arisen. Though cash incentive was connecte Th ected with exports and was in the nature of a trading receipt o ipt or a revenue receipt, it cannot be said to accrue or arise un se unless the exporter made his claim. Cash assistance was giv s given to an exporter to encourage exports. The making of g of the application was, therefore, an important event so f so far as the accrual of income was concerned. The date of t of the export would not by itself give rise to an income unles nless the assessee laid a claim to receive the income from the the Government. The date of the receipt of cash incentive wou would also be not relevant once it is found that the assessee ssee was maintaining his accounts on the mercantile system. em. Therefore, the accrual of income would either depend on th n the date of the making of MOHIT GOYAL 2024.10.23 17:22 I attest to the accuracy and integrity of this document ITR-99-1984 (O& (O&M) the export or on the date of the ma making of application by the assessee claiming cash incentive tive from the Government. The date of export would not crea Th create a right unless the assessee made a claim therefor. If th If the assessee did not file his claim, there was no accrual in his n his favour.”

6. It is furt is further asserted that the said dec id decision of the High Court was challenge allenged before the Supreme Court d as Court by the Department titled as Commiss missioner of Income-tax vs. Pun Punjab Bone Mills, reported in [2001] 1 1] 119 Taxman 781 (SC), wherein herein the Apex Court vide its order dated 19. ted 19.07.2001 passed the following or ing order: “1. No interference with the the judgment and order of the High Court - CIT v. Punjab Bone Bone Mills [1998] 232 ITR 795 (Punj. & Har) is called for. Hav 79 . Having regard to the first question, considering how that que question is worded, it is properly answered. As to the second cond question, the relevant material in regard to the cash ince incentive for exports does not appear to have been placed ced before the Tribunal. Without that material, it is not possi Wi possible to decide that the ect. contention of the revenue is correct.

2. The civil appeals are dismis ismissed with cost.”

7. Thus, it us, it is apparent that the second qu ence, ond question in the said reference, which is ich is identical to the question No.1 in o.1 in the present case, has not been decided o cided one way or the other by the Sup he Supreme Court, and we therefore will have ll have to look into the other aspects spects relating to the cash incentive provided ovided for the various years to reach to ach to an independent conclusion. MOHIT GOYAL 2024.10.23 17:22 I attest to the accuracy and integrity of this document ITR-99-1984 (O& (O&M)

8. We find e find that the ITAT while decidin - deciding the case of the assessee- responde pondent for the assessment year 1 ear 1978-79, vide its order dated

27.04.19 .04.1984 found as under: “4. The second question of of the Revenue relates to the accrual of cash incentive. The I he ITO has dealt with the issue in the para marked 'B' of of his assessment order. According to him, the assessee had Ac had accounted for the cash incentive on receipt basis even tho though it was following mercantile system of accounts and b nd by so doing had short- disclosed an amount of Rs. 240,083/ ,083/- as part of its income of the assessment year 1978-79. Aft . After referring to certain authorities, he held that as the as e assessee itself had been following the mercantile system of a of accounting in respect of the cash incentive an addition of Rs. f Rs. 240,080/- was being made to the income returned by the a the assessee.. The assessee challenged the decision of the he ITO before the CIT (Appeals), who has dealt with it in pa (A paras 4 to 6 of his order. It was contended by the assessee bef It e before him that it had not changed the system of accounting ting from the mercantile system to cash, system but the dispu ispute was to which of the cash, system but the dispute was as s as to which of the cash incentive received could be said to to accrue or arise within the accounting period ended on 31.

31.3.1978 relebant to the assessment year 1978-79. Howeve wever, the CIT (Appeals) dealt with the issue in the particular ular fashion and ultimately upheld the action of the ITO. The as e assessee came in appeal to the Tribunal and the Tribunal has has dealt with the issue in paras 5, 6 & 6. 1 of its order, which a ich are quoted below: "5. The last contention of th f the assesse is about the addition of Rs 2,4,000/- on account o unt of cash incentive in the asstt. year 1978-79. The CIT (Appea ppeals) has dealt with this MOHIT GOYAL 2024.10.23 17:22 I attest to the accuracy and integrity of this document ITR-99-1984 (O& (O&M) point in para 4 to 6 of his order. rder. The assessee filed a statement giving particulars about out cash incentive and we reproduce the information given belo below: Period/ Pe quarter ending

30.6.77 30

30.9.77 30

31.12.77 31

31.3.78 31 Date application of Amount received Date receipt of amount 977 12th July, 1977 108379/-

10.1.1978 977 20th Oct, 1977 50680/- 978 18th Jan, 1978 135779/ 1st April 1978 104304/ Total 399142/-

21.3.78

19.4.78

30.9 78 The dispute is about adding o ing of the last two amounts of Rs. 135,779/-and Rs. 104,304/- in the assessment year under appeal.

6. We have heared the ri e rival submissions and perused the order of the C.I.T. (A T. (Appeals). Shri A nant Narayanan submitted that his arg Na s arguments had not been correctly appreciated by the CIT (Ap (Appeals) to some extent. He explained that the assessee wa He e wanted the claim to be judged under the mercantile system tem but according to it the amounts of cash incentive in disput ispute had not accrued as assessee's income the assess ssessment year 1978-79 Acvording to him, the cash incentive Ac tive amount will accrue on the date when the claim was sanc sanctioned. He cited two decisions of Madras High Court, na t, namely, CITI Tamil Nadu Vs Ashoka Lungi Co.-12 OITR 413 a Vs 13 and CIT Tamil Nadu Vs Motor Credit Co. P.Ltd.-127 ITR 5 M TR 572. On behalf of the Revenue, it was submitted that cash Re ash incentive was allowed by the Government of India accordin rding to a duly formulated scheme announced before hand and and, therefore, it accrued no sooner the assessee affected the the necessary exports and the procedure for claiming that c at cash incentive merely MOHIT GOYAL 2024.10.23 17:22 I attest to the accuracy and integrity of this document ITR-99-1984 (O& (O&M) related to the quantification of am f amount payable. Cases cited by the ITO in the assessment o ent order were relied upon in support of this submission. It was was stated that the facts of Madras decision in 127 ITR 572 we M 2 were altogether different and that decision would not apply i ply in the case like that of the assessee.

6.1 We have considered the r the rival submissions. The assessee on our inquiry informed th ed that he could not make available the cash incentive sche scheme applicable to the assessee but Shri Anant Narayanan nan submitted on the basis of the chart, the particulars of w of which are reproduced above, that a claim for cash incenti centive admissible is to be filled at the end of the each quarter rter by the assessee and it will be admissible only when the the assessee makes the required application each quarter. rter. Taking note of this circumstance and the Madras High igh Court decision in the case of Ashoka Lungi Co. 120 I. T. R R. 413, we will hold that the right to cash incentive of each qu ch quarter will become due to the assessee at the time when th n the application is made. After the application what follows Af ows is the verification of assessee's claim and the quantific ntification of the amouut admissible. Applying this principle, ple, we will hold that cash incentive for the quarter ended on 3 on 3-3-1978 amounting to Rs. 1,04,304/- cannot be said to acc Rs. accrue to the assessee in the assessment year 1978-79 an and that amount had, therefore, not been rightly includ luded in the assessment under mercantile system. Consequen quently, we will reduce the addition made by the ITO by the am e amount of Rs. 1,04,304/- and partly accept the assessee's cont contention."

5. We refer question No. No. 2 proposed by the Commissioner for the opinion of Co of the Honourable High Court. Co MOHIT GOYAL 2024.10.23 17:22 I attest to the accuracy and integrity of this document ITR-99-1984 (O& (O&M)

6. The statement of the case case is finalised after due notices to the parties.”

9. It appear appears that the said aspects were not ge of ere not brought to the knowledge of the Supr Supreme Court, and therefore the re the Apex Court has made the aforesaid resaid observations.

10. Be that a e that as it may, with regard to assessm ssessment year 1979-80, we find that on facts, facts, the Tribunal made following owing observations relating to cash incentive entives and it had remanded the m the matter to the IAC (Asstt.) for deciding ciding it afresh on the basis appro r the approved by the Tribunal for the assessme sessment year 1978-79. “5. The second objection of n of the Revenue is about the relief of Rs. 2,40,083/- given b en by the CIT (A) in the account of cash incentive. The asse assessee has also objected in its appeal urging that point regard garding cash incentive had not been properly appreciated b d by the CIT (A). Our attention was invited to the fact tha t that this very issue arose for the preceeding assessment year ear and the Tribuanl dealt with it in paras 5,6, and 6.1 of its ord ts order. We will consider it proper to set aside the finding of th of the lower authorities on this issue and restore it to the fil e file of IAC (Asstt.) for deciding it afresh on the basis appro pproved by the Tribunal for the asseesment year 1978-79. Thi This will dispose of the ground of appeal raised by the assesse ssessee also.

6. In the result, the appeal o eal of the revenue may be treated to be allowed for satistical pu al purposes only.”

11. Thus, it hus, it is apparent that while on facts, facts, it would be for the concerned officer to ficer to examine as to what are the ca the cash incentives allowed in each MOHIT GOYAL 2024.10.23 17:22 I attest to the accuracy and integrity of this document ITR-99-1984 (O& (O&M) quarter, arter, but so far as the question is co is concerned, we confirm and take the same same view as already taken by this C f the this Court in the earlier case of the responde pondent bearing No. ITR-37-1987 (su n the 87 (supra), and hold that it is on the date of su te of submission of claim that the accr ld be e accrual of cash incentive would be recogniz ognized and not from the date of s e of submission or receipt of cash incentive entive.

12. The ref he reference is accordingly answere - swered in favour of the assessee- responde pondent and against the Revenue.

13. ITR stan R stands disposed of as above.

14. All pend ll pending applications also stand dispo d disposed of accordingly. (SANJE ANJEEV PRAKASH SHARMA) JUDGE (SANJAY VASHISTH) JUDGE October 23, 202 Mohit goyal , 2024

1. Whether 2. Whether ther speaking/reasoned? ther reportable? Ye Yes/No Yes/No Ye MOHIT GOYAL 2024.10.23 17:22 I attest to the accuracy and integrity of this document