INCOME TAX OFFICER v. REHMAT KHAN & PARTY
[Citation -1986-LL-0619-6]

Citation 1986-LL-0619-6
Appellant Name INCOME TAX OFFICER
Respondent Name REHMAT KHAN & PARTY
Court ITAT
Relevant Act Income-tax
Date of Order 19/06/1986
Assessment Year 1981-82
Judgment View Judgment
Keyword Tags enhanced compensation • proportionate amount • statutory liability • excess realisation • excise department • accrual of income • state government • country liquor • licence fee • sale price • levy sugar • sales-tax
Bot Summary: The assessee sought to make a claim for loss of Rs. 9,90,000 incurred by it due to this closure of the assessee's business. Called upon the assessee as to why this amount should not be treated as the assessee's income during the relevant accounting year and after getting the assessee's reply he added back this figure. CIT vs. Nagireddy Co. 105 ITR 669 and CIT vs. Kashi Ram Agrawalla 37 CTR 111 he ordered that the addition of Rs. 9,90,000 be deleted from the income of the assessee. O n behalf of the Department it was contended that the assessee had already filed three civil suits in the Court of Civil Judge at Agra wherein it has been alleged by the assessee that if closure of shops were forced upon the contractors in any manner or for any reason they are to be compensated for the losses and the proportionate amount of licence fee and auction may also be payable only when the contractors were allowed to run the shops for all the permissible days. The assessee claimed refund of the licence fee for the days on which the assessee was asked to close its shops and further compensation etc. Every kind of claim on the basis of contractual obligations will not necessarily involve accrual of income, For examine, in the case of Shri Someshwar Sahakari Sakhar Karthana Ltd vs. ITO 21 TTJ 89: 11 ITD 335 the assessee had filed a Writ Petition in a High Court challenging the action of the Government in fixing the rate of levy sugar and he was allowed by the High Court to receive a higher rate subject to a bank guarantee. The Department would be at liberty to bring it to tax as and when the assessee gets any further amount from the Government.


H.S. AHLUWALIA, J.M. very ticklish issue is involved in this appeal. Assessee was running business of country liquor at Agra city and suburbs thereof. As per orders of Government, liquor shops are closed for several days and sale was also restricted during certain working hours. assessee, therefore, sought to make claim for loss of Rs. 9,90,000 incurred by it due to this closure of assessee's business. ITO therefore, called upon assessee as to why this amount should not be treated as assessee's income during relevant accounting year and after getting assessee's reply he added back this figure. On appeal, CIT(A) was of opinion that in Para 6 of direction IAC had himself observed that keeping in view facts and decision cited, he was of opinion that liability on account of licence fee incurred as per contract with Excise Department was totally allowable. Therefore referring to Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC) (1983) 32 CTR 221), Addl. CIT vs. Nagireddy & Co. (1976) 105 ITR 669 (AP) and CIT vs. Kashi Ram Agrawalla (1983) 37 CTR (Pat) 111 he ordered that addition of Rs. 9,90,000 be deleted from income of assessee. Revenue has come up in second appeal before us. We have heard representatives of parties at length in this appeal. O n behalf of Department it was contended that assessee had already filed three civil suits in Court of Civil Judge at Agra wherein it has been alleged by assessee that if closure of shops were forced upon contractors in any manner or for any reason they are to be compensated for losses and proportionate amount of licence fee and auction may also be payable only when contractors were allowed to run shops for all permissible days. writ petition had already been filed challenging order of Government of U.P. not to enforce notification for closing shops on particular days. assessee, therefore, claimed refund of licence fee for days on which assessee was asked to close its shops and further compensation etc. It was contended on behalf of Revenue that this refund became due to assessee in terms of contract between assessee and State Government and therefore it was liable to be taxed as assessee's accrued income. Though argument is plausible, upon consideration of all over circumstances of case, we are not inclined to agree with representative of Department. This is not statutory liability of Department to refund licence fee in respect of those days on which assessee had to close down its shops. fact that assessee made such claim does not necessarily mean that whole of amount of claim accrued to assessee. Every kind of claim on basis of contractual obligations will not necessarily involve accrual of income, For examine, in case of Shri Someshwar Sahakari Sakhar Karthana Ltd vs. ITO (1985) 21 TTJ (Pune) (SB) 89: (1985) 11 ITD 335 (Pune) (SB) assessee had filed Writ Petition in High Court challenging action of Government in fixing rate of levy sugar and he was allowed by High Court to receive higher rate subject to bank guarantee. It was held that ITO was not justified in treating impugned excess realisation as part of sale price and taxing it as revenue receipt. Again in case of Harish Chandra & Ors. vs. CIT (1985) 45 CTR (Del) 329: (1985) 154 ITR 478 (Del) question involved was taxability of capital gains on enhanced compensation awarded by District Judge. It was held that so long as appeals against orders of district Judge were pending enhanced compensation determined by him could not be deemed to have accrued and would not be taken into account in commuting amount of capital gains. In CIT vs. Motor Credit & Co. (1981) 127 ITR 572 (Mad) where principal monies advanced by assessee were doubtful of realisation it was held that there was no question of taxing interest on accrual basis. Special Leave Petition by Department against this order of Madras High Court was dismissed by their Lordships of Supreme Court on 17th Aug., 1984 as reported at page 93 of statutes portion in 149 ITR. On behalf of Department reliance was placed upon in case of CIT vs. Babulal Narottamdas (1976) 105 ITR 721 (Bom). In that case there had been resolution to give additional special remuneration to assessee. Though resolution was challenged by some co-sharers, High Court ultimately upheld resolution. What was held by High Court was that amount payable under resolution was taxable in years to which it related to. Obviously it was payment in pursuance of resolution and there was no dispute between company and assessee over this payment. Therefore, there could be no dispute about its accrual. other case cited was CIT vs. Planters Co. P. Ltd. (1980) 15 CTR (Mad) 395: (1980) 123 ITR 648 (Mad) what was held in that case w s only that sales-tax collected by assessee earlier could not be brought to tax in particular year because it had been transferred to profit and loss account of that year and omission to tax it in earlier year was no ground for taxing in that year. In present case position is rather different. Here assessee claimed some compensation from Government but amount of that claim has never been decided. It was stated on behalf of assessee that whatever claim was accepted by Government assessee was prepared to be taxed thereon, whenever it was so done. This we think would be more fair, to both parties because it is premature to say what would be ultimate fate of assessee's claim. mere fact that some stay orders i n relation to closing of liquor shops were issued is not conclusive of genuineness of assessee's claim, and it would not be safe to tax entire claim in this year. Department would be at liberty to bring it to tax as and when assessee gets any further amount from Government. With these remarks, we are of opinion that there is no force in this appeal which is hereby dismissed. *** INCOME TAX OFFICER v. REHMAT KHAN & PARTY
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