Ltd v. The Appeal Is Accordingly Dismissed. There Sh

* THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A.No.49 of 2003 % Date: 02.09.2014# Commissioner of Income Tax, Rajahmundry … Appellant And$ The India Fruits Ltd., Kadiam, East Godavari District. … Respondent ! Counsel for Appellant: Sri S.R.Ashok^ Counsel for Respondent: Sri K.Neeraja for Sri K.K.Viswanatham. < GIST: > HEAD NOTE: ? Cases referred 1. 66 ITR 1592. 358 ITR 295 HON’BLE SRI JUSTICE L. NARASIMHA REDDYANDHON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No.49 OF 2003 JUDGMENT:-(Per Hon’ble Sri Justice L.Narasimha Reddy) This appeal is preferred by the Revenue against the order, dated 25.06.2002 passedby the Visakhapatnam Bench of the Income Tax Appellate Tribunal, in I.T.A.No.25/V/2002. The facts, in brief, are as under: The respondent is a manufacturer of electrical conductors of different categories. Anitem of conductor manufactured by it was supplied to a purchaser. Under the relevantagreement, 10% of the cost of the goods was to be paid only after final certification of theconductor after erection and charging. For the assessment year 1998-99, the respondent has shown the income ofRs.59,30,592/-. The Assessing Officer, however, added a sum of Rs.64,58,606/-,representing 10% of the cost of the conductor sold by the respondent. The reasons statedby the Assessing Officer was that though the said amount would be paid at a later stage,the respondent has acquired right to receive the same. The appeal preferred by the respondent before the Commissioner was rejected. Inthe further appeal being I.T.A.No.25/V/2002, the Tribunal has set aside the order passed bythe Assessing Officer in that behalf. Hence, this appeal. Heard Sri S.R. Ashok, learned Senior Counsel for the appellant, and Smt K.Neeraja, learned counsel for the respondent. The facts, that gave rise to the filing of the appeal, are not in dispute. The entirecontroversy turns around the question as to whether the respondent has acquired the rightto receive the balance of 10% of the consideration for the conductor supplied to itscustomer. The plea of the appellant is that the amount of 10% is nothing but part of theconsideration so much so, the sales tax was also paid for the entire consideration and, inthat view of the matter, it cannot be said that the amount representing 10% is not liable tobe taxed at this stage. The respondent, on the other hand, pleaded that it is only when the final certificationis given as to the goods, that amount becomes payable, and till then, it cannot be said thata right has accrued to receive that amount. There is no denial of the fact that the amount which the appellant sought to add tothe income of the respondent is part of the consideration for the conductor supplied by it. However, it was to be paid only on the certification as to the quality and specification of theconductor being found to be in order. That eventuality, admittedly, did not take place withinthat assessment year. The Tribunal has dealt with the matter extensively by referring to quite a largenumber of precedents on the subject. For example, in Seth Pushalal Mansinghka (P.) Ltd., v. Commissioner of Income-tax[[1]],the Supreme Court explained subtle itselfbetween the words ‘accrued’ and ‘arise’, on the one hand, and ‘actual receipt’, on the otherhand, in relation to profits of an assessee. It was explained in detail that an assessee canbe said to have received the income, only when corresponding right has accrued to him. Recently, in Commissioner of Income Tax vs. Excel Industries[[2]],the Supreme Courtadded a further dimension to the concept. It was held that an income accrues to anassessee not only when it is due to him, but also it is accompanied by a correspondingobligation on the part of the other party, to pay it. Ltd., v. Commissioner of Income-tax[[1]],the Supreme Court explained subtle itselfbetween the words ‘accrued’ and ‘arise’, on the one hand, and ‘actual receipt’, on the otherhand, in relation to profits of an assessee. It was explained in detail that an assessee canbe said to have received the income, only when corresponding right has accrued to him. Recently, in Commissioner of Income Tax vs. Excel Industries[[2]],the Supreme Courtadded a further dimension to the concept. It was held that an income accrues to anassessee not only when it is due to him, but also it is accompanied by a correspondingobligation on the part of the other party, to pay it. Thus, though an assessee may claim a particular amount as of right, it cannot betreated as his income, unless the corresponding obligation is either accepted by, orfastened upon, the other party; in accordance with law. On application of the said principleto the facts of the present case, it emerges that the respondent was no doubt entitled toreceive 10% of the consideration for the goods supplied by it. However, the correspondingobligation of the recipient of the goods would have arisen only when a certificate, to theeffect that the quality conform to the specifications. That event, admittedly did not takeplace, by the time the order of assessment was passed. We agree with the findingrecorded by the Tribunal and we do not find any basis to interfere with the order passed bythe Tribunal. The Appeal is accordingly dismissed. There shall be no order as to costs. Miscellaneous Petitions, if any pending in this appeal shall also stand disposed of. ___________________________ L. NARASIMHA REDDY, J Date:02.09.2014Note: L.R.copy B/o vv/gk ____________________________CHALLA KODANDA RAM, J HON’BLE SRI JUSTICE L. NARASIMHA REDDY vv/gk [1]66 ITR 159[2]358 ITR 295 ANDHON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No.49 OF 2003 Date:02.09.2014