CIT Vs. MAHAVIR PLANTATIONS (P.) LTD.

JUDGEMENT

(1.) THE purported substantial questions of law raised in this appeal are as follows :

(2.) THE respondent which is an assessee under the Income Tax Act which also deals with in exports, had credited to its P&L a/c a sum of Rs. 5,37,909 representing the estimated amount of exchange difference on outstanding Sudan export bills. But, the respondent contended that the said amount did not represent any income received or accrued as on the date of the balance sheet and, therefore, the same should be excluded in the determination of income from its Cochin office. According to the respondent/assessee, the said amount had not accrued during the previous year which ended on 30 -6 -1981. The assessing officer rejected the contentions, finding that the respondent was entitled to receive the sale consideration in foreign exchange. When the prevailing exchange rate is taken into consideration, the assessee is entitled to receive Indian currency equivalent to the sale bills raised and the estimation difference is now credited to the export sales, it is found. The exchange difference, in view of the system of accounting (mercantile) being followed by the assessee was rightly taken credit. The Commissioner (Appeals) confirmed the disallowance. However, the Tribunal allowed the assessees appeal, holding that since realisation of the sale proceeds in foreign exchange depended on the repatriation of the funds, there is no accrued income in the hands of the assessee. The Revenue carried the matter in appeal before the High Court which remanded the matter back. The High Court took the view that the correct factual position relating to the entry made on 11 -6 -1981 has not been properly explained by the respondent/assessee or considered by the Tribunal. On remand, we notice the following line of argument taken by the assessee :

(3.) LEARNED senior counsel for the Revenue would contend that the approach of the Tribunal is clearly insupportable. Admittedly, the respondent/assessee was maintaining its accounts by following the mercantile or double entry system of accounting, which meant that income would be reflected on the basis of accrual and not receipt. In other words, it was not necessary that there should be actual receipt of income. In this case, admittedly the assessee has itself credited its accounts with the sum in question. Learned senior counsel would then pose the question as to how it is open to the assessee to turn round and question the said amount being exigible to tax. The following case law was canvassed before us :