COMMISSIONER OF INCOME TAX Vs. PIONEER ENGINEERING SYNDICATE

JUDGEMENT

(1.) IN pursuance of the order passed by this court dated March 3, 1981, in T.C.P. Nos. 24 and 25 of 1980, the Tribunal referred the following two questions for the assessment years 1974-75 and 1975-76 for the opinion of this court under section 256(2) of the INcome-tax Act, 1961 :

(2.) FOR the assessment year 1974-75, the assessee filed a return claiming loss of Rs. 22,371 under the head "Business" without taking into consideration the depreciation and development rate and disclosing income of Rs. 36,368 under the head "Other sources". In doing so, the assessee had credited in the profit and loss account Rs. 4,67,885 being the amount due from the Government of Andhra Pradesh in respect of Godawari Barrage Project Works and Rs. 51,844 being the amount due from the Government of Andhra Pradesh in respect of Musi Bridge Works. The Income-tax Officer passed an order dated February 16, 1976, determining the total loss as Rs. 23,02,323. Before the Appellate Assistant Commissioner in appeal the assessee contended that Rs. 4,67,885 which had been credited in the profit and loss account as the amount due from the Government of Andhra Pradesh in respect of Godawari Barrage Works had not accrued since there was a dispute between the assessee and the Government. A similar contention was taken in respect of the sum of Rs. 51,844 credited to the profit and loss account as the amount due from the Government of Andhra Pradesh in respect of the Musi Bridge Works. The Appellate Assistant Commissioner accepted the second contention. Regarding the first contention he held that Rs. 3,50,964 out of Rs. 4,67,885 could not be said to have been accrued to the assessee during the relevant accounting year and that it could be considered if at all only for the assessment year 1975-76. Regarding the balance of Rs. 1,16,921, the Appellate Assistant Commissioner held that it was only a claim against the Government of Andhra Pradesh and since it was not accepted by the latter, it cannot be said to have been accrued to the assessee. The Appellate Assistant Commissioner directed deletion of both the amounts.

(3.) BEFORE us, learned standing counsel for the Department submitted that inasmuch as the assessee had done its work and made a claim for payment of the above said sums, it would be deemed to have accrued to the assessee in the assessment years under consideration. Therefore, the Tribunal was not correct in stating that these amounts were not relating to the assessment years under consideration. According to learned standing counsel, inasmuch as the assessee followed the mercantile system of accounting, soon after the work done by the assessee, the assessee is entitled to receive the amount for the work done. Therefore, it would be deemed to have accrued to the assessee, in the assessment years under consideration. For these reasons it was stated that the Tribunal was not correct in deleting the amounts accrued to the assessee in both the assessment years under consideration.