June 2014
Addl. CIT vs. Vinay Vasudeo Kulkarni Income-tax Appellate Tribunal Pune Bench “A”, Pune Before Shailendra Kumar Yadav (J.M.) and R. K. Panda (A. M.) ITA No. 2363 / PN / 2012 Asst. Year 2009-10 Decided on 29-04-2014 Counsel for Revenue/Assessee: P. L. Pathade/ Kishore Phadke
By Jagdish d. Shah, Jagdish T. Punjabi, Chartered Accountants
Reading Time 2 mins
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Section 145 – Income is taxable in the year when right to receive accrues.
Facts:
The assessee, an individual, was in business. His main business was that of commission agent /dealer for Daikin Air-conditioning India Pvt. Ltd. As per the practice followed – on receipt of the order for air-conditioner placed by the assessee, Daikin used to credit the commission to the account of assessee irrespective of the supply of goods and deduct tax at source. The assessee had shown such commission as “Contingent Income” under the group “Current Liabilities” in the Balance Sheet. The balance in the said account on 31-03-2009 was Rs. 32,72,500. However, the assessee was advised by Daikin to raise invoice for commission only after the installation of the air-conditioner and collection of money from the air-conditioner sold. The assessee received the payment only thereafter. The assessee, who was following the mercantile method of accounting, recognised the income in the year when invoice was raised. The AO treated the sum of Rs. 32.72 lakh as the income of the current year. On appeal, the CIT(A) allowed the appeal filed by the assessee.
Held:
The Tribunal observed that income accrues only when there is right to receive such income. It further observed that though the Schedule VI requires income accrued but not due as part of profit, for income tax purpose ‘income accrued but not due’ is a contradiction in terms, since what was not due could not have accrued. What is not due cannot be subjected to legal action to enforce recovery and hence, income in legal sense could not be treated as accrued, so as to require its inclusion in taxable income. The Tribunal relied on the decision of the Pune Tribunal in the case of Dana India Pvt. Ltd. (ITA No. 375 / PN / 09 dt. 09.02.2011). In the case of the assessee, the Tribunal noted that the work relating to erection and installation was completed in the subsequent years. Therefore, the income also accrued in the subsequent years. Relying on the decision of the Madras high court in the case of CIT vs. Lucas Indian Services Ltd. (315 ITR 273), the Tribunal dismissed the appeal of the revenue.
