MITSU INDUSTRIES LIMITED vs. ASSTT. COMMISSIONER OF INCOME TAX

Facts

The assessee, Mitsu Industries Limited, filed its return of income for assessment year 1996-97 declaring a total loss. The assessment was completed under Section 143(1)(a) of the Income Tax Act, 1961. During assessment proceedings, the assessee was questioned regarding the actual cost of a Wind Mill and the depreciation claimed. The Assessing Officer allowed depreciation on the Wind Mill. The assessee appealed to the CIT(A), which was partly allowed. The assessee then appealed to the Income-tax Appellate Tribunal (ITAT), which dismissed the appeal. The present appeal is filed by the assessee against the ITAT's order.

Held

The High Court allowed the appeal. It noted that the issue involved notional income from an advance licence benefit. The Court referred to the Supreme Court's decision in Commissioner of Income-tax v. Excel Industries Ltd. (358 ITR 295), which was stated to be squarely applicable. Based on this precedent, the Court concluded that the notional income was not taxable. The substantial question of law was answered in favour of the assessee and against the department. The operative direction was to allow the appeal.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in concluding that the alleged notional income from advance licence benefit receivable amounting to Rs. 2,02,54,522/- has accrued as taxable income for the assessment year under consideration? (Question of law). Assessee's contention: The income sought to be taxed was notional and arose without the assessee exercising the option of importing goods. The assessee relied on the Supreme Court decision in Commissioner of Income-tax v. Excel Industries Ltd., reported in 358 ITR 295. Revenue's contention: The judgment does not record any specific contentions made by the revenue.