C I T JAIPUR vs. THE RAJ SMALL INDUSTRIES COR L
What did the High Court hold?
The High Court held that the Tribunal had rightly appreciated the evidence and allowed the appeal preferred by the assessee. The Court found that the assessee, being a Government Corporation, had shown a liability despite a stay order granted by the Court. The High Court opined that the view taken by the Tribunal was just and proper. Consequently, the issues were answered in favour of the assessee and against the Department. The Court did not expressly leave any issue undecided. The operative direction was that the appeals were dismissed.
What were the facts?
The appeals before the High Court were filed by the Commissioner of Income Tax, Jaipur, against the orders of the Income Tax Appellate Tribunal (ITAT). The ITAT had allowed appeals preferred by the assessee, The Rajasthan Small Industries Corporation Ltd., reversing the judgments and orders of the CIT and Assessing Officer. The dispute pertains to assessment years not explicitly stated in the judgment. The core of the dispute involves whether certain income, specifically demurrage/wharfage charges and rental income, had accrued to the assessee. The assessee followed the mercantile system of accounting. The Department challenged the ITAT's findings, arguing that the income had accrued and should be assessed in the relevant years.
What were the issues?
The High Court framed the following questions for determination: 1. (DB Income Tax Appeal No.37/2000) Whether the Income Tax Appellate Tribunal was justified in concluding that income disputed by importers had not accrued to the assessee, despite a Rajasthan High Court decision favoring the assessee? 2. (DB Income Tax Appeal No.37/2000 & DB Income Tax Appeal No.35/2000) Whether, on proper appreciation of the Customs Act and import procedures, demurrage/wharfage charges could be said to have not accrued to the assessee, given the mercantile system of accounting, an existing right to receive charges, and billing for the same? 3. (DB Income Tax Appeal No.37/2000) Whether the Income Tax Appellate Tribunal was justified in deleting rental income accounted for in the assessee's books, where the premises were used by a tenant, and the assessee maintained accounts on a mercantile basis? Assessee's contentions: The assessee supported the ITAT's order, arguing that a contingency was kept in case of failure, leading to a huge liability in the relevant year, but after that, it became their income. Revenue's contentions: The revenue contended that the assessee had not followed the correct procedure. They argued that the Supreme Court held it was the assessee's income and, under the mercantile system, income under the relevant year was accruable. Reliance was placed on Commissioner of Income-Tax, Jaipur Vs. Vijay Laxmi Trading Co. Ltd., 147 ITR 372, and Income Tax Vs. Woodward Governor India P. Ltd., (2009) 312 ITR 254 (SC), asserting that the system of accounting followed by the assessee is binding, and central income in the assessee's account should be assessed in the relevant year.
Which sections of the Income-tax Act were involved?
Not explicitly mentioned
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT ---------
By way of these appeals, the Department has assailed the judgment and order of the Tribunal whereby the Tribunal has allowed the appeals preferred by the assessee and reversed the judgment and order of the CIT and Assessing Officer.
While admitting the appeals, this Court framed the following questions: Appeal No.37/2000 (i) Whether the Income Tax Appellate Tribunal was justified in coming to the conclusion that apart of the income which was disputed by the importers had not accrued to the assessee in spite of the fact that the decision of the Rajasthan High Court was in favour of the assessee? (ii) Whether on the proper appreciation of the provisions of the Customs Act, import procedure etc. it could be said that the demurrage/wharfage charges had not accrued to the assessee particularly when the assessee followed mercantile system of accounting and there was existing right in favour of the assessee to receive the charges and the assessee accordingly billed for the same? (iii) Whether the Income Tax Appellate Tribunal was justified in deleting the rental income which was accounted for in the books of account of the assessee and the premises were -2- actually used by the tenant particularly when the assessee maintained account on mercantile basis? Appeal No.35/2000 (i) Whether on the proper appreciation of the provisions of the Customs Act, import procedure, etc. it could be said that the demurrage/wharfage charges had not accrued to the assessee particularly when the assessee followed mercantile system of accounting and there was existing right in favour of the assessee to receive the charges and the assessee accordingly billed for the same?”
Counsel for the appellant Mr. Mathur contended that the assessee has not followed the correct procedure. The Supreme Court has held that it was their income and income under the relevant year was on mercantile system. Learned counsel for the petitioner has tried to rely upon the decision of this Court and also decision of the Supreme Court. Firstly, Commissioner of Income-Tax, -3-
We have heard Mr. Mathur and Mr. Ranka.
Taking into consideration the evidence on record, we are of the opinion that the Tribunal while considering the issue has rightly appreciated and has rightly allowed
the appeal preferred by the assessee. Assessee was a Government Corporation and has shown the liability in spite of stay order granted by the Court and in our view, the view taken by the Tribunal is just and proper. The issues are required to be answered in favour of the assessee and against the Department. The appeals are accordingly dismissed. A copy of this judgment be placed in the connected appeal. (Mahendra Maheshwari),J. (K.S. Jhaveri),J. BM Gandhi/ 2,3 BM Gandhi/ 2,3
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