COMMISSIONER OF INCOME TAX DEL vs. SARVATRA ROADRUNNERS P.LTD.

Whether the Reporters of local papers may be allowed to see the judgment?

To be referred to Reporter or not?

Whether the judgment should be reported in the Digest?

The Assessee had entered into two agreements with M/s South Eastern Coalfields Ltd. (SECL) for transportation of coal. Certain disputes arose between the Assessee and SECL with the result that the agreements were terminated and disputes referred for arbitration. In terms of the arbitration Award, the Assessee was to receive a sum of Rs.6,57,31,517/-. Objections appear to have been filed to the Award but they were rejected by the Court of competent jurisdiction on 26th July, 1996. Thereafter, SECL challenged the Award before the Madhya Pradesh High Court at Jabalpur. While admitting the appeal filed by SECL, the Madhya Pradesh High Court passed the following orders on 14th October, 1996 and 13th December, 1996. The order dated 14th

Pursuant to the aforesaid orders, the Assessee received a sum of Rs.3,28,65,728/- being 50% of the awarded amount. This amount was shown under the head current liabilities and provisions pending the decision of the Madhya Pradesh High

The return filed by the Assessee was processed under Section 143(1)(a) of the Income Tax Act, 1961 (the Act) and accepted. Subsequently, the assessment was reopened under Section 148 of the Act on the ground that there was reason to believe that the amount received by the Assessee as a result of the interim orders passed by the Madhya Pradesh High Court had escaped assessment.

The Assessee naturally contested the case before the Assessing Officer but its objections were overruled and an assessment order was passed treating the amount of Rs.3,28,65,728/- as the Assessee’s income liable to tax.

On appeal, the Commissioner of Income Tax (Appeals) [CIT (A)] came to the conclusion that in the event SECL succeeded in its plea before the Madhya Pradesh High Court, the Assessee would be obliged to return the amount received by it

The Revenue preferred an appeal before the Income Tax Appellate Tribunal but the view taken by CIT (A) was approved by the Tribunal and that is how the Revenue is in appeal before us.

On a reading of the interim orders passed by the Madhya Pradesh High Court on 14th October, 1996 and 13th December, 1996, it is quite clear that the Assessee had no right to receive the money in the sense that no right had accrued or vested in the Assessee in this regard. In the event SECL succeeded in the appeal filed by it, the Assessee was obliged to return the amount by way of restitution under Section 144 of the Code of Civil

A somewhat similar situation had arisen in Hindustan Housing. In that case, the lands belonging to the assessee were requisitioned and then acquired by the State Government. The issue of compensation was required to be adjudicated by the Calcutta High Court as a result of an appeal preferred by the State Government. Pending the appeal, the State Government deposited some amounts payable under the Award made under the provisions of the Requisition of Land (Continuance of Powers) Act, 1951. The assessee was permitted by the High Court to withdraw the amount on furnishing a security and the assessee did withdraw the amount and credited it in its suspense account. The question that arose before the Supreme Court was whether the Revenue could claim that the amount payable to the assessee as compensation could be said to have accrued to it as income during the relevant previous year. While answering this in the negative and accepting the contention of the assessee, it was held that the assessee had no absolute right to receive the amount

Learned counsel for the Revenue, however, relied upon K.C.P. Limited v. Commissioner of Income Tax, [2000] 245 ITR 421. We, however, find that the decision relied upon is quite inapposite. In K.C.P. Limited, the levy price of sugar was fixed at Rs.120.30 per quintal and this was challenged by the assessee in the High Court of Andhra Pradesh. The assessee was then permitted by the High Court, by an interim order, to sell sugar at the rate prevailing prior to the notification fixing the levy price of sugar with the result that the assessee was able to sell the sugar at Rs.131.01 per quintal plus excise duty until further orders.

The Andhra Pradesh High Court had not cast any liability on the assessee to refund the amount to the purchasers of sugar from whom the excess amount was realized in the event the writ petition filed by the assessee was dismissed. As luck would have it, the writ petition filed by the assessee was in fact

The amount realized by the assessee as a result of the interim order passed by the High Court was treated by the Assessing Officer as a trading receipt and even though the CIT

Quite clearly, the facts in K.C.P. Limited are not at all applicable to the facts of the present case inasmuch as there was no requirement of the assessee therein to refund the amount to anybody either in law or as a result of any order passed by the

In view of the above, we are of the opinion that both the CIT (A) as well as the Tribunal were correct in law in deleting the addition of Rs.3,28,65,728/- made by the Assessing Officer.

No substantial question of law arises for consideration. The appeal is dismissed.