SMT. VED AHUJA VS COMMISSIONER OF INCOME-TAX
1998 P T D 2188
[221 I T R 797]
[Punjab and Haryana High Court (India)]
Before Ashok Bhan and N. K. Sodhi, JJ
COMMISSIONER OF INCOME-TAX
versus
MANGAT RAM HAZARI LAL
Income-tax Reference No.20 of 1981, decided on 18/04/1996.
Income-tax---
----Income---Accrual of income---Accounting---Mercantile system of accounting- --Asses see running cold storage---Cold storage charges fixed by State Government ---Assessee increasing its charges because it had to install a generator---Writ petition filed to restrain State Government from enforcing its rates---High Court passing interim order directing deposit of excess collections in Cooperative Bank---Excess amounts had accrued to assessee-- Subsequent High Court decision allowing increase in charges---Excess amount assessable---Indian Income Tax Act, 1961.
The assessee owned a cold storage. It maintained its accounts on the mercantile system. A tariff which a cold storage owner can charge from the growers for keeping food items in his cold storage is fixed by the Government. The Government had fixed the tariff at Rs.10 per bag of 85 Kg. of potatoes. Following an acute shortage of power in the State of Punjab, cold storage owners decided upon installing their own generators. The assessee also installed his own generator. Like other cold storage owners, he raised the tariff charges from Rs.10 per bag of potatoes to Rs.15 per bag of potatoes. The Government by notification, dated May 12, 1976, permitted the cold storage owners to charge Rs.11.70 per bag from those who had already entered into transaction& with them while for new transactions they fixed Rs.10 per bag only. The cold storage owners approached the High Court for issuance of a writ for restraining the Government from enforcing the rates published in the notification, dated May 12, 1976. The High Court admitted the writ petition and permitted them to collect storage charges at Rs.13 per bag. The difference between the rates fixed by the Government vide notification , dated May 12, 1976, and the rates permitted by the High Court came to Rs.1.30 per bag. The High Court, as an interim measure, directed that the sum of Rs.1.30 per bag, representing the excess over the Government fate should be deposited in a Cooperative Bank at Kapurthala and pledged in the name of the Deputy Commissioner, Kapurthala, during the pendency of the writ petition. The excess amount realised by the assessee came to Rs.26,045, which he deposited in the Cooperative Bank at Kapurthala, pledged in favour of the Deputy Commissioner, Kapurthala. The assessee contended that this amount was not assessable but the Income-tax Officer did not accept it. The Tribunal held that the amount in question in the pledged state could not be treated as a trading receipt of the assessee, till the matter was decided by the High Court. On a reference:
Held, that the amount had been received by the assessee and he deposited the same in the Cooperative Bank at Kapurthala by way of guarantee and its pledge with the Deputy Commissioner, Kapurthala, did not mean that he was no longer the owner of the amount so deposited. The High Court had allowed charges at Rs.13 per bag (which had been realised by the assessee) and, therefore, on the principle of the mercantile system of accountancy, which the assessee was following, the said charges had accrued to it and, therefore, were liable to be included in the total income of the assessee. It had also come on record that the writ petitions had been accepted and decided in favour of the assessee and the extra charges which were deposited by way of Bank guarantee had been returned to the assessee. The excess charges received by the assessee, under the interim orders of the High Court, had accrued to the assessee in the year in question.
Nonsuch Tea Estate Ltd. v. CIT (1975) 98 ITR 189 (SC) ref.
R.P. Sawhney, Senior Advocate with Sanjay Goel for the Commissioner.
Nemo for the Assessee.
JUDGMENT
ASHOK BHAN, J.---The Income-tax Appellate Tribunal, Amritsar thereinafter referred to as "the Tribunal), at the instance of the Commissioner of Income-tax, Jullundur, has referred the following question of law for the opinion of this Court:
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has erred in law in deleting from the income of the assessment year 1976-77, the addition of Rs.26,045 made by the Income-tax Officer on account of potato storage charges actually received considering particularly the terms of the High Court's stay order?"
Briefly stated, the facts which are relevant to the point in issue are as under:
Respondent No.3 (hereinafter referred to as "the assessee") owns a cold storage. A tariff which a cold storage owner can charge from the growers for keeping the food items in his cold storage is fixed by the Government. The Government had fixed the tariff at Rs.10 per bag of 85 kgs. of potatoes. Following an acute shortage of power in the State of Punjab, cold storage owners decided upon installing their own generators. The assessee also installed his own generator. Like other cold storage owners, he raised the tariff charges from Rs.10 per bag of potatoes to Rs.15 per bag of potatoes. The Government by notification dated May 12, 1976; permitted the cold storage owners to charge Rs.11.70 per bag from those who had already entered into transactions with them while for the new transactions they fixed Rs.10 per bag only. The cold storage owners, by way of C.W.P. No.4111 of 1975, approached the High Court for issuance of a writ for restraining the Government from enforcing the rates published in the notification, dated May 12, 1976. The High Court admitted the writ petition and permitted them to collect the storage charges at Rs.13 per bag. The difference between the rates fixed by the Government vide notification, dated May 12, 1976, and the rates permitted by the High Court came to Rs.1.30 per bag. The High Court, as an interim measure, directed that the sum of Rs.1.30 per bag, representing the excess over the Government rate be deposited in a cooperative bank at Kapurthala and pledged the same in the name of the Deputy Commissioner, Kapurthala, during the pendency of the writ petition. The excess amount realised by the assessee came to Rs.26,045, which he deposited in the co-operative bank at Kapurthala, pledged in favour of the Deputy Commissioner, Kapurthala. The assessee contended that the fate of this amount could not be settled till the adjudication by the High Court and, therefore, the same could not be treated as an assessable trading receipt of the assessee for the year in issue. The Income-tax Officer did not agree with this and assessed the same as a trading receipt of the year in the hands of the assessee. The Commissioner of Income-tax confirmed the additions and dismissed the appeal filed by the assessee. The assessee carried a further appeal to the Tribunal, which was accepted and it was held that the amount in question in the pledged state could not be treated as a trading receipt of the assessee, till the matter was decided by the High Court. The Income-tax Officer was directed to exclude the sum of Rs.26,045 from the income of the assessee.
"The Commissioner of Income-tax filed an application under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for making a reference of the question reproduced in the earlier part of the judgment, for the opinion of the jurisdictional High Court, which has been referred.
Counsel for the parties have been heard.
The case of assessee is that the amount of Rs.26,045 was pledged with the Deputy Commissioner, Kapurthala, and the same could not be included in the total income of the assessee whereas the case of the Department is that the sum of Rs.26,045 had accrued and had actually been received by the assessee. The assessee was maintaining his accounts on the mercantile basis.
In C.W.P. No.4111 of 1975, the High Court passed the following interim order on August 6, 1975:
"The petitioners are, therefore, permitted to charge at the agreed rate subject to maximum of Rs.13 per bag of 85 kgs. (instead of Rs.10 per bag of 85 kgs. other terms remaining the same as contained in the impugned order), after furnishing the bank guarantee to the satisfaction of the District Magistrate, Jullundur, initially for a sum of Rs.10,000 in respect of the excess amount charges over that fixed by the impugned order. The Inspector appointed under the impugned order will be entitled to inspect the accounts of the petitioner every week and in case he finds that there is a shortfall in the bank guarantee, the petitioner shall have to make good the shortfall within three days thereafter by furnishing additional bank guarantee failing which the interim relief granted to the petitioner shall be entitled to began charging at the contractual rate subject to the above-mentioned maximum only after the initial bank guarantee of Rs.10,000 has been furnished by them."
A perusal of this order shows that the amount had been received by the assessee and he deposited the same in the cooperative bank at Kapurthala by way of guarantee and its pledge with the Deputy Commissioner, Kapurthala did not mean that he was no longer owner of the amount so deposited. The High Court had allowed charges at Rs.13 per bag (which had been realised by the assessee) and, therefore, on the principle of the mercantile system of accountancy, which the assessee was following, the said charges had accrued to it and, therefore, liable to be included in the total income of the assessee. After receiving the amount, the assessee pledged the. same with the Deputy Commissioner, Kapurthala, in terms of the interim order of the High Court. The interim order of the High Court was to ensure the recovery of the excess amount and its refund to the growers in case the writ failed. It has also come on the record that C.W.P. No.4111 of 1975 has been accepted and decided in favour of the assessee and the extra charges which were deposited by way of bank guarantee have been returned to the assessee. The excess charges received by the assessee, under the interim orders of the High Court had accrued to the assessee in the year in question. Reliance placed by the Tribunal on Nonsuch Tea Estate Ltd. v. CIT (1975) 98 ITR 189 (SC), to come to the conclusion that the amount had not accrued to the assessee is misplaced. In the said case, there was a bar under the Companies Act, 1956, against the appointment or re-appointment of a managing agent before approval of the Central Government was obtained. Since, the approval of the Central Government had not been received, it was held by their Lordships that the company's liability of pay the remuneration of the managing agents arose only when the Government conveyed its approval and not prior to that date. The facts of this case are totally different and the ratio of Nonsuch Tea Estate Ltd.'s case (1975) 98 ITR 189 (SC) would not be applicable to the facts of the present case. In the present case, excess amount had been received by the assessee under the interim orders of the High Court and to ensure its recovery, the same was ordered to be pledged with the Deputy Commissioner, Kapurthala, in the writ failed.
For the reasons stated above, we answer the question referred to us in the affirmative, in favour of the Department and against the assessee and hold that the Tribunal erred in law in deleting from the income of the assessment year 1976-77, the addition of Rs.26,045 made by the Income-tax Officer on account of potato storage charges, actually received by the assessee. No costs.
M.B.A./1327/FC Reference answered.