High Court Of Delhi
CIT vs. Vijay Fertilizers (P) Ltd.
Asst. Year 1989-90
Arijit Pasayat, C.J. & D.K. Jain, J.
IT Appeal No. 31 of 2000
13th July, 2000
R.D. Jolly with Ms. Prem Lata Bansal, for the Appellant : None, for the Respondent
ARIJIT PASAYAT, C.J. :
This appeal under s. 260A of the IT Act, 1961 (for short âthe Actâ), is in respect of order dt. 7th June, 1999, passed by the Income-tax Appellate Tribunal, Delhi Bench-D (for short âthe Tribunalâ), in ITA No. 5264/Del/1991 for the asst. yr. 1989-90. Dispute relates to the question whether subsidies shown as receivable for the months of February and March, 1989, were correctly reflected. The AO during the course of assessment found that the assessee had shown subsidy receipts at Rs. 96,14,044 which was inclusive of Rs. 8,34,765 receivable for the months of February and March, 1989. He noticed that subsequent to the closure of the accounting period ending on 31st March ,1989, on 5th April, 1989, assessee had submitted a supplementary bill for an amount of Rs. 8,43,765 on account of subsidy for the month of February, 1989, and on 7th April, 1989, another bill for Rs. 4,11,705 for the month of March, 1989. AO concluded that there was an attempt to conceal the amount of subsidy receivable for the month of March to the extent of Rs. 4,11,075. It was also noticed by the AO that the assessee had received a sum of Rs. 6,39,946 as subsidy on account of revised rates in respect of assessment year in question and, therefore, an addition of Rs. 10,51,021 was made to the total income of the assessee. Being aggrieved by the aforesaid order, assessee filed an appeal before the Commissioner of Income-tax (Appeal) [in short the CIT(A)] who reduced the addition in respect of Rs. 4,11,075 to Rs. 2,93,651 observing that subsidy for the months of February and March, 1989 at the old rate (Rs. 788 for MT) came to Rs. 11,28,416 against which assessee had declared a subsidy of Rs. 8,34,768 and the difference comes to Rs. 2,93,651 only. Addition of Rs. 6,39,946 was fully deleted by the CIT(A) by observing that the Notification dt. 28th March, 1989, revising the subsidy, came to the knowledge of the assessee only in the first week of April, 1989, and was received on 5th May, 1989. Before the Tribunal, Revenue contended that the relief granted to the assessee was uncalled for. Tribunal dismissed the same holding that no interference was called for.
It was observed that assessee was carrying on the business of manufacture of single superphosphate and received subsidy from the Government of India. Prices of fertilizers are fixed from time to time. In order to claim subsidy, assessee raised bills on the basis of rates notified by the Fertilizer Industries Coordination Committee (in short FICC) and got the subsidy. Bills were raised usually in the first week of the next month on the basis of actual quantity produced and moved to the warehouses. FICC revises subsidy rates from time to time by issuing notifications. On the basis of such notifications indicating revised rates, subsidy is claimed at revised rates. As revision is effected from a particular date prior to the year of notification, subsidy received on the basis of revised rates is accounted for in the year of receipt and is assessed to tax. In support of the appeal learned counsel for the Revenue submitted that the assessee knew of the revised rates and, therefore, immediately after the closure of the accounting period submitted revised bills. What it ought to have done is to give the actual figure as receivable and that having not been done, the AO was justified in his conclusion about the concealment of income and understatement of subsidy receivable. We find that both the CIT(A) and the Tribunal noticed that the Notification dt. 28th March, 1989, was received by the assessee in the first week of April, 1989, and, therefore, arrears were subsequently received. Amounts received on the basis of revised rates have to be assessed only in the subsequent year i.e., 1990-91. In fact it is accepted by learned counsel for Revenue that such amounts were included in the income of the subsequent period and has been assessed also. It is to be noted that the assessee followed mercantile system of accounting during the relevant assessment year. There is no dispute that assessee indicated figures of subsidy receivable at the old rate. The Notification dt. 28th March, 1989, as observed by the CIT(A) and the Tribunal, came to the knowledge of the assessee in the first week of April, 1989, whereafter the revised claims were made. Since inception of business, assessee is following mercantile system of accounting. In the past also amounts received as arrears of subsidy at the revised rates were being included in the income of the year of receipt and assessments were completed accordingly. That being the position, the CIT(A) and the Tribunal were justified in their conclusions about the non-sustainability of the addition made by the AO. No question of law, much less substantial question of law, is involved to warrant our interference.
The appeal stands dismissed accordingly.
[Citation : 246 ITR 541]