Punjab & Haryana H.C : The duty draw back accrues in the year in which rate is fixed by the competent authority, after verification of the claim of the assessee to be in order and the amount is quantified and not in the year of export even if the assessee keeps its account on mercantile basis

High Court Of Punjab & Haryana

CIT, Patiala vs. Sriyansh Knitters (P.) Ltd.

Assessment Year : 1987-88

Section : 5

Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.

ITC No. 184 Of 1994

October 11, 2010

ORDER

Adarsh Kumar Goel, J. – This application has been filed under section 256(1) of the Income-tax Act, 1961 (for short, ‘the Act’) for directing Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh to refer following questions of law for opinion of this Court, arising out of its order dated 6-7-1993 in ITA No. 69/Chandi/89 for the assessment year 1987-88.

“(i) Whether on the facts and in the circumstances of the case, the ITAT was justified in law in holding that the duty draw back accrues in the year in which rate is fixed by the competent authority, after verification of the claim of the assessee to be in order and the amount is quantified and not in the year of export even if the assessee keeps its account on mercantile basis?

(ii) Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that no disallowance on account of personal use of cars by the Directors of the company could be made in the case of company when section 38(2) of the Income-tax Act, 1961 provides for such disallowance?”

2. The assessee derives income from manufacturing and exporting of hosiery goods. It received export incentive in the form of duty draw back which is taxable income. The Assessing Officer made addition in the year of export on the ground that income accrued in that year while stand of the assessee was that without the amount being verified and quantified by the competent authority, the income could not be held to have accrued. Plea of the assessee was accepted by the CIT(A) as also by the Tribunal. Reasons given by the Tribunal for accepting the plea of the assessee are:-

“The mere export of goods does not entitle an exporter to receive the draw back though that is certainly the starting point. There may, however, be a slip between the cup and the lip the draw back actually accrues when the duty draw back rate is fixed by the competent authority and the assessee’s claim after examination has been found in order. Since the quantification of the assessee claim and its verification did not fall in the year under consideration, the learned CIT(A) was justified’ in deleting the addition of Rs. 4,75,351.”

3. We have heard learned counsel for the revenue.

4. As regards question (i), view taken by the Tribunal cannot be held to be erroneous. The Tribunal, after examining the scheme for export incentive, found that before quantification based on verification, no income could be held to have accrued to the assessee. There is nothing to dispute this factual aspect. In such a situation, the Tribunal rightly held that no income accrued till claim of the assessee was quantified and verified. We, thus, do not find it necessary to give direction to the Tribunal to refer the said question for opinion of this Court.

5. As regards second question, learned counsel for the revenue fairly states that the amount involved is only Rs. 15,000 and in view of smallness of the amount involved, there is no justification for directing reference of the said question.

6. Accordingly, this application is dismissed.

[Citation : 336 ITR 235]

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