Punjab & Haryana H.C : Whether the right to receive IPRS accrued on the date of export, i.e., March 22, 1993, in the year relevant to the assessment year 1993-94

High Court Of Punjab & Haryana

CIT vs. Manav Tools (India) (P.) Ltd

Assessment Year : 1993-94

Section : 5

Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.

IT Appeal No. 206 Of 2003

November 23, 2010

JUDGMENT

Ajay Kumar Mittal, J.- This appeal under section 260A of the Income-tax Act, 1961 (for short “the Act'”) has been filed by the Revenue against the order dated August 2, 2002, passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar, (in short “the Tribunal”) in I. T. A. Nos. 1200/Chandi/95 and 1543/Chandi/95 relating to the assessment year 1993-94.

2. The Revenue has claimed the following substantial question of law for determination by this court :

“Whether the right to receive IPRS accrued on the date of export, i.e., March 22, 1993, in the year relevant to the assessment year 1993-94?”

3. The facts necessary for adjudication, as narrated in the appeal are that the assessee filed its return for the assessment year 1993-94, declaring net income at Rs. nil. The assessee claimed unabsorbed investment allowances of Rs. 50,454 and Rs. 37,971 for the past assessment years 1989-90 and 1990-91 respectively. The return was processed under section 143(1)(a) of the Act. Assessment was framed, vide order dated March 30, 1994, at an income of Rs. 5,46,412 and, while doing so, the Assessing Officer made the following additions :

(i) addition of Rs. 2,35,554 on account of commission paid to M/s. Uni Tools (India) Pvt. Ltd.

(ii) addition of Rs. 6,47,261 on account of IPRS on accrual basis as the assessee became entitled to receive the IPRS incentive on the date of export itself which was March 22, 1993 relating to the assessment year 1993-94 though the claim was received in the assessment year 1994-95.

4. The Commissioner of Income-tax (Appeals) (hereinafter referred to as “the CIT(A)”) in the appeal carried by the assessee, vide order dated July 19, 2005, upheld the disallowance of commission but deleted the addition of Rs. 6,47,261 on account of IPRS observing that the assessee did not file claim to receive IPRS in the assessment year 1993-94 before the Appropriate Authority for obtaining such incentive and the claim having been filed and finalized in the financial year 1993-94, the IPRS incentive accrued in the assessment year 1994-95 and not in 1993-94.

5. The order passed by the Commissioner of Income-tax (Appeals) was challenged by both the sides, i.e., the Revenue and the assessee, before the Tribunal, by preferring separate appeals. The appeals of both the sides were dismissed by the Tribunal, vide order dated August 2, 2002. This is how the Revenue has preferred the instant appeal.

6. We have heard learned counsel for the parties and perused the record.

7. The Revenue has raised an issue with regard to taxability of IPRS relating to the assessment year 1993-94. Counsel for the Revenue argued that the IPRS accrued on the date of export, i.e., March 22, 1993, and therefore, the same was exigible to income-tax relating to the assessment year 1993-94.

8. We are unable to accept the aforesaid submission of the Revenue. The issue regarding accrual of income from export incentive came up for consideration before this court in I. T. C. No. 184 of 1994 decided on October 11, 2010 (CIT v. Sriyansh Knitters P. Ltd. [2011] 336 ITR 235 (P&H)) wherein it was held that no income accrued till the claim of the assessee was quantified and verified. Admittedly, in the present case, the assessee had submitted the claim for IPRS and received it during the next assessment year, i.e., the assessment year 1994-95 and, therefore, the same could not be held to be taxable in the current assessment year. The findings recorded by the Tribunal while upholding the claim of the assessee deserve to be noticed here, which are as under :

“We have heard both the parties and given our thoughtful consideration to the rival submissions. We have also examined the facts, evidence and material on record. From the facts discussed above, it is obvious that the assessee had exported the goods towards the fag end of the accounting year under reference, i.e., on March 22, 1993. It is not in dispute that the assessee had made the claim in the next accounting year and IPRS received in the next accounting year were duly reflected in the assessment year 1994-95. It is also a fact that the assessee had been following the mercantile system of accounting. The question that requires to be considered is–whether the assessee becomes entitled to IPRS automatically without making such claim to the Government or it is subject to finalization and approval of the Government ? As discussed above, IPRS is allowed by the Government on account of the price difference between the international and Indian price of raw material consumed in the manufacture of goods, which have been exported. There does not appear to be any automatic formula to determine the difference between the price prevailing in the international market and the price of raw material prevailing in the country. It is also not the case that reimbursement of IPRS was being made at a fixed percentage of the exports. Thus the very nature of the scheme is such which requires scrutiny and examination by the Government for determination of the price difference. Until and unless the claim is submitted to the Government and is scrutinized and approved by the Government it cannot be said that the assessee has acquired the right to receive such income. Moreover, the exports were made at the fag end of the accounting year, i.e., about 8 days before the close of the accounting year. Therefore, it does not appear that the assessee delayed submission of its claim for IPRS with an intention to defer its income to the next assessment year. Therefore, the amount which was neither quantified nor accrued or finalized by the Government in the assessment year under reference could not be considered to have accrued to the assessee in the assessment year under reference. We have also referred to the two judgments relied upon by the learned Departmental representative for the Revenue. In the case of Anglo French Textiles [1993] 199 ITR 785 (Mad), the issue before the High Court was whether income by way of import entitlements for the export carried out in Pondichery accrued to the assessee in Pondichery, which was then governed by French laws or the income accrued in India. Since the assessee was carrying on its entire business in Pondichery, even the exports were made from Pondichery and the amounts were received in Pondichery, it was held that the import entitlements also accrued to the assessee in Pondichery. Thus, the facts of the case are totally distinguishable from the facts of the present case. As regards the judgment of the Bombay High Court in the case of CIT v. Pink Star [2000] 245 ITR 757 (Bom) the issue before the High Court related to the amounts of Rs. 15,47,005 received by the assessee on the unutilised import licence. In that case the assessee had already exported goods. As per the scheme of the Government the assessee had already exported goods. As per the scheme of the Government the assessee was entitled to cash equivalent to 8 per cent. of the unutilised import licence. Thus in that case the percentage of the amounts to be received in respect of the unutilised amount of import licence, was determined at a fixed rate. This is not the case here. The assessee is not entitled to IPRS at a fixed percentage of the exports value of goods. It was still to be examined and determined by the Government. Therefore, the ratio of the judgment of the Bombay High Court is also not applicable to the facts of the present case. Having regard to the facts and circumstances of the case, we are of the considered opinion that the order of the Commissioner of Income-tax (Appeals) does not merit any interference. Accordingly, the same is upheld and this ground of appeal is dismissed.”

9. No perversity or illegality could be pointed out in the aforesaid finding, which may warrant interference by this court. Accordingly, there is no merit in the appeal and the same is dismissed.

[Citation : 336 ITR 237]

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