Case: Commissioner Of Income Tax Vs. United Provinces Electric Supply Co

of the Undertaking. A sum of Rs. 60,000- was paid to the assessee in that regard on June 3, 1959. There was a dispute about the valuation of the assets acquired and ultimately by Memorandum dated November 18, 1963, the assets were revalued at Rs. 2,02,781-, but finally its valuation was determined in the accounting year 1966-67, i.e. between April 1, 1965 and October 26, 1965. In the light of that fact Court arrived at the conclusion that on the determination of the amount, the balancing charge would be includable in the assessment year 1966-67. In CIT v. The Central Indian Electric Supply Co. Ltd., 1993(114) CTR (MO) 160, the Undertaking was taken over by the M.P. Electricity Board. The assessee was entitled to the market value of its undertaking taken over or purchased under the Act. The assessee for the accounting year in question, i.e. 1970-71 submitted a return showing its income as nil, although along with the return it had enclosed a balance-sheet showing therein the written down value of its assets acquired by the Board as also the compensation actually received by it from the Board. Revenue contended that the amount had become due for payment only when the decree in terms of the award was passed by the District Judge and the same having been passed in the relevant year, it was the case of income accruing to the assessee and could be brought to tax in the assessment year in question. The Court held that in the two expressions "payable" and "due" there is difference only of degree and time. The money is payable immediately on the date of acquisition or sale under the Act, but it becomes due for payment at some future date, if there is a dispute about the price. In the event of dispute about the price, quantification of the price is done only through the award of the arbitrator. The Court thereafter observed :- "....the price due for payment to the assessee on the date of the passing of the decree was taxable in the relevant succeeding assessment year to the financial year, in which the decree was passed even though the amount under the decree may not have been actually paid or received by the assessee. In the scheme of IT Act, the taxable event is on "accrual of income" and not on actual receipt thereof. Pendency of litigation in respect of an amount or price due has no relevancy so far as the taxability of such accrued income is concerned. The likelihood of the income being reduced in the subsequent assessment year as a result of the litigation may give rise to resort to other remedies available in the Act for rectification and refund of the tax, but on that ground it cannot be held that no income had accrued to the assessee for the relevant assessment year. We find great support for our decision from the decision of the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd. v. CWT, 1966(59) ITR 767 SC. As for the wealth-tax so also th e income-tax. The liability to pay income-tax arise in the relevant financial year on accrual of income in that year and if the income is ascertainable and quantified, it can be brought to tax in the relevant assessment year." 18. We agree with the observation of Madhya Pradesh High Court that Pendency of litigation in respect of an amount or price due has no relevancy so far as the taxability of such accrued income is concerned. The likelihood of the income being reduced in the subsequent assessment year as a result of the litigation may give rise to resort to other remedies available in the Act for rectification and refund of the tax, but on that ground it cannot be held that no income had accrued to the assessee for the relevant assessment year. 19. In CIT v. National Electric Supply and Trading Corporation Ltd., 1996(222) ITR 60, Delhi, the Government purchased the Undertaking on February 20, 1949 and the compensation was paid in the year 1949-50 and 1951-52. The Undertaking demanded additional compensation. The matter was compromised and the additional amount was paid on October 29, 1968. Applying the decisions in Okara Electric Supply Co. Ltd and P.C. Gulati (supra), the Court held that the year of inclusion of the balancing charge would be when the moneys payable became due and the moneys payable could be held to have become due only when the same was ascertained. 20. From all the aforesaid cases dealt with by the High Courts, it is apparent that it was the contention of the asessee that the balancing charge is to be taxed in the year in which the undertaking is taken over. As against the revenue contended that when the compensation amount is determined the balancing charge is to be taxed. In the present case, the amount of compensation is determined and is paid. As there is dispute with regard to the determination of the market price, the matter is referred to the arbitrator. Presuming that it is ad hoc payment in the sense that final compensation is not determined by the arbitrator or appellant authority still the payment is towards purchase price. Section 41(2) nowhere provides that such balancing charge would be taxable in which "moneys payable" are determined `finally by the Arbitrators or the Appellate authority or such other authority provided under the Acquisition Act. Further, it is not the case of the assessee that pending final determination of the purchase price he has not accepted the said amount. Pendency of litigation for getting additional amount in respect of `moneys payable has no relevancy so far as the taxability of accrual of income - compensation received - is concerned. Hence, in case where compensation amount and its receipt is admitted, which is business profit under Section 41(2), it is to be taxed in the previous year of its receipt. 21. In the result, appeal

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]In our view, in the present appeal, we are only concerned with the limited question which was referred to the High Court, whetheron the facts andes of the case and oninterpretation of the provisions of the Indian Electricity Act, 1910, the provisions of Section 41(2) of the Act are applicable to the receipts of the amount by the assessee towards the compensation payable to him ? Therefore, additional question raised by the learned counsel for the appellant which depends upon facts, is not required to be dealt with or decided in this appeal. We also make it clear that we have not considered the effect of Section 7-A of the Indian Electricity Act, 1910 as amended by the U.P. Act 14 of 1976 as the said question was not there before the High Court. Further, we would make it clear that it would be open to the assessee to raise these contentions before the competentall the aforesaid cases dealt with by the High Courts, it is apparent that it was the contention of the asessee that the balancing charge is to be taxed in the year in which the undertaking is taken over. As against the revenue contended that when the compensation amount is determined the balancing charge is to be taxed. In the present case, the amount of compensation is determined and is paid. As there is dispute with regard to the determination of the market price, the matter is referred to the arbitrator. Presuming that it is ad hocnse that final compensation is not determined by the arbitrator or appellant authority still the payment is towards purchase price. Section 41(2) nowhere provides that such balancing charge would be taxable in which "moneys payable" are determined `finally by the Arbitrators or the Appellate authority or such other authority provided under the Acquisition Act. Further, it is not the case of the assessee that pending final determination of the purchase price he has not accepted the said amount. Pendency of litigation for getting additional amount in respect of `moneys payable has no relevancy so far as the taxability of accrual of income - compensation received - is concerned. Hence, in case where compensation amount and its receipt is admitted, which is business profit under Section 41(2), it is to be taxed in the previous year of its receipt.