JUDGMENT
V. K. SINGHAL J. – The Income-tax Appellate tribunal has referred the following question of law arising out of its order dated July 28, 1986, in respect of the assessment year 1981-82 under section 256(1) of the Income-tax Act, 1961 :
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in upholding the decision of the Commissioner of Income-tax (Appeals) deleting the sum of Rs. 9,90,000 from the income of the assessee ?”
The brief facts of the case are that the Income-tax Officer during the course of assessment proceedings found that as per the order of the Government, liquor shop of the assessee was required to be closed on Fridays and, accordingly, the shop remained closed on August 29, September 5, September 12, and September 19, 1980. The assessee worked out the licence fee at Rs. 1,84,000 and calculated profit at Rs. 18,400 and thereby claimed loss of Rs. 2,02,400 from the Excise Department. Similarly, the shops remained closed on January 9, and January 16, 1981, and the loss against the licence fee is said to be at Rs. 92,000 and profit thereon was of Rs. 9,200 as claimed by the assessee. In accordance with the order of the Government, the assessee was allowed to open the shops from 10 a.m. to 4 p.m. instead of 10 a.m. to 10 p.m. on August 18 and 20, 1980. As per separate order, shops were to be closed on certain dates from 10 a.m. to 7 p.m. Thus the total claim of loss against the above closure is of Rs. 4,09,200. The Income-tax Officer asked the assessee as to why the said amount be not treated as its income. It was submitted by the assessee that he has to go to the High Court/civil court against the loss so incurred. Since the books of account were maintained on the basis of the mercantile system, the said amount was treated as income of the assessee.
In an appeal before the Commissioner of Income-tax (Appeals), the additions was deleted. In second appeal before the Income-tax Appellate Tribunal, the matter was taken up by the Revenue and it was found that three civil suits were filed in the civil court at Agra and a writ petition was also filed in the High Court. The Income-tax Appellate Tribunal found that only compensation has been claimed by the assessee and the said claim has not been decided. If the claim was accepted by the Government, the assessee was prepared to pay tax thereon. In these circumstances, it was observed by the Tribunal that it is premature to say what will be the ultimate fate of the assessees claim and the entire claim could not be brought to tax within this year and the Department will be at liberty to bring it to tax as and when the assessee gets any further amount from the Government. We tried to find out and seek information as to what ultimately happened in the case, but no such information was given. The matter is still pending and only the claim has been rejected. The word “income” under the provision of section 4 of the Income-tax on which the charge has been created is in respect of the total income of the previous year. The word “total income” has been defined under section 2(45) which means the total amount of income referred to in section 5, computed in the manner laid down in the Income-tax Act. Section 5 provides that subject to the provisions of the Income-tax Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which (a) is received or is deemed to the received in India in such year by or on behalf of such person, or (b) accrues or arises or is deemed to accrue or arise to him in India during such year, or (c) accrues or arises to him outside India, during such year. On the basis of these provisions it has to be seen that the income must be received or deemed to be received or accrued or arisen or must be deemed to accrue or arise. This section refers to an ascertained amount which can be received or deemed to be received or accrued or deemed to be accrued. If the amount itself is not determined and only the claim has been made which is uncertain it cannot be said to have arisen. The apex court in the case of CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524 has held that it is only on the final determination of the amount of compensation that the right to claim income can be said to accrue or arise. The assessee had been fair to offer to tax such income which is determined and received by him. In these circumstances, we are of the opinion that the Income-tax Appellate Tribunal was justified in upholding the decision of the Commissioner of Income-tax (Appeals) deleting the sum of Rs. 9,90,000 from the income of the assessee. The Income-tax Officer may now find out the final figure within a period of three months from the date of receipt of the copy of this order and tax it in accordance with law.
Consequently, the reference is answered in favour of the assessee and against the revenue. No order as to costs.
