{"id":167206,"date":"1998-12-18T00:00:00","date_gmt":"1998-12-17T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-bokaro-steel-limited-bokaro-on-18-december-1998"},"modified":"2015-02-14T20:50:01","modified_gmt":"2015-02-14T15:20:01","slug":"commissioner-of-income-tax-vs-bokaro-steel-limited-bokaro-on-18-december-1998","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-bokaro-steel-limited-bokaro-on-18-december-1998","title":{"rendered":"Commissioner Of Income-Tax … vs Bokaro Steel Limited, Bokaro on 18 December, 1998"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Commissioner Of Income-Tax … vs Bokaro Steel Limited, Bokaro on 18 December, 1998<\/div>\n
Author: M S Manohar<\/div>\n
Bench: Sujata V. Manohar, G.B.Pattanaik.<\/div>\n
           PETITIONER:\nCOMMISSIONER OF INCOME-TAX BIHAR-II, PATNA\n\n\tVs.\n\nRESPONDENT:\nBOKARO STEEL LIMITED, BOKARO\n\nDATE OF JUDGMENT:\t18\/12\/1998\n\nBENCH:\nSUJATA V. MANOHAR, & G.B.PATTANAIK.,\n\n\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
JUDGMENT\n<\/p>\n
——–\n<\/p>\n
Mrs. Sujata V. Manohar, J.\n<\/p>\n
————————-\n<\/p>\n
Civil  Appeal  Nos.  2544-45  of  1988\tpertain\t  to
\nassessment  year  1972-73  while Civil Appeal Nos. 642-48 of
\n1989 pertain to assessment years  1965-66  to  1971-72.\t The
\nIncome-tax  Appellate  Tribunal\t had  referred the following
\nquestions to the High Court for determination under  Section
\n256(1) of the Income-tax Act, 1961:-\n<\/p>\n
At the instance of the Revenue:\n<\/p>\n
——————————\n<\/p>\n
\t“Assessment year 1965-66:\n<\/p>\n
\t————————\n<\/p>\n
\tWhether,   on\tthe   facts   and   in\t the
\n\tcircumstances  of  the\tcase,\tthe   Tribunal\t was
\n\tjustified in law in holding that the hire charges of
\n\tRs.  56 received by the assessee-company for letting
\n\tout the plant and machinery to the contractors\twere
\n\tnot taxable?\n<\/p>\n
\tAssessment year 1966-67:\n<\/p>\n
\t———————–\n<\/p>\n
\t(1)   Whether, on the facts and in the circumstances
\n\tof  the\t case,\tthe Tribunal was justified in law in
\n\tholding that the hire charges of Rs. 7,224  received
\n\tby the assessee-company for letting out of the plant
\n\tand machinery to the contractors were not taxable?
\n\t(2) Whether, on the facts and in  the  circumstances
\n\tof  the\t case, the Tribunal was justified in holding
\n\tthat the royalty of Rs.\t 8,530\/- received  from\t the
\n\tcontractor  was\t not  taxable  as  it was of capital
\n\tnature and not revenue?\n<\/p>\n
\tAssessment year 1967-68:\n<\/p>\n
\t———————–\n<\/p>\n
\t(1) Whether, on the facts and in  the  circumstances
\n\tof  the\t case,\tthe Tribunal was justified in law in
\n\tholding that  the  hire\t charges  of  Rs.     12,195
\n\treceived  by the assessee-company for letting out of
\n\tcontractors were not taxable?\n<\/p>\n
\t(2)   Whether, on the facts and in the circumstances
\n\tof  the\t case, the Tribunal was justified in holding
\n\tthat the royalty of Rs.1,22,902\t received  from\t the
\n\tcontractors  was  not  taxable\tas it was capital in
\n\tnature and not revenue?\n<\/p>\n
\tAssessment year 1968-69:\n<\/p>\n
\t———————–\n<\/p>\n
\t(1) Whether, on the facts and in  the  circumstances
\n\tof  the\t case,\tthe Tribunal was justified in law in
\n\tholding that  the  hire\t charges  of  Rs.     17,913
\n\treceived  by the assessee-company for letting out of
\n\tthe plant and machinery to the contractors were\t not
\n\ttaxable?\n<\/p>\n
\t(2)   Whether, on the facts and in the circumstances
\n\tof the case, the Tribunal was justified\t in  holding
\n\tthat  the  royalty  of\tRs. 65,799 received from the
\n\tcontractor was not taxable as it was of\t capital  in
\n\tnature and not revenue?\n<\/p>\n
\tAssessment year 1969-70:\n<\/p>\n
\t———————–\n<\/p>\n
\t(1) Whether, on the facts and in  the  circumstances
\n\tof  the\t case,\tthe Tribunal was justified in law in
\n\tholding that  the  hire\t charges  amounting  to\t Rs.
\n\t46,342\treceived by the assessee-company for letting
\n\tout of the plant and machinery\tto  the\t contractors
\n\twere not taxable?\n<\/p>\n
\t(2)\tWhether,   on\tthe   facts   and   in\t the
\n\tcircumstances\tof   the   case,  the  Tribunal\t was
\n\tjustified in law in  holding  that  the\t royalty  of
\n\tRs.25,928  received  from  the\tcontractors  was not
\n\ttaxable as it was of capital nature and not revenue?
\n\tAssessment year 1970-71:\n<\/p>\n
\t———————–\n<\/p>\n
\t(1)  Whether,  on the facts and in the circumstances
\n\tof the case, the Tribunal was justified\t in  law  in
\n\tholding\t  that\t the   interest\t  received   by\t the
\n\tassessee-company  on  the  amount   of\t Rs.7,50,502
\n\tadvanced to the contractors was not taxable?
\n\t(2)\tWhether,   on\tthe   facts   and   in\t the
\n\tcircumstances\tof   the   case,  the  Tribunal\t was
\n\tjustified in law in holding that the hire charges of
\n\tRs.182 received by the assessee-company for  letting
\n\tout  the plant and machinery to the contractors were
\n\tnot taxable?\n<\/p>\n
\t(3) Whether, on the facts and in  the  circumstances
\n\tof  the\t case, the Tribunal was justified in holding
\n\tthat  the  royalty  of\t Rs.13,502   received\tfrom
\n\tcontractors  in\t not  taxable  as  it  is of capital
\n\tnature and not revenue?\n<\/p>\n
\t(4)\t Whether,  on\tthe   facts   and   in\t the
\n\tcircumstances\tof   the   case,  the  Tribunal\t was
\n\tjustified  in  law   in\t   holding  miscellaneous of
\n\tRs. 49 as not taxable?\n<\/p>\n
\tAssessment year 1971-72:\n<\/p>\n
\t———————–\n<\/p>\n
\t(1)\t Whether,  on\tthe   facts   and   in\t the
\n\tcircumstances\tof   the   case,  the  Tribunal\t was
\n\tjustified  in  law  in\tholding\t that  the  interest
\n\treceived  by  the  assessee-company on the amount of
\n\tRs.14,98,993 advanced  to  the\tcontractor  was\t not
\n\ttaxable?\n<\/p>\n
\t(2)  Whether,  on the facts and in the circumstances
\n\tof the case, the tribunal was justified\t in  law  in
\n\tholding\t  that\t the  hire  charges  of\t Rs.3,68,442
\n\treceived by the assessee-company for letting out the
\n\tplant and machinery  to\t the  contractors  were\t not
\n\ttaxable?\n<\/p>\n
\t(3)\t Whether,   on\t the   facts   and   in\t the
\n\tcircumstances  of  the\tcase,\tthe   Tribunal\t was
\n\tjustified  in  holding\tthat the royalty of Rs.6,504
\n\treceived from the contractors is not taxable  as  it
\n\tis capital in nature and not revenue?\n<\/p>\n
\t(4)\t  Whether,   on\t  the\tfacts\tand  in\t the
\n\tcircumstances  of  the\tcase,\tthe   Tribunal\t was
\n\tjustified  in  law  in\tholding\t that  the  interest
\n\treceived   amounting   to   Rs.7,39,332\t   by\t the
\n\tassessee-company  on  the  amount  advanced  to M\/s.
\n\tHindustan Steel Ltd. is not taxable?”\n<\/p>\n
For  the  assessment  year  1972-73  a\tconsolidated
\nreference was made at the instance of the revenue as well as
\nthe assessee and the following questions were referred:-
\n\t“(1)  Whether  on the facts and in the circumstances
\n\tof the case, the receipts arising from\tthe  letting
\n\tout  of\t the  quarters\tto  the\t outsiders,  such as
\n\temployees  of  the  contractors\t  engaged   in\t the
\n\tconstruction  of  the  plant  can  be treated as the
\n\tincome of the assessee and\/or, in any event,  should
\n\tbe  adjusted  against the cost of construction so as
\n\tto reduce such cost?\n<\/p>\n
\t(2)\t Whether   on\tthe   facts   and   in\t the
\n\tcircumstances  of  the\tcase,  the receipts from the
\n\tletting out of the properties to outsiders, such  as
\n\tthe  employees\tof  the\t contractors  engaged in the
\n\tconstruction of the plant  are\tto  be\tassessed  as
\n\tincome\t from  property\t under\tsection\t 22  of\t the
\n\tIncome-tax Act, 1961, or the said income  should  be
\n\tassessed  under\t section  28  of the Income-tax Act,
\n\t1961, as business income  or  in  any  event,  under
\n\tsection\t 56  of\t the Income-tax Act, 1961, as income
\n\tfrom other sources?\n<\/p>\n
\t(3) Whether on the facts and in the circumstances of
\n\tthe case, the receipts arising from the letting\t out
\n\tof  the quarters to the outsiders, such as employees
\n\tof the contractors engaged in  the  construction  of
\n\tthe  plant  can\t be  treated  as  the  income of the
\n\tassessee and\/or, in any event,\tshould\tbe  adjusted
\n\tagainst\t the  cost  of\tconstruction so as to reduce
\n\tsuch cost?\n<\/p>\n
\t(4) Whether on the facts and in the circumstances of
\n\tthe case, the interest received\t from  the  bank  on
\n\tshort-term  deposits is liable to be assessed as the
\n\tincome of  the\tassessee  or  such  interest  should
\n\treduce the cost of construction of the assessee and,
\n\ttherefore,  would  not\tconstitute the income of the
\n\tassessee?\n<\/p>\n
The  assessee  is  a corporation wholly owned by the
\nGovernment of India.  It was assessed in  the  status  of  a
\ncompany.   The\tassessee-company, M\/s Bokaro Steel Ltd., was
\nincorporated in January 1964.  Its object was  to  construct
\nand  own  an  integral\tiron  and  steel  works.  During the
\nassessment  years   under   consideration,   the   work\t  of
\nconstruction  of  the  company’s factory and installation of
\nthe plant was in the process of completion. The company\t had
\nnot  started  any  business  during  the assessment years in
\nquestion.\n<\/p>\n
(1)\tDuring this period the\tcompany\t had  given  to\t the
\ncontractors  quarters  for  the\t residence  of the staff and
\nworkers employed by the contractors who had been engaged  by
\nthe   assessee-respondent  for\tcarrying  out  the  work  of
\nconstruction. The assessee charged the contractors  for\t the
\nuse  of\t the  quarters\tso  given to the contractors for the
\nresidence  of  his  workmen  who   were\t  engaged   in\t the
\nconstruction activity of the assessee’s plant.
\n(2) Secondly, during the assessment years  in  question\t the
\nassessee  had entered into supplementary agreements with its
\ncontractors  under  which  the\tassessee  had  made  certain
\nadvances  to  the  contractors to enable them to execute the
\nlarge scale construction work smoothly.\t  The  assessee\t had
\nagreed\tto  advance  these  advances  to  the contractors on
\npayment of interest.  The contractors thus did not  have  to
\nraise funds    from    outside\t  agencies.\t   For\t the
\nassessee-company, this arrangement primarily  meant  payment
\nin  advance  of\t the  amounts  of the contractors’ bills for
\nwhich the asseessee-company  had  charged  interest.\tThis
\ninterest   was\tlater  adjusted\t against  the  dues  of\t the
\ncontractors.\n<\/p>\n
(3)   For the purpose of the construction work the  assessee
\nhad  given  on\thire  certain  plant  and  machinery  to the
\ncontractors. Against the letting of plant and machinery\t the
\nassessee received from the contractors income in the form of
\nhire   charges.\t  It   was   not   the\t business   of\t the
\nassessee-company to let out plant and machinery\t to  others.
\nThe  assessee-company  permitted  its  use  only  to its own
\ncontractors  for  the  construction   work   done   by\t the
\ncontractors for the assessee-company. The Tribunal has found
\nthat  the assessee-company charged hire charges for such use
\nof plant and machinery in order to cover the maintenance and
\nwear and tear of the plant and machinery  belonging  to\t the
\nassessee.\n<\/p>\n
(4) The assessee-company allowed the contractors to use\t the
\nstones\tlying  on the assessee’s land for construction work.
\nThe stones lying on the assessee’s company’s land  were\t the
\ncapital assets\t of  the  assessee-company.    The  assessee
\ncharged the contractor a certain amount by  way\t of  royalty
\nfor  excavation\t and  use  of  these stones for construction
\nwork.\n<\/p>\n
(5) The assessee had, during  the  assessment  year  1971-72
\nshown  in its accounts as income from interest a certain sum
\nsaid to have been accrued to the assessee from M\/s Hindustan
\nSteel  Limited\tfor  eight  locomotives\t supplied   by\t the
\nassessee-company to   M\/s  Hindustan  Steel  Limited.\t The
\nassessee-company, however, reversed this entry in  the\tnext
\nyear  because  eight  new  locomotives\twere supplied by M\/s
\nHindustan Steel Limited to  the\t assessee  and\tno  interest
\nincome actually accrued to the assessee.
\nWe  have to consider whether the amounts received by
\nthe assessee under these five heads can be treated as income
\nof the assessee for the\t relevant  assessment  years.\t The
\nTribunal  has  held that all these amounts (under items 1 to\n<\/p>\n
4) received by the assessee have gone to reduce the cost  of
\nconstruction.\tThese  are in the nature of capital receipts
\nwhich  can  be\tset  off  against  the\tcapital\t expenditure
\nincurred  by  the  assessee  during  the relevant assessment
\nyears.\tThis view has been upheld  by  the  High  Court\t and
\nhence the department has come by way of the present appeals.\n<\/p>\n
During\t    these      assessment     years,\t the
\nrespondent-assessee had invested the amounts borrowed by  it
\nfor   the  construction\t work  which  were  not\t immediately
\nrequired, in short-term deposits and earned  interest.\t  It
\nhas  been  held\t in  these  proceedings\t that the receipt of
\ninterest amounts  to  income  of  the  assessee\t from  other
\nsources.   The\tassessee  has not filed any appeal from this
\nfinding which is given\tagainst\t it.\tIn  any\t case,\tthis
\nquestion  is  now  concluded  by a decision of this Court in
\nTuticorin Alkali  Chemicals  and  Fertilizers\tLtd.\t  v.
\nCommissioner of Income-tax<\/a> ( [1997] 227 ITR 172).  Hence, we
\nare not called upon to examine that issue.
\nWe  will  take the first three heads under which the
\nassessee has received certain amounts.\tThese are, the\trent
\ncharged\t by  the  assessee  to\tits  contractors for housing
\nworkers\t and  staff  employed  by  the\tcontractor  for\t the
\nconstruction   work   of   the\tassessee  including  certain
\namenities granted to the staff by the assessee.\t   Secondly,
\nhire  charges for plant and machinery which was given to the
\ncontractors by the assessee for the purpose of\tfacilitating
\nthe work of construction.  The activities of the assessee in
\nconnection  with  all  these  three  receipts  are  directly
\nconnected with or are incidental to the work of construction
\nof its plant undertaken by the assessee.  Broadly  speaking,
\nthese  pertain to the arrangements made by the assessee with
\nits contractors pertaining to the work of construction.\t  To
\nfacilitate   the   work\t of  the  contractor,  the  assessee
\npermitted the contractor to use the premises of the assessee
\nfor  housing  its  staff  and\tworkers\t  engaged   in\t the
\nconstruction activity  of  the\tassessee’s  plant.  This was
\nclearly to facilitate the work of construction.\t   Had\tthis
\nfacility  not been provided by the assessee, the contractors
\nwould have had to make their own arrangements and this would
\nhave been reflected in the charges of  the  contractors\t for
\nthe construction  work.\t  Instead, the assessee had provided
\nthese facilities.  The same is true of the hire charges\t for
\nplant  and  machinery which was given by the assessee to the
\ncontractor for\tthe  assessee’s\t construction  work.\t The
\nreceipts  in  this  connection\talso  go  to  compensate the
\nassessee for the wear  and  tear  on  the  machinery.\t The
\nadvances  which\t the  assessee\tmade  to  the  contractor to
\nfacilitate the construction activity of putting\t together  a
\nvery  large  project  was as much to ensure that the work of
\nthe contractors proceeded without any financial\t hitches  as
\nto help\t the  contractors.  The arrangements which were made
\nbetween the assessee-company and the contractors  pertaining
\nto   these   three   receipts  are  arrangements  which\t are
\nintrinsically connected with the construction of  its  steel
\nplant.\t The receipts have been adjusted against the charges
\npayable to the contractors and have gone to reduce the\tcost
\nof construction.  They have, therefore, been rightly held as
\ncapital\t receipts  and\tnot  income of the assessee from any
\nindependent source.\n<\/p>\n
In the case of Addl.   Commissioner  of\t Income-tax,
\nNew Delhi V.  Indian Drugs and Pharmaceuticals ltd.  ([1983]
\n141  ITR  134), the Delhi High Court considered a case where
\nthe work of construction of the factory of the assessee\t was
\nin progress and production had not commenced.  receipts from
\nsale  of tender forms and supply of water and electricity to
\nthe contractors engaged in construction as also receipts  on
\naccount\t of  sale  of stones, boulders, grass and trees were
\nheld to be receipts not from independent  sources  but\twere
\nconsidered  as\tinextricably  linked  with  the\t process  of
\nsetting up of business.\t These were directly related to\t the
\ncapital structure of business and were held to be capital in
\nnature.\t  We  agree  with  this view taken by the Delhi High
\nCourt.\n<\/p>\n
The appellant, however, relied upon the decision  of
\nthis  Court  in\t Tuticorin  Alkali Chemicals and Fertilizers
\nLtd.  v.  Commissioner of Income-tax<\/a>  (supra).\t  That\tcase
\ndealt with the question whether investment of borrowed funds
\nprior  to  commencement of business, resulting in earning of
\ninterest by  the  assessee  would  amount  to  the  assessee
\nearning any  income.\tThis  Court  held  that\t if a person
\nborrows money for business purposes, but utilizes that money
\nto earn\t interest,  however  temporarily,  the\tinterest  so
\ngenerated will\tbe  his income.\t This income can be utilized
\nby the assessee whichever way he likes.\t Merely\t because  he
\nutilized  it  to re-pay the interest on the loan taken, will
\nnot make the interest income as\t a  capital  receipt.\t The
\ndepartment   relied  upon  the\tobservations  made  in\tthat
\njudgment (at page 179) to the effect that  it  the  company,
\neven  before it commences business, invests surplus funds in
\nits hands for purchase of land or house property  and  later
\nsells  it  at  profit,\tthe gain made by the company will be
\nassessable under the head “capital gains”.  Similarly, if  a
\ncompany purchases rented house and gets rent, such rent will
\nbe  assessable\tto tax under Section 22 as income from house
\nproperty.  Likewise, the company may have income from  other
\nsources.   The\tcompany\t may also, as in that case, keep the
\nsurplus funds  in  short-term  deposits\t in  order  to\tearn
\ninterest.  Such interest will be chargeable under Section 56
\nof the\tIncome-tax Act.\t This Court also emphasised the fact
\nthat the company was not bound to utilize  the\tinterest  so
\nearned\tto  adjust  it against the interest paid on borrowed
\ncapital.  The company was free to use  this  income  in\t any
\nmanner it   liked.     However,\t while\tinterest  earned  by
\ninvesting borrowed capital  in\tshort-term  deposits  is  an
\nindependent   source   of  income  not\tconnected  with\t the
\nconstruction  activities  or  business\tactivities  of\t the
\nassessee,  the same cannot be said in the present case where
\nthe utilisation of various assets of  the  company  and\t the
\npayments  received  for such utilisation are directly linked
\nwith the activity of setting  up  the  steel  plant  of\t the
\nassessee.   These  receipts are inextricably linked with the
\nsetting up of the capital structure of the assessee-company.
\nThey must, therefore, be viewed as capital receipts going to
\nreduce the cost of construction.  In the case of Challapalli
\nSugars Ltd.  v.\t Commissioner of Income-tax, A.P.<\/a>    ([1975]
\n98  ITR\t 167),\tthis  Court  examined  the  question whether
\ninterest paid before the commencement  of  production  by  a
\ncompany\t  on   amounts\tborrowed  for  the  acquisition\t and
\ninstallation of plant and machinery would form a part of the
\nactual cost of the asset to the assessee within the  meaning
\nof that expression in Section 10(5) of the Indian Income-tax
\nAct,  1922  and\t whether  the  assessee\t will be entitled to
\ndepreciation  allowances   and\t development   rebate\twith
\nreference to  such  interest  also.  The Court held that the
\naccepted accountancy rule for  determining  cost  off  fixed
\nassets is to include all expenditure necessary to bring such
\nassets\tinto existence and to put them in working condition.
\nIn case money is borrowed by a newly started  company  which
\nis  in\tthe  process of constructing and erecting its plant,
\nthe interest incurred before the commencement of  production
\nof  such  borrowed money can be capitalised and added to the
\ncost of the  fixed  assets  created  as\t a  result  of\tsuch
\nexpenditure.   By  the\tsame  reasoning if the assessee such
\nexpenditure.  By the same reasoning if the assessee receives
\nany amounts which are inextricably linked with\tthe  process
\nof setting up its plant and machinery, such receipts will go
\nto reduce  the\tcost of its assets.  These are receipts of a
\ncapital nature and cannot be taxed as income.
\nThe same reasoning would apply to  royalty  received
\nby the\tassessee  company for stone etc.  excavated from the
\nassessee company’s land.  The land had been  allowed  to  be
\nutilized  by  the  contractors for the purpose of excavating
\nstones to be used in the  construction\twork  of  assessee’s
\nsteel plant.\tThe  cost of the plant to the extent of such
\nroyalty received, is  reduced  for  the\t assessee.    It  is
\ntherefore, rightly taken as a capital receipt.
\nIn the assessment year\t1971-72,  the  assessee\t had
\nshown  in  its\tbooks  of accounts a sum of Rs.7,39,232\/- as
\nincome from interest received from  M\/s.    Hindustan  Steel
\nLtd.\tfor   the   eight   locomotives\t  supplied   by\t the
\nassessee-company to them.  The\tentry  in  this\t regard\t was
\nreversed in  the  next year since M\/s.\tHindustan Steel ltd.
\nhad   replaced\t the   eight   locomotives   lent   by\t the
\nassessee-company to  it\t by  new ones.\tThe entire nature of
\nthe transaction was changed between the parties.  There\t was
\na  resolution of the assessee-company in this regard and the
\nincome from interest did not result at all as  the  original
\nagreement ceased  to  be  operative ab initio.\tThe entry in
\nthe books which was made was  about  a\thypothetical  income
\nwhich  did not materialise and the entry was reversed in the
\nnext year.  Both the Tribunal as well as the High Court have
\nheld that  since  this\tentry  reflected  only\thypothetical
\nincome, it could not be brought to tax as income.  Only real
\nincome can be brought to tax.\n<\/p>\n
In support of this finding, the assessee  has  drawn
\nour  attention\tto  a  decision\t of  this  Court  in  Godhra
\nElectricity Co.\t Ltd.\t v.    Commissioner  of\t  Income-tax<\/a>
\n([1997]\t 225  ITR 746) where the Court, inter alia, examined
\nthe case system and the mercantile system of  accounting  in
\nthe context  of\t hypothetical  income.\t  The computation of
\nincome is made in accordance with the method  of  accounting
\nregularly employed  by\tthe  assessee.\tIt may be either the
\ncase system where entries are made on the  basis  of  actual
\nreceipts and actual outgoings or disbursements; or it may be
\nthe  mercantile\t system\t where\tentries\t are made on accrual
\nbasis, that is to say,\taccrual\t of  the  right\t to  receive
\npayment and the accrual of the liability to disburse or pay.
\nHowever,  in  both  cases unless there is real income, there
\ncannot be any income-tax.  Considering the facts before\t it,
\nthe  Court  said  that\talthough  the  assessee-company\t was
\nfollowing the mercantile system of accounting and  had\tmade
\nentries\t in  the  books\t regarding  enhanced charges for the
\nsupply of electricity made to its consumers, no real  income
\nhad  accrued  to  the  assessee-company\t in respect of those
\nenhanced charges in view of the fact  that  soon  after\t the
\nassessee-company decided to enhance the rate, representative
\nsuits  were filed by the consumers which were decreed by the
\ncourt and ultimately, after various proceedings\t which\ttook
\nplace,\tthe  assessee-company  was  not\t able to realise the
\nenhanced charges.  The Court held that no  real\t income\t had
\naccrued to assessee-company and hence the entries in respect
\nof  enhanced  charges did not reflect the real income of the
\nassessee and could not be brought to tax by  the  Income-tax
\nOfficer.\n<\/p>\n
In  the\t present  case\talso  the  entry  which\t was
\ninitially made\tas  interest  was  reversed  the  next\tyear
\nbecause\t in  fact  the nature of the transaction was changed
\nand the assessee did not receive any real income.  The\tHigh
\nCourt  has,  therefore,\t rightly  held\tthis  entry  as\t not
\nreflecting the real income of the  assessee  and  hence\t not
\nexigible to income-tax.\n<\/p>\n
In  the\t premise,  the\tappeals are dismissed. There
\nwill, however, be no order as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Commissioner Of Income-Tax … vs Bokaro Steel Limited, Bokaro on 18 December, 1998 Author: M S Manohar Bench: Sujata V. Manohar, G.B.Pattanaik. PETITIONER: COMMISSIONER OF INCOME-TAX BIHAR-II, PATNA Vs. RESPONDENT: BOKARO STEEL LIMITED, BOKARO DATE OF JUDGMENT: 18\/12\/1998 BENCH: SUJATA V. MANOHAR, & G.B.PATTANAIK., ACT: HEADNOTE: JUDGMENT: JUDGMENT ——– Mrs. Sujata […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-167206","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nCommissioner Of Income-Tax ... vs Bokaro Steel Limited, Bokaro on 18 December, 1998 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-bokaro-steel-limited-bokaro-on-18-december-1998\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Commissioner Of Income-Tax ... vs Bokaro Steel Limited, Bokaro on 18 December, 1998 - 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