The Punjab and Haryana High Court has held that date of submission of claim would be recognized under income tax on accrual of cash incentive.
It was submitted that cash incentive was allowed by the Government of India according to a duly formulated scheme announced before hand and, therefore, it accrued no sooner the assessee affected the necessary exports and the procedure for claiming that cash incentive merely related to the quantification of amount payable.
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A notice issued on the respondent, Punjab Bone Mills had been served and no one appeared. The Commissioner of Income Tax, referred by the Income Tax Appellate Tribunal (ITAT), before the Court relating to question No.1 alone.
The ITAT while deciding the case of the assessee respondent for the assessment year 1978-79, vide its order. The ITO has dealt with the issue in the para marked ‘B’ of his assessment order. According to him, the assessee had accounted for the cash incentive on receipt basis even though it was following mercantile system of accounts and by so doing had short disclosed an amount of Rs. 240,083/- as part of its income of the assessment year 1978-79. After referring to certain authorities, he held that as the assessee itself had been following the mercantile system of accounting in respect of the cash incentive an addition of Rs. 240,080/- was being made to the income returned by the assessee.
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The assessee challenged the decision of the ITO before the CIT (Appeals). It was contended by the assessee before him that it had not changed the system of accounting from the mercantile system to cash, system but the dispute was to which of the cash, system but the dispute was as to which of the cash incentive received could be said to accrue or arise within the accounting period ended on 31.3.1978 relevant to the assessment year 1978-79. However, the CIT (Appeals) dealt with the issue in the particular fashion and ultimately upheld the action of the ITO.
It was submitted that cash incentive was allowed by the Government of India according to a duly formulated scheme announced before hand and, therefore, it accrued no sooner the assessee affected the necessary exports and the procedure for claiming that cash incentive merely related to the quantification of amount payable.
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A division bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth observed that while on facts, it would be for the concerned officer to examine as to what are the cash incentives allowed in each quarter, held that it is on the date of submission of claim that the accrual of cash incentive would be recognized and not from the date of submission or receipt of cash incentive.
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