Commissioner of Income Tax-II vs Monarch Dyestuff Industries

K.S. Jhaveri, J.—This appeal u/s. 260A of the Income Tax Act, 1961 is filed against the judgment and order dated 30.05.2014 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in ITA No. 672/AHD/2010 whereby, the appeal of the assessee was allowed.

The facts in brief are that the assessee herein is engaged in the business of manufacturing, trading and export of chemicals. The return of income for the A.Y. 1995-96 was filed on 31.03.1997 declaring total income at ''Nil''. Assessment scrutiny was undertaken and thereafter, the Assessing Officer passed the order u/s. 143(3) dated 23.03.1998 assessing the total income at Rs. 26,16,174/-. Aggrieved by the said order, the assessee preferred appeal before the CIT(A), who, vide order dated 08.11.2000, partly allowed the appeal. The Revenue filed appeal against the decision of CIT(A) before the Appellate Tribunal. Vide judgment and order dated 05.01.2007, the Appellate Tribunal directed the A.O to decide the issue of deduction u/s. 80HHC in respect of Advance Licence afresh.

Pursuant to the aforesaid direction of the Appellate Tribunal, Notice was issued and served upon the assessee. Thereafter, the Assessing Officer passed the order u/s. 143(3) dated 26.12.2008. Aggrieved by the said order, the assessee filed appeal before the CIT(A). Vide order dated 15.10.2009, the CIT(A) dismissed the appeal of the assessee. Being aggrieved by the same, the assessee filed appeal before the Appellate Tribunal. Vide impugned judgment and order dated 30.05.2014, the Appellate Tribunal allowed the appeal of the assessee. It is against this order of the Appellate Tribunal that the Revenue has preferred the present appeal.

Heard Mr. M.R. Bhatt learned Senior Standing Counsel appearing for the Revenue. The Revenue has proposed to raise the following question as substantial question of law;

"Whether the Appellate Tribunal has substantially erred in deleting the addition made u/s. 28(iii)(c) on issue of advance licence based upon the fact that assessee had discontinued its business after 31.03.1995 even though in return of income for A.Y. 1996-97, assessee had claimed manufacturing expenses?"

While entertaining the appeal filed by the assessee, the Appellate Tribunal made the following observations in para-7 of its judgment;

"7. We have heard the rival submissions and perused the material on record. Before us the assessee has submitted that as per the accounting system followed by it, it had accounted for the incentive income of advance licence on hand for unused licence or licenses not received but for which application to the appropriate authorities were made. It was further submitted that the assessee had discontinued its manufacturing operations after 31.03.1995 and due to discontinuing of its operations, had surrendered the licences and no benefit has been derived out of sale of advance licence or by importing materials. The aforesaid submissions have not been controverted by Revenue. The Hon''ble Supreme Court in the case of CIT v. Excel Industries [(2013) 86 CCH 86] has held as under;

"It was found that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income was not hypothetical and it had really accrued to the assessee. In so far as the present case was concerned, even if it was assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods were actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialize and its money value is therefore not the income of the assessee. Applying the three tests laid down by various decisions of court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realization of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it was quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) would be inapplicable to the facts and circumstances of the case."

Considering the facts of the case and the decision of the Apex Court in the case of Excel Industries (supra), on which the Appellate Tribunal has based its judgment, we are of the opinion that no illegality or impropriety has been committed by the Appellate Tribunal while passing the impugned judgment. There is nothing on record to show that the decision of the Appellate Tribunal is based on wrong interpretation of facts or law and therefore, in our view, no substantial question of law arises in this appeal for our consideration afresh. Accordingly, the appeal is dismissed at admission stage itself.