JUDGEMENT
G. Krishnamurthy, President -
(1.)AS these Departmental appeals filed for the assessment years 1975-76, 1976-77 and 1980-81 give rise to common issues, they were heard together and for the sake of convenience, are being disposed of by this common order.
(2.)These appeals came up for hearing before Bench '"C". The learned Members noted that the question involved was whether royalty income was assessable on cash basis as claimed by the assessee or on Mercantile basis as assessed by the assessing officer. The Appellate Tribunal vide its order dated 16-11-1978 in I.T.A. Nos. 590 and 591 (Del.)/1977-78 in the assessee's case for the assessment years 1975-76 and 1976-77 restored the appeals to the Appellate Assistant Commissioner for deciding the matter afresh after looking into the balance-sheet of the assessee and after allowing the Income-tax Officer to examine the books of account produced before him. After remand of the case, the C.I.T. (Appeals) held that the assessments for the assessment years 1975-76 and 1976-77 should have been on receipt basis. For the assessment year 1980-81 the Income-tax Officer again assessed royalty income on accrual basis and the C.I.T. (Appeals) held that the assessments should have been made on receipt basis. However, for the assessment years 1977-78 and 1978-79 Delhi Bench "E" of the Appellate Tribunal held vide its order dated 26-5-1984 in I.T.A. Nos. 1594 and 1595 (DEL)/1983 that the said income has to be assessed on accrual basis. The learned Members in view of the conflicting views of different Benches of the Tribunal in the assessee's own case, referred the matter to the President for constituting a Special Bench for resolving the controversy whether in the instant case royalty income is assessable on cash basis as claimed by the assessee or on mercantile basis as is the case of the Department. Thereafter, the President constituted a Special Bench and that is how the matter is before us.
In all these appeals the common ground raised by the Department is as follows: -
On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals) erred in directing the assessing officer to assess the royalty income on receipt basis as against accrual basis adopted by the assessing Officer at the time of assessment.
(3.)THE assessee is a non-resident German company. It entered into a collaboration agreement with an Indian company namely, M/s. Reinz Talbros (P) Ltd. THE assessee-company derived income in India from royalty and dividend from the said Indian company. THE assessee's claim is that its royalty income is assessable on cash basis. For the assessment year 1975-76 the assessee declared nil income from royalty and in the assessment year 1976-77 it declared royalty income at Rs. 1,04,986. Returns for both these years were filed on cash basis. THE Income-tax Officer, however, took the royalty income at Rs. 1,76,168 for the assessment year 1975-76 on accrual basis and for the assessment year 1976-77 he assessed royalty income on both accrual and cash basis. For this assessment year besides the royalty income of Rs. 1,04,986 returned by the assessee, the Income-tax Officer subjected to tax a sum of Rs. 1,75,138 as royalty income on accrual basis.
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