- (1.) The appeal is directed against a judgment and order dated April 6, 1999, by which the learned Tribunal allowed the appeal preferred by the assessee on the basis of following reasons: 4. We have considered the submissions of the learned representative and have perused the orders of the authorities below and also the earlier orders of the Tribunal dated June 12, 1997, and November 29, 1997. On a perusal of the earlier orders of the Tribunal, we observe that the Tribunal took into consideration the scheme regarding credit for excise and held that the right to receive the credit accrued only when there was a liability under the Excise Act and unless the liability under the Excise Act accrued on the production of specified goods, in which the inputs were used and other relevant conditions were fulfilled, the benefit by way of credit does not accrue to the assessee and, further, if there was and that too to the extent of the amount of liability and the balance amount of the accumulated credit would either to be carried over or would lapse. The pro forma credit available to the assessee operated in the filed quantification of liability by way of deduction and it had nothing to do with the character of income. We find that the issue in both the appeals is squarely covered with the order of the Tribunal in the assessee's own case in I.T. A, BI, 1466/Cal/1996 of the assessment year 1992-93 dated June 12, 1997, respectively, such following the said order of the Tribunal dated June 12, 1997, the issue is decided in favour of the assessee in both the assessment years. Accordingly, the appeals of the assessee are allowed. Aggrieved by the order of the learned Tribunal, the Revenue came up in appeal which was admitted by the order dated January 9, 2009. The following question of law was formulated: Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that 'excise credit' received by the assessee-company and credited in the profit and loss account does not form part of the income to be assessed?
(2.) The learned Tribunal evidently has passed the impugned order on the basis of the view taken earlier in its judgment dated June 12, 1997, and November 29, 1997. A copy of the judgment dated June 12, 1997, though not included in the paper book has been handed over to us by Mr. Khaitan, learned senior advocate appearing for the assessee-respondent. The issue was discussed by the learned Tribunal in some detail. The reasoning advanced by the Tribunal as to why is the credit entry not taxable, inter alia, are as follows: It appears to us that the right to receive the credit rebate accrued only when there is liability under the Excise Act. Unless the liability under the Excise Act accrues on the production of specified goods in which inputs are used and other relevant conditions are fulfilled by the assessee the benefit by way of credit does not accrue to the assessee. If there is liability it will get adjusted against the pro forma rebate to the extent of the liability. Thus, the right to realise the rebate is dependent upon the accrual of liability, like the right of rebate under section 88 of the Income-tax Act. One can say that grant of rebate is so integral part that it operates in the field of calculation and quantification of the liability and, therefore, the right becomes contingent and operates in the field of deductions rather than in the field of income. The entry passed by the assessee in the books of account is superfluous. On reading the various other notes and the financial data stated in the audited accounts it appears to us that the entry was passed in the account only for the purpose of window-dressing. On seeing the statement of the accrual and utilisation of the rebate the opinion we are expressing gets strength. In the financial year 1986-87, when the scheme was introduced the credit accrued to the assessee was Rs. 88 lakhs plus and the credit availed of during that year was Rs. 48 lakhs plus and the balance amount of Rs. 40 lakhs plus was carried over to the next year and so on and we find that as on March 31, 1996, the accumulated credit unavailed of and unutilised by the assessee was to the tune of 15 crores plus and the credit lapsed since notification was rescinded in 1996. Had there been increased liability of excise in earlier years on specified goods, such lapse of the unutilised rebate could not have resulted. The credit of such pro forma rebate taken in the accounts is only illusory and no income in reality is accrued. For the purpose of the Income-tax Act, a mere accounting entry cannot be income unless income has actually resulted. Income-tax is a tax on income and, therefore, a hypothetical income is not an income for the purpose of levy of tax. This was held by the Supreme Court in the case of CIT v. Shoorji Vallabhdas and Co., 1962 46 ITR 144 (SC). Again, it was held by the Gujarat High Court in the case of CIT v. Western India Engg. Co., 1971 81 ITR 712 (Guj) that while, under the mercantile system of accounting the accrual of an amount to the assessee would justify a credit entry in the books the converse is not true and mere posting of an entry would not always be conclusive evidence on the question of accrual. It would be worthwhile to see what the Supreme Court in : in the case of Delhi Stock Exchange Association Ltd. v. CIT, 1961 41 ITR 495(SC) had to say. The judgment laid down that the treatment given to a transaction by an assessee in the books of account or his profit and loss account is not decisive of the nature of the transaction. In : in the case of K.S. Narayanaswami Iyer v. CIT, 1956 29 ITR 515(Mad) it was held that accountancy cannot set at naught the general principles concerning the computation of profit which belonged to the substantive law. It is incorrect in this case to say that neither the assessee nor the auditors disputed that the rebate credited was an income as is observed by the tax authorities. In fact in the computation of income itself they have disputed the taxability of the credit which is treated as income for the purpose of accounts.
(3.) The learned Tribunal has, after going into the facts and in the circumstances of the case, held that the credit of such pro forma rebate taken into account is illusory and no real income had accrued. This was a finding of fact which has not been challenged by the Revenue in the sense that the finding is perverse nor is the finding of the learned Tribunal was demonstrated by Mr. Dutta, learned advocate for the appellant to be erroneous either in fact or in law. Mr. Dutta drew our attention to a judgment in the case of Sahney Steel and Press Works Ltd. v. CIT, 1997 228 ITR 253(SC). He drew our attention to the following paragraph from page 4 (page 260): In the instant case, the first proposition of Viscount Simon clearly applies. The amount paid to the assessee in the instant case is in the nature of subsidy from public funds. The funds were made available to the assessee to assist it in carrying on its trade or business. In our view, having regard to the scheme of the notification, there can be little doubt that the object of various assistance under the subsidy scheme was to enable the assessee to run the business more profitably.;