Soumitra Pal, J. - (1.) THE appeal was admitted on the following substantial questions of law: - - "1. Whether the Tribunal was justified in deleting the addition of Rs. 63,37,320/ - on the plea of deferred receipt instead of treating the same as accrued receipt when admittedly the assessee is following Mercantile system of accounting and the receipt should have been on accrual basis?
(2.) WHETHER the Tribunal erred in deleting the said amount by misinterpreting two agreements and the condition contained therein although the agreement in question is an arranged mutual agreement dated 05.09.1988 which cannot take away the nature of accrued receipt of fees in the hands of the assessee and therefore the decision of the Tribunal is perverse? Whether the order of the Tribunal is at all sustainable in view of the subsequent events or activities of the assessee inasmuch as the assessee stopped filing of return from the assessment year 1992 -93 as per the records of the Assessing Officer which proved the assessee is not inclined to pay due taxes on the accrued receipts rather to evade - Considering the gravity and importance of the present appeal, we requested Mr. J.P. Khaitan, learned Senior Advocate to act as amicus curiae to assist the Court, which he did willingly and admirably. 2. This income tax appeal relates to the income tax assessments of the assessee for the assessment years 1989 -90, 1990 -91 and 1991 -92. The assessee, a company, follows the mercantile system of accounting. Since trade mark and marketing assistance fee of Rs. 63,37,320 ('fee' for short) payable by M/s. Telelink Nicco Ltd. (for short 'Telelink Nicco') to the assessee accrued in the financial year 1990 -91, the assessment year 1991 -92 is relevant. The Assessing Officer found that the assessee did not credit the fee. Explanation was as the original agreement between the assessee and Nicco Telelink for payment of fee payable by Telelink Nicco got modified by an agreement, the income did not accrue during the financial year 1990 -91, that is in the assessment year 1991 -92. However as fee was receivable from Telelink Nicco, the Assessment Officer treated the income as accrued and added it to the income of the assessee. Aggrieved, appeal was preferred before the CIT(A). The assessee succeeded. The revenue, being aggrieved, preferred appeal before the Income Tax Appellate Tribunal. The Tribunal found that the assessee, a co -promoter of Telelink Nicco and M/s. Nicco Orissa Ltd., had guaranteed loan from financial institutions apart from investing money by way of share capital and loan. In view of financial difficulties of the two companies, the payment of loan and interest payable to the financial institutions were delayed. On being approached for reschedulement of loan and interest, necessary conditions were imposed by the financial institutions for deferment of fee payable to the assessee. The Tribunal found that as the assessee had agreed to deferment of fee, the original agreement got modified which were ratified by a resolution of the Board. Since modification of the agreement rendered the amount as not due and as the genuineness of the modifications were not in doubt and was not an afterthought, the Tribunal held that for the assessment year 1991 -92 nothing had accrued to the assessee for the purpose of taxation. 3. Mr. S.N. Dutta, learned advocate for the appellant submits that there is no dispute that the fees were receivable from Telelink Nicco a sister concern of the assessee. The said company was promoted by the assessee. Since the income had accrued, deferment cannot take it out of the ambit of the definition of 'income'. As the assessee did not give up the income, the Tribunal erred in holding that the income did not accrue.
(3.) MR . J.P. Khaitan, learned amicus curiae has pointed out that the real dispute hinged around the issue whether the income had really accrued or not. The facts surrounding the deferment of income has to be examined. If deferment means postponing the income itself, as deferment was made prior to the close of the assessment year 1991 -92 and parties agreed not to pay, therefore, it does not come within the ambit of the term 'income'. In support of his submission he has relied on the following judgments: - CIT v. Birla Gwalior (P.) Ltd. : [1973] 89 ITR 266 (SC), CIT v. Excel Industries Ltd. : [2013] 358 ITR 295/38 taxmann.com 100/219 Taxman 379 (SC), CIT v. Simplex Concrete Piles India (P.) Ltd. : [l989] 179 ITR 8/45 Taxman 370 (Cal.) and CIT v. Shree Export House Ltd. : [1992] 194 ITR 695/61 Taxman 152 (Cal).;