RADHEY LAL MANNI LAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a case stated under section 66(1) of the Income-tax Act, 1922 (hereinafter referred to as the Act). The question referred is :

(2.) THE material facts are these : THE assessee is registered firm dealing in iron goods and also runs a steel rolling mill. THE relevant assessment year is 1957-58, the previous year being the year ended 3rd February 1957. During the relevant year, the assessee received a sum of Rs. 32,218 from the Government on an account of difference in the price of goods supplied by the assessee to permit-holders in the accounting periods relevant assessment year 1943-44 onwards. THE suppliers were made during the war years when the price of iron and steel goods were controlled and the assessee was obliged to sell his goods at prices fixed by the Iron and Steel Controller. However, it seems, the Iron and Steel Controller recognised that before the control orders came into force persons in the trade like assessee might have purchased raw materials at higher rates and by a letter dated February 27, 1943, all the members of the Steel Rolling Mills Association were assured of reimbursement to the extent of the difference between the actual price paid by re-rollers and price fixed by the Government for purchase of the raw materials. THE relevant portion of this letter reads :

(3.) IN the relevant assessment year, however, the assessee has thought fit to rake up the question on which it had accepted and acquiesced in the decisions with regard to 1950-51 and 1951-52. It was contended that the amount received in the assessment year 1957-58 was assessable on accrual basis during the war years when the goods were actually supplied. Reliance for this proposition was placed on the decision of the Madras High Court in A. Gajapathy Naidu v. Commissioner of INcome-tax. IN that case, it was held that where a receipt is correlated to and arises out of commercial transactions between the parties the receipt related back to the year of account when the transaction took place, irrespective of the year when the money was received. This was distinguished and the Tribunal further rejected the assessees contention holding that the amount could be taxed only in the year in which the compensation due to assessee was quantified, as before that date the assessee had no right to receive it. Hence, this reference at the instance of the assessee.