ॐ असतो मा सद्गमय
The proper officer shall issue notice requiring him to show cause as to why the amount so collected as tax should not be paid by him to the Government and why a penalty equivalent to the amount specified in the notice should not be imposed on him under the provisions of the Act. The proper officer shall adjudicate the matter and issue order within one year from the date of issue of the show cause notice.
(ICAI FAQ PUBLICATIONS 06-09-2017 Tax collected but not paid to Government: FAQ NO. 32)
In Gemini Pictures Circuit (P.) Ltd. v. CIT [1981] 130 ITR 686/6 Taxman 42 (Mad.) it was held that onus is on the department to prove that land is non agricultural or that it forms part of business assets. Once the assessee proves that the land is raagricultul land the burden of proving that it is not agricultural land is on the revenue.
In case of Gordhanbhai Kahandas Dalwadi v. CIT [1981] 127 ITR 664 (Guj.), it was held that the correct test that has to be applied is whether on the date of sale the land was agricultural land or not. Just because after the sale the purchaser was going to put the land to non-agricultural use, it does not mean that the land had ceased to be agricultural land on the date of sale.
In case of CIT v. Borhat Tea Co. Ltd. [1982] 138 ITR 783/[1981] 7 Taxman 388 (Cal.), it was held that for the purpose of land being agricultural land, actual agricultural operations or cultivation or tilling of the land is not necessary. What is to be seen is whether such land is capable of agricultural operations being carried on.
In case of CIT v. Modhabhai H. Patel [1994] 208 ITR 638/77 Taxman 408 (Guj.), it was held that if a land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land, and if the owner of the land has not taken any step which would indicate his intention to exploit the land thereafter as non-agricultural land, then such a piece of land would have to be regarded as agricultural even though it was included within the municipal limits or it was sold on a per square yard basis and not acreage basis.
The purpose for which such a land is sold, though not relevant, will not have that much importance and weight as it would have in a case where the land has remained a spadatar or idle or is used for agricultural purposes only by way of a stop-gap arrangement.
Facts
Assessee , a closely held company in USA , entered into contract with Indian Companies. Contract could be executed partly only because contratee companies failed to pay the bils raised. The USA Company raised bill for work done and also for demobilization in winding up site operations. The bills were not offered for Income and assesse made a disclosure in this regard in his computation. AO made addition. CIT A deleted addition of bill for demobilization only saying that this bill was never accepted by contractee.
Held by ITAT Mumbai in Bechtel International Inc [2016] 71 taxmann.com 62 (Mumbai – Trib.)OCTOBER 30, 2015 that:
Supreme Court in the case of Excel industries Ltd had laid down three tests to determine when income can be said to have accrued :
| (a) | Whether the income is real or hypothetical; | |
| (b) | Whether there is a corresponding liability of the other party to pay the amount to the assessee; | |
| (c) | the probability or improbability of realisation of the income by the assessee has to be considered from a realistic and practical point of view. |
Thus, probability or improbability of realization of the income has to be considered from practical point of view.
Also drew support from Eicher Ltd. [2010] 320 ITR 410/[2009] 185 Taxman 243
Further ITAT Mumbai held that As per Accounting Standard (‘AS’) – 9 i.e. Revenue recognition, if there is uncertainty with regard to the collection of amount then recognition of said amount should be deferred in the books of account. The assessee being company has to follow these accounting standards while maintaining its books of accounts Further, the CBDT has recently issued a Notification dated 31st March 2015 notifying the Income Computation and Disclosure Standards (‘ICDS’) to be followed by all income-tax assessee following the mercantile system of accounting for the purposes of computation of income chargeable to tax under the heads “Profit and gains of business or profession” or “Income from other sources”. As per ICDS – III (revenue recognition in the case of construction contracts) and IV (revenue recognition in other case) also ultimate recovery of amount is important criteria for the amount to be held as accrued during the year. Thus, revenue itself has now recognized ultimate recovery as important principal for accrual of income.
However ITAT directed to tax the amount in the year of receipt.
Other References:
The inspector deputed by the assessing officer had full opportunity to make inquiry and the assessee should not suffer on account of a lapse on the part of the inspector. [Para 14 of the Judgement] Prahlad Bhattacharya [2016] 71 taxmann.com 63 (Calcutta) MARCH 4, 2016