CIT v. Excel Industries Ltd.

INCOME TAX ACT, 1961

--Business income--Year of assessabilityDEPB on export of goods--Assessee-company was maintaining its account on mercantile system of accounting. Assessee claimed certain sums under the head advance licence benefit receivable. Assessee also claimed deduction in respect of duty entitlement pass book benefit (DEPB). According to assessee, the amount were excluded from its total income since they could not be said to be have accrued until imports were made and the raw-material consumed. AO did not accept assessee's claim. CIT(A) and Tribunal allowed assessee's claim. More over, High Court did not accept revenue's appeal under section 260A. Held: Rightly so. It is quite clear that, in fact, no real income but only hypothetical income had accrued to assessee and section 28(iv) would not be applicable to the facts and circumstances of the case. Essentially, AO is required to be pregmatic and not pedantic. As the benefits under advance receivable and DEPB would be charged in the year of import of raw-material.