DCIT, New Delhi V. M/s National Fertilizers Limited, New Delhi

ITA 2149/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3594 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 08-07-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RA J TANDON
• Keywords: Recovery proceedings; Depreciation; Bad and doubtful debts
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T. A. NO.2149/DEL/2009 ASSESSMENT YEAR : 2005-06 DY. COMMISSIONER OF INCOME-TAX, M/S. NATIONAL FERTI LIZERS LTD., CIRCLE-13(1), NEW DELHI. VS. CORE-III, SCOPE COMPL EX, 7, INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI. PAN: AAACNO189N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJ TANDON, CIT(DR). RESPONDENT BY: SH. VED JAIN & MS. RANO JAIN, CA. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 4. 03.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) PE RTAINING TO THE ASSESSMENT YEAR 2005-06. 2. GROUND NO.1 IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW & FACTS IN DELETING THE ADDITION O F INTEREST ACCRUED ON ADVANCES GIVEN TO M/S. KARSAN AMOUNTING TO RS.6,64,71,000/- AS AFTER THE RECEIPT OF FINAL AWAR D BY DUTCH HIGH COURT IN THE F.Y. 2003-04 IN FAVOUR OF THE ASS ESSEE, THE INTEREST WAS ACCRUED ON ADVANCES GIVEN TO M/S. KARS AN AND THE SAME WAS TO BE OFFERED FOR TAXATION IN THE YEAR UND ER CONSIDERATION. 2 3. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 31.10.2005 DECLARING TOTAL INCOME OF RS.210,44,82,910/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SEC. 143(2) WAS ISSUED ON 7.08.2006 AND DULY SERVED ON THE ASSESSEE. IN COMPLIANCE TO THE STATU TORY NOTICE ISSUED BY THE AO, THE ASSESSEES AUTHORIZED REPRESENTATIVE AND TH E PERSON FROM THE FINANCE DEPARTMENT OF THE ASSESSEE COMPANY HAD APPE ARED BEFORE THE AO AND FILED VARIOUS DETAILS OR INFORMATION OR EVIDENC ES AS CALLED FOR FROM TIME TO TIME. 4. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF NITROGENOUS FERTILIZERS AND OTHER RE LATED INDUSTRIAL PRODUCTS. DURING THE ASSESSMENT PROCEEDINGS, THE AO PERUSED A NOTE NO.3 OF SCHEDULE `M OF THE NOTES TO ACCOUNTS ANNEXED WITH THE ANNUA L AUDITED ACCOUNTS FOR THE RELEVANT YEAR AND HE FOUND THAT THE ASSESSEE HA D NOT OFFERED INTEREST ACCRUED AMOUNTING TO RS.664.71 LAKHS DURING THE YEA R UNDER CONSIDERATION. THE SAID NOTE WAS EXTRACTED AT PAGE 4 OF THE ASSESS MENT ORDER BY THE AO. IT WAS FURTHER OBSERVED BY THE AO THAT AS ON 31.03.200 4 INTEREST AND LITIGATION COST RECOVERABLE FROM M/S. KARSAN WAS SHOWN AT RS.2 4,647.22 LAKHS AS AGAINST AMOUNT OF RS.25,311.93 LAKHS AS ON 31.03.20 05. THE AO FURTHER OBSERVED THAT INTEREST HAD ACCRUED AS PER THE AWARD GIVEN BY THE DUTCH HIGH COURT AS ON 22.01.2004. THE AO FURTHER STATED THAT ACCRUAL OF INTEREST 3 INCOME AND RECOVERABLE LITIGATION COST AMOUNTING TO RS.11.79 CRORES WAS TREATED AS INCOME IN THE ASSESSMENT YEAR 2004-05. HE FURTHER OBSERVED THAT IN CONNECTION WITH THE SAME AWARD, THERE WAS FURTHE R ACCRUAL OF INTEREST OF RS.664.71 LAKHS DURING THE CURRENT YEAR. HE, THERE FORE, ISSUED A NOTICE TO THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ACCRUAL OF INT EREST SHOULD NOT BE TAKEN AS INCOME OF THE CURRENT YEAR AS THE ASSESSEE WAS F OLLOWING MERCANTILE SYSTEM OF ACCOUNT. THE ASSESSEE SUBMITTED ITS REPL Y VIDE LETTER DATED 5.11.2007 WHICH HAS BEEN REPRODUCED IN PARA 3.3 OF THE ASSESSMENT ORDER. 5. AFTER CONSIDERING THE ASSESSEES SUBMISSION, THE ASSESSING OFFICER BROUGHT THE AMOUNT OF RS.664.71 LAKHS TO INCOME ON ACCOUNT OF INTEREST ACCRUED ON THE OUTSTANDING RECEIVABLE FROM M/S. KAR SAN. 6. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A). 7. BEFORE THE LEARNED CIT(A), IT WAS SUBMITTED BY T HE ASSESSEE THAT HONBLE ITAT VIDE ITS ORDER IN ITA NO.497/DEL/2008 PERTAINING TO THE ASSESSMENT YEAR 2004-05, HAS HELD THAT NO LEGAL RIG HT HAS BEEN CREATED IN FAVOUR OF THE ASSESSEE IN THAT YEAR AS AWARD WAS NO T MADE A RULE OF THE COURT. RELYING ON THE FINDINGS OF THE ITAT IN THE ASSESSME NT YEAR 2004-05, ON THE IDENTICAL ISSUE, THE LEARNED CIT(A) DELETED THE ADD ITION ON ACCOUNT OF INTEREST ACCRUED ON THE ADVANCES RECEIVABLE FROM M/ S. KARSAN. 8. HENCE, THE REVENUE IS IN APPEAL BEFORE US. 4 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS AN ADMITTED POSITION THAT THE AO HAS MADE THE AD DITION ON THE BASIS OF THE NOTING ON THE NOTE OF ACCOUNTS AND ON THE BASIS OF HIS FINDING GIVEN IN ASSESSMENT YEAR 2004-05. THIS IDENTICAL ISSUE HAD COME UP FOR CONSIDERATION BEFORE ITAT DELHI BENCH `B, NEW DELH I IN ITA NO.497(DEL)/2008 PERTAINING TO THE ASSESSMENT YEAR 2004-05 (REPORTED IN (2009) 120 ITD 259), WHERE THE ITAT HAS CONSIDERED THE WHOLE FACTS OF THE CASE AND CAME TO THE CONCLUSION THAT ALTHOUGH THE A WARD WAS GIVEN IN FAVOUR OF THE ASSESSEE ON 3 RD DECEMBER, 1998, THE LITIGATION CAME TO AN END ONLY WHEN THE APPLICATION FOR SUSPENSION OF THE AWARD WA S DISMISSED BY THE COURT OF APPEAL ON 4 TH DECEMBER, 2006, MUCH AFTER THE CLOSE OF THE PREVIO US YEAR. IT WAS FURTHER HELD THAT THE AWARD DID NOT B ECOME THE RULE OF ANY COURT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R 2004-05 UNDER CONSIDERATION AND THEREFORE, NO INCOME ACCRUED IN T HE RELEVANT YEAR. THE RELEVANT PORTION OF THE TRIBUNALS ORDER PASSED IN ASSESSMENT YEAR 2004-05 IS EXTRACTED BELOW:- 6. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. THE FACTS ARE THAT THE ASSESSE E HAD PLACED AN ADVANCE OF RS.133.69 CRORE WITH M/S KARSAN I N THE YEAR 1995-96 FOR IMPORT OF UREA. THE SUPPLIES WERE NOT RECEIVED AND SUBSEQUENTLY THE AGREEMENT WAS TERMINATED. THE AGREEMENT CONTAINED AN ARBITRATION CLAUSE, IN VIEW OF WHICH ARBITRATION PROCEEDINGS WERE INITIATED BY THE A SSESSEE IN THE ICA. THE COURT DELIVERED ITS JUDGMENT ON 3.12. 1998 IN 5 FAVOUR OF THE ASSESSEE TO THE EFFECT THAT THE ASSESSEE WAS ENTITLED TO RECEIVE THE AFORESAID ADVANCE F ROM M/S KARSAN ALONG WITH INTEREST @ 5% P.A. ON THE PRINCIPAL A MOUNT W.E.F. 14.11.1995 TILL THE DATE OF THE PAYMENT. THE ASSESSEE WAS ALSO ENTITLED TO RECEIVE LITIGATION CHARGES FRO M M/S KARSAN. THE RECOVERY PROCEEDINGS WERE STARTED IN PURSUANC E OF THE AWARD AGAINST M/S KARSAN AND ITS EXECUTIVES IN VARIOUS COUNTRIES. HOWEVER, THEY HAD FILED COUNTER CLAI M AMOUNTING TO RS.161.04 CRORE. THIS CLAIM WAS REJECTED BY THE ICA. THE AWARD WAS ALSO CHALLENGED IN THE DISTRICT COURT AT AMSTERDAM IN MARCH, 1999, WHICH WAS REJECTED BY THE DISTRICT COURT ON 12.12.2001. IN THE NOTE TO THE ACCOUNT, IT WAS MENTIONED THAT THE AWARD BECAME ENFORCEABLE ON RECEIPT OF JUDGMENT OF THE DISTRICT COURT ON 12.12.2001. HOWEVER, AN APPEAL WAS FILED AGAINST THIS JUDGMENT BEFORE DUT CH HIGH COURT. THE APPEAL WAS REJECTED BY THE HIGH COURT O N 22.1.2004. THE ASSESSEES ATTORNEY CONFIRMED TH AT M/S KARSAN THEREAFTER DID NOT PURSUE THE CASE IN T HE DUTCH SUPREME COURT AND IN VIEW THEREOF, THE MANAGEMEN T OF THE ASSESSEE COMPANY CAME TO THE CONCLUSION THAT THERE WAS NO FURTHER POSSIBILITY OF ANY LIABILITY ARISING A S A CONSEQUENCE OF COUNTER CLAIM. THE CASE OF THE LOWER AUT HORITIES IS THAT SINCE THE DISPUTE CAME TO AN END ON 22.1.2004, T HE INCOME ACCRUED TO THE ASSESSEE ON THAT DATE IN RESP ECT OF INTEREST AND LITIGATION COSTS. ON THE OTHER HAND, THE C ASE OF THE ASSESSEE IS THAT THE JUDGMENT OF THE DUTCH HIGH COU RT MERELY PUT AN END TO THE COUNTER CLAIMS WHICH COULD HAVE BEEN PURSUED BY M/S KARSAN. THAT DOES NOT MEAN THAT THE AWARD BECAME ENFORCEABLE ON 22.1.2004 FOR THE REASON THAT THE AWARD DOES NOT BECOME ENFORCEABLE TI LL IT IS MADE THE RULE OF THE COURT, WHICH DID NOT HAPPEN IN TH IS YEAR. THE ASSESSEE BROUGHT CERTAIN FURTHER FACTS TO THE N OTICE OF THE LEARNED CIT(A), WHICH WERE CONSIDERED BY HIM. THE FACTS ARE THAT THE AWARD DATED 3.12.1998 DID NOT BECO ME FINAL AS IT WAS UNDER CHALLENGE BY M/S KARSAN AND THE LI TIGATION IN THIS REGARD CAME TO AN END ON 14.12.2006. FU RTHER, THE ASSESSEE HAD APPLIED BEFORE THE COMPETENT COU RT OF MONACO FOR THE EXECUTION OF THE AWARD, WHICH WAS REJECTED BECAUSE THE APPLICATION WAS NOT COMPLETE IN ALL R ESPECTS. THE ASSESSEE HAD ALSO FILED PETITION BEFORE THE CITY JUDGE, 6 HYDERABAD, TO PASS A DECREE IN ITS FAVOUR ON THE BASIS OF THE AWARD AND THE DECISION OF THE COURT IS PE NDING. THUS, THE FACTS ARE THAT ALTHOUGH THE AWARD WAS GIVEN IN FAVOUR OF THE ASSESSEE ON 3.12.1998, THE LITIGAT ION CAME TO AN END ONLY ON 4.12.2006, MUCH AFTER THE CLOSE OF THIS PREVIOUS YEAR. THE AWARD DID NOT BECOME THE RULE OF ANY COURT IN THIS PREVIOUS YEAR. KEEPING IN MIND THESE FACTS, WE MAY DISCUSS THE CASES RELIED UPON BY THE REVENUE AN D THE ASSESSEE IN SUCCESSION. 6.1 THE REVENUE HAD RELIED ON THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF ASHOKBHAI CHIMAN BHAI (SUPRA). THE FACTS OF THAT CASE ARE THAT THE KARTA OF A HINDU UNDIVIDED FAMILY HELD ON BEHALF OF THE F AMILY A SHARE OF FIVE ANNAS IN THE RUPEE IN PROFITS AND L OSS OF A FIRM, WHOSE ACCOUNTS WERE TO BE ADJUSTED AT THE EN D OF THE CALENDAR YEAR. THE HUF WAS PARTITIONED O N 12.11.1955 AND THE ASSESSEE WAS ALLOTTED THE FIVE ANN AS SHARE IN THE FIRM. CONSEQUENTLY, HE BECAME THE FULL FLEDGE D OWNER OF THE INCOME BY WAY OF SHARE IN PROFITS OF THE FIRM. THE QUESTION WAS WHETHER ANY PART OF THE INCOME FROM THE FI RM FOR CALENDAR YEAR 1955 WAS LIABLE TO BE INCLUDED I N THE INCOME OF THE FAMILY? THE DETERMINATION OF THE QUESTIO N INVOLVED THE TIME OF ACCRUAL OF PROFITS TO INDIVIDUA L PARTNERS IN THE FIRM. THE COURT CAME TO THE CONCLUSION THAT THE DATE WHEN ASHOKBHAI ACQUIRED THE RIGHT TO RECEIVE THE SHARE OF PROFIT, THERE WAS NO SUBSISTING JOINT FAMILY AND HIS SHARE OF PROFIT WAS NOT RECEIVED BY HIM ON BEHALF O F THE ASSESSEE. THEREFORE, IT WAS HELD THAT NO PART OF THE PROFI TS COULD BE TAXED IN THE HANDS OF THE FAMILY. IT WAS ALSO P OINTED OUT THAT UNDER THE INCOME-TAX ACT, INCOME IS TAXAB LE WHEN IT ACCRUES, ARISES OR IS RECEIVED OR WHEN IT IS BY FICTION DEEMED TO ACCRUE, ARISE OR IS DEEMED TO BE RECEIVED. RECEIPT IS NOT THE ONLY TEST OF CHARGEABILITY T O TAX; IF INCOME ACCRUES OR ARISES, IT MAY BECOME LIABLE TO TAX. IN THE CASE AT HAND, THE PROFIT HAD TO BE ADJUSTED AT THE END OF THE YEAR AND THE PROFIT FOR CALENDAR YEAR 1955 COULD NOT BE ADJUSTED BEFORE 31.12.1955. ON 31.12.1955, TH E HINDU UNDIVIDED FAMILY WAS NOT IN EXISTENCE. THEREFO RE, IT WAS HELD THAT PROFIT ACCRUED TO ASHOK BHAI ON 3 1.12.1955. 7 HAVING CONSIDERED THE RATIO OF THIS CASE, IT CANNOT BE STRAIGHTWAY SAID THAT THE INCOME ACCRUED TO THE ASSESSEE ON 22.1.2004 WHEN THE ASSESSEES ATTORNEY CON FIRMED THAT M/S KARSAN DID NOT PURSUE THE MATTER FURTHER I N DUTCH SUPREME COURT. THE FACT IS THAT THE LITIGATIO N CAME TO AN END ON 14.12.2006 WHEN THE APPLICATION FOR SUS PENSION OF THE AWARD WAS DISMISSED BY THE COURT OF APPE AL. 6.2 THE REVENUE ALSO RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MORVI INDUSTRIES LT D. (SUPRA). THE FACTS OF THAT CASE ARE THAT THE ASSES SEE WAS THE MANAGING AGENT OF ITS SUBSIDIARY COMPANY AND WA S ENTITLED TO RECEIVE OFFICE ALLOWANCE OF RS.1,000/- P.M. , COMMISSION @ 12.5% ON THE NET PROFIT OF THE MANAGED COMPANY AND AN ADDITIONAL COMMISSION OF 1.5% ON ALL PURCHASES OF COTTON AND SALE OF CLOTH AND YARN. THE ASSESSEE MAINT AINED ITS ACCOUNT ON MERCANTILE METHOD. IN THE TWO YEARS ENDED ON 31.12.1954 AND 31.12.1955, THE MANAGED COMPANY SUFFERED LOSSES AND, THUS, COMMISSION WAS EARNED ONL Y IN RESPECT OF SALE OF CLOTH AND YARN FOR THESE TWO YEARS . UNDER THE AGREEMENT, THE MANAGING AGENCY COMMISSION BECAM E DUE TO THE ASSESSEE ON 31.12.1954 AND 31.12.1955, WHICH WAS PAYABLE IMMEDIATELY AFTER PASSING OF THE ACCO UNTS OF THE MANAGED COMPANY IN THE GENERAL MEETINGS, WHICH WERE HELD ON 24.11.1955 AND 21.7.1956 RESPECTIVELY. THE ASSESSEE RELINQUISHED THE COMMISSION ON SALES AND ALSO THE OFFICE ALLOWANCE AFTER IT HAD BECOME DUE BUT BEFORE IT HAD BECOME PAYABLE UNDER THE AGREEMENT, FOR THE REASON THAT THE MANAGED COMPANY SUFFERED LOSSES. THE QU ESTION WAS, WHETHER THE AMOUNT FOREGONE BY THE ASSESSEE CO ULD BE INCLUDED IN THE TOTAL INCOME FOR THE TWO ACCOUNTIN G YEARS? THE HONBLE COURT POINTED OUT THAT UNDER MERCA NTILE SYSTEM OF ACCOUNTING, CREDIT ENTRIES ARE MA DE IN RESPECT OF AMOUNTS DUE CONCURRENTLY WHEN THEY BECOME LEGALLY DUE AND EVEN BEFORE THEY ARE ACTU ALLY RECEIVED. SIMILARLY, THE EXPENDITURE IS DEBITED ON BE COMING LEGALLY DUE, THOUGH IT MAY BE DISBURSED LATER ON. TH ERE COULD BE EXCEPTIONAL CASES WHERE ONLY A HYPOTHETICAL ENTRY IS MADE FOR THE INCOME WHICH DOES NOT MATERIALIZE. APPLY ING THE AFORESAID PRINCIPLE, IT WAS HELD THAT THE IN COME WAS GIVEN 8 UP UNILATERALLY BY THE ASSESSEE AFTER IT HAD ACCRUED TO IT. THEREFORE, THE ASSESSEE COULD NOT ESCAPE THE TAX LIABILITY. THE CASE BEFORE US IS NOT ONE OF FOREGOING OF INCOME AFTER IT BECAME ONE. THUS, THE FACTS ARE DISTINGUISH ABLE. THE REAL QUESTION BEFORE US IS WHETHER THE INCOME ACCR UED TO THE ASSESSEE ON 21.1.2004 ON RECEIVING THE INFORM ATION THAT M/S KARSAN DID NOT PURSUE THE MATTER IN DUTCH SUP REME COURT, IN A SITUATION WHEN THERE WAS FURTHER LITIGAT ION IN THE MATTER, WHICH CAME TO AN END ON 14.12.2006? WE ARE OF THE VIEW THAT THE RATIO OF THE CASE DISCUSSED ABOV E, DOES NOT LEAD TO A CONCLUSION THAT INTEREST AND LI TIGATION CHARGES DEFINITELY ACCRUED TO THE ASSESSEE ON 22.1.2004 . 6.3 THE REVENUE ALSO RELIED ON THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF SHRI GOVERDHAN LTD. (SUPRA). THE FACTS OF THE CASE ARE THAT THE ASS ESSEE DERIVED INCOME FROM ITS OWN BUSINESS AS WELL AS INCOM E BY WAY OF SHARE IN THE PROFITS OF A FIRM. THE QUESTION BEFORE THE COURT WAS REGARDING ACCRUAL OF INCOME BY WAY O F SHARE OF PROFIT IN THE FIRM FOR THE PERIOD 1.10.1950 T O 31.3.1951. THE CASE OF THE ASSESSEE WAS THAT THIS INCOME WAS NOT KNOWN TO THE ASSESSEE BEFORE ITS GENERAL MEET ING HELD ON 17.5.1951. THE HONBLE COURT POINTED OUT THAT IT IS A WELL ESTABLISHED PROPOSITION OF LAW THAT THE INCOME MAY ACCRUE TO AN ASSESSEE WITHOUT ITS ACTUAL RECEIPT. IF THE ASSESSEE ACQUIRES A RIGHT TO RECEIVE THE INCOME, IT CA N BE SAID TO HAVE ACCRUED TO HIM THOUGH IT MAY BE RECEIVED LATER ON, WHEN IT IS ASCERTAINED. THE LEGAL POSITION IS THAT A LIABILITY DEPENDING UPON A CONTINGENCY IS NOT A DEBT IN PRAESENTI OR IN FUTURO TILL THE CONTINGENCY HAPPENS. BUT IF IT IS A DEBT, THE FACT THAT THE AMOUNT HAS T O BE ASCERTAINED DOES NOT MAKE IT ANY THE LESS A DEBT IF THE LIABILITY IS CERTAIN AND WHAT REMAINS IS ONLY A QUANTIFI CATION OF THE AMOUNT. HAVING CONSIDERED THIS DECISION, WE ARE OF THE VIEW THAT IT IS NOT ON ALL FOURS WITH THE FACT S OF THE CASE OF INSTANT ASSESSEE. AS POINTED OUT EARLIER, THE QUESTION IS WHETHER, ON RECEIPT OF INFORMATION FROM THE A TTORNEY THAT M/S KARSAN DID NOT PURSUE THE MATTER IN THE DUTC H SUPREME COURT, THE INCOME BY WAY OF INTEREST AND LITIGATI ON CHARGES ACCRUED TO THE ASSESSEE? THIS WILL DEPEND UPO N THE FACT 9 WHETHER THE RIGHT TO RECEIVE, IN THE SENSE OF A LEGALLY ENFORCEABLE RIGHT, CAME INTO EXISTENCE IN FAV OUR OF THE ASSESSEE. THE CASE OF THE ASSESSEE IS THAT AN AWARD IS NOT A DECREE AND, THEREFORE, NO ENFORCEABLE RIGH T GOT VESTED IN THE ASSESSEE ON 22.1.2004. 6.4 WE MAY NOW EXAMINE THE CASES REFERRED T O BY THE ASSESSEE. THE FIRST AND THE FOREMOST CASE IS THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF FUERSE D AY LAWSON LTD. VS. JINDAL EXPROTS LTD. IN THAT CASE, TH E PETITIONER FILED AN EXECUTION PETITION CONSTRUING THE ARBITRATIO N AWARD TO BE A DECREE. THE HONBLE COURT POINTED OUT THAT THE PROVISIONS FOR ENFORCEMENT OF A FOREIGN AWARD, HOWEVER, SPECIFICALLY STATE THAT ONLY WHEN THE COURT IS SATISFIED AND HOLD THAT THE AWARD IS ENFORCEABLE, THEN AND T HEN ONLY THE AWARD WOULD BE DEEMED TO BE A DECREE OF THAT C OURT. THEREFORE, SO LONG THE PROCESS OF RECORDING THE SATISFACTION THAT THE AWARD IS ENFORCEABLE IS NO T COMPLETE, THE SAME DOES NOT BECOME A DECREE AND, THEREFORE, CANNOT BE EXECUTED AS IF IT WAS A DECREE. IT WAS FURT HER POINTED OUT THAT THE FOREIGN AWARD PER SE CANNOT BE S AID TO BE FINAL AND BINDING SO LONG AS IT IS NOT HELD AS ENFORCEABLE AND DOES NOT BECOME A DEEMED DECREE BY VIRTUE OF THE PROVISIONS OF SECTION 49 OF THE ACT. COMING TO THE FACTS OF INSTANT ASSESSEE, IT IS AN ADMITTED POSITION THAT THE COURT OF MONACO REJECTED THE APPLICATION OF THE ASSE SSEE TO PASS A DECREE IN ITS FAVOUR. SIMILAR PROCEEDINGS WERE PENDING IN THE CITY CIVIL COURT AT HYDERABAD. THUS, NO COMPETENT COURT RECORDED THE SATISFACTION U/S 49 TO MA KE THE AWARD AS A DEEMED DECREE. FILLING THE FORM BEFOR E THE COURT SHOWING THE ASSESSEE TO BE A DECREE HOLDING C ANNOT LEAD TO A CONCLUSION THAT A DECREE WAS PASSED IN IT S FAVOUR FOR THE REASON THAT THE FORMS ARE SO PRESCRIBED. THE AWARD BECOMES ENFORCEABLE ONLY WHEN IT BECOMES THE R ULE OF A COMPETENT COURT, WHICH DID NOT HAPPEN IN THIS YEAR. THEREFORE, WE ARE OF THE VIEW THAT THIS CASE S UPPORTS THE ARGUMENT OF THE LD COUNSEL THAT THE AWARD DID NOT BECOME ENFORCEABLE IN THIS YEAR AND, THUS, THERE WAS NO ACCRUAL OF INCOME UNDER MERCANTILE SYSTEM OF ACCOUNTING. 10 6.5 THE ASSESSEE ALSO RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF FAZILKA ELECT RIC SUPPLY CO. LTD. (SUPRA). THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS A LICENSEE UNDER THE PUNJAB ELECTRICITY SU PPLY ACT. THIS BUSINESS WAS TAKEN OVER BY THE GOVERNMENT OF PU NJAB ON 23.7.1949, IN PURSUANCE OF PROCEEDINGS U/S 7(1) OF THE INDIAN ELECTRICITY ACT, 1910. THE PROCEEDINGS IN THIS REGARD WERE STARTED ON 13.3.1947 WHEN SECRETARY TO THE GO VERNMENT OF PUNJAB ISSUED A LETTER TO THE ASSESSEE TO TH E EFFECT THAT THE GOVERNMENT HAD DECIDED TO PURCHASE THE ELECT RICITY SUPPLY UNDERTAKING UNDER CLAUSE 9(1) OF THE LI CENSE GRANTED TO THE ASSESSEE. COMPENSATION OF RS. 3,17,691/- WAS FIXED AS PAYABLE TO THE ASSESSEE. THE ASSESSEE DID NOT AGREE WITH THE AMOUNT OF COMPENSATION AND AGITATED FO R ITS INCREASE. ACCORDINGLY, A LETTER DATED 5.5.1952 WAS WRITTEN TO THE SECRETARY PLACING THE CORRECT VALUE OF CO MPENSATION AT RS. 10,80,000/-. THE ASSESSEE ALSO HINTED AT ARBITRATION IN CASE ITS VALUATION WAS NOT ACCEPTED AND SUG GESTED THE NAME OF THE ARBITRATOR IN THE MATTER ON ITS BEHAL F. THERE WAS DELAY ON THE PART OF THE GOVERNMENT IN APPOINTING ITS ARBITRATOR AND, THUS, THE ASSESSEES ARBITRATOR BECAME THE SOLE ARBITRATOR OF THE CASE. HOWEVER, HIS APPO INTMENT WAS SET ASIDE BY THE COURT. THEREAFTER, THE GOVER NMENT NOMINATED ITS ARBITRATOR AND THE ARBITRATION PROCEEDINGS CONTINUED TILL 17.4.1961, BUT NO FINAL CONC LUSION WAS REACHED ABOUT THE PROPER VALUATION OF THE ASS ETS OF THE UNDERTAKING. ON 25.4.1961, THE PARTIES REFER RED THE DISPUTE TO SHRI MEHAR CHAND MAHAJAN AS AN UMPIRE, WHO DETERMINED THE VALUE OF THE UNDERTAKING AT RS . 6,25,000/- TO WHICH SOLATIUM OF 20% WAS ADDED ON ACCOUNT OF C OMPULSORY PURCHASE. THE ASSESSEE HAD ALSO AGITATED FOR PAYMENT OF INTEREST. LOOKING TO THE FACT THAT IT HAD ALREADY BEEN PAID A SUM OF RS.3,17,691/-, INTEREST ON BALANCE AMOU NT OF RS. 4,32,309/-WAS ALLOWED @ 4.5% FOR 8 YEARS, WHI CH WORKED OUT TO RS.1,55,623/-. THUS, THE ASSESSEE BECAME ENTITLED TO RECEIVE A TOTAL SUM OF RS. 5,87,927/- UNDER THE AWARD. ON 23.11.1961, AN APPLICATION WAS MADE TO THE COUR T TO MAKE THE AWARD OF THE UMPIRE A RULE OF THE COURT. TH IS WAS DONE ON 28.9.1962. THE ENTIRE INTEREST WAS PAID TO THE ASSESSEE THROUGH THE COURT ON 13.2.1963. IN THE CONTE XT OF 11 AFORESAID FACTS, ONE OF THE QUESTIONS BEFORE THE HONBLE COURT WAS WHETHER, ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE, WAS THE APPELLATE TRIBUNAL JUSTIFIED IN HOLDING THAT THE SUM OF RS. 1,55,628/- IS THE INCOME OF T HE ASSESSEE LIABLE TO BE TAXED IN THE ASSESSMENT YEAR 19 63-64? THE FINDING OF THE COURT WAS THAT AN AWARD OF AN ARBITRATOR THAT IS NOT FILED IN THE COURT AND MADE A RULE OF COURT HAS NO FORCE OR VALIDITY. IT HAS NO EFFECTIVE VALU E AND IT CANNOT CREATE, EXTINGUISH OR PASS ANY TITLE OR INTERES T. IN THIS CONNECTION, WE WOULD LIKE TO REPRODUCE ONE PARAGR APH FROM PAGES 158 AND 159 OF THE JUDGMENT, WHICH READS AS UNDER:- EVEN IF IT COULD BE SAID THAT THIS QUESTION IS COMPREHENSIVE ENOUGH TO RAISE THE POINT NOW SOUGHT TO BE RAISED BY THE LEARNED COUNSEL, THE TRIBUNAL DECLINED TO REFER THIS QUESTION AS WELL AS ANOTHER QUESTION POSED BY THE ASSESSEE RELATING TO ITS METHOD OF ACCOUNTING AND THE ASSESSEE HAS NOT PURSUED THE MATTER FURTHER UNDER SECTION 256(2). THIS ASPECT OF THE MATTER HAS, THEREFORE, NOT BEEN REFERRED TO US AND IT IS NOT OPEN TO THE ASSESSEE T O RAISE THE ISSUE BEFORE US. SECONDLY, EVEN ON THE MERITS, THE PLEA IS NOT TENABLE. AN AWARD OF AN ARBITRATOR THAT IS NOT FILED IN COURT AND MADE A RULE OF COURT HAS NO FORCE OR VALIDITY. IT HAS NO EFFECTIVE VALUE AND IT CANNOT CREATE, EXTINGUISH OR PASS ANY TITLE OR INTEREST. NOBODY CAN RELY ON SUCH AWARD BY WAY OF ATTACK OR DEFENCE IN ANY PROCEEDING WHATSOEVER. INDEED, IN SUCH A CASE, THE PARTIES ARE NOT BARRED EVEN FROM FILING A SUIT ON THE ORIGINAL CAUSE OF ACTION. NO PARTY CAN BE PREJUDICED OR BENEFITED BY THE MERE EXISTENCE OF SUCH AN AWARD. IT MAY BE THAT EFFECT CAN BE GIVEN TO THE AWARD IF BOTH PARTIES CONSENT TO ABIDE BY IT S TERMS. BUT THAT WILL BE ON THE GROUND THAT THE PARTIES HAVE BY MUTUAL AGREEMENT SETTLED A DISPUTE BETWEEN THEMSELVES AND PERHAPS IN THAT SITUATION THE LIABILITY CAN BE SAID TO HAVE BEEN ADMITTED AND SO TO HAVE ACCRUED WHEN THE AWARD IS GIVEN. BUT 12 WHERE PROCEEDINGS ARE TAKEN UNDER SECTION 14 OF THE ARBITRATION ACT, 1940, THE POSITION IS DIFFEREN T. IN SUCH A CASE, UNTIL THE PROCEEDINGS IN COURT CONCLUDE, THE AWARD AS SUCH IS UNENFORCEABLE. MOREOVER, WHEN THE AWARD IS FILED INTO COURT AND A DECREE ON ITS TERMS SOUGHT, IT IS OPEN TO THE COU RT TO CONSIDER IT IN ALL ITS ASPECTS. THE COURT CAN SE T ASIDE, MODIFY OR REMIT THE AWARD FOR FRESH CONSIDERATION AND IT CANNOT BE TAKEN FOR GRANTED THAT THE COURT WILL MAKE A DECREE ON ITS TERMS. WE ARE, THEREFORE, OF OPINION THAT THE ASSESSEE DID NO T GET AN ENFORCEABLE RIGHT (WHICH IS WHAT IS MATERIAL FOR PURPOSES OF ACCRUAL) UNTIL THE AWARD HAD BEEN MADE A RULE OF THE COURT, THIS IS ALSO THE VIEW TAKEN BY THE ALLAHABAD HIGH COURT IN A.P.S. COLD STORAGE & ICE FACTORY V. CIT [1979] 119 ITR 709. WE UPHOLD THE VIEW TAKEN BY THE TRIBUNAL ON THIS POINT. IT WAS ALSO HELD THAT IF THE SUBJECT MATTER IS CONSIDERED AS TO THE ASSESSEES ENTITLEMENT TO A PA RTICULAR AMOUNT, WHICH HAS BEEN AWARDED TO HIM, SUCH ENTITLEMEN T CLEARLY CAN BE SAID TO HAVE CRYSTALLIZED ONLY ON TH E DATE ON WHICH THE AMOUNT IS AWARDED TO HIM FINALLY, I.E., WH EN NO DISPUTE POSSIBLE IN REGARD THERETO PERSISTS. IN THIS CONNECTION ALSO, WE WOULD LIKE TO REPRODUCE ONE PARAGRAPH FROM PA GES 572 AND 573 OF THE JUDGMENT, WHICH READS AS UNDE R:- THE ABOVE SURVEY OF THE DECISIONS SHOWS A CLEAR CLEAVAGE OF OPINION BETWEEN THE HIGH COURTS ON THIS ISSUE. ALL THE DECISIONS HAVE APPLIED THE PRINCIPLES REGARDING ACCRUAL AS ENUNCIATED IN SASSOON'S CASE (SUPRA) AND CIT V. A. GAJAPATHY NAIDU [1964] 53 ITR 114 (SC), VIZ., THAT INCOME ACCRUES AT THE POINT OF TIME WHEN A RIGHT TO RECEIV E THAT INCOME IS CREATED IN THE ASSESSEE. IF WE VIEW THE SUBJECT-MATTER OF TAXATION IN THE ABSTRACT OF T HE COMPENSATION OR INTEREST THEREON, RECEIVABLE BY AN ASSESSEE WHEN HIS PROPERTY IS TAKEN AWAY, THEN 13 CLEARLY THE RIGHT TO COMPENSATION OR INTEREST THEREON WILL ARISE AS FROM THE DATE OF DISPOSSESSIO N BOTH UNDER THE RELEVANT STATUTORY PROVISIONS AS WELL AS THE EARLIER PROVISIONS IN THE CONSTITUTION WHICH PROHIBITED THE DEPRIVATION OF PROPERTY WITHOUT COMPENSATION. BUT IF WE CONSIDER THE SUBJECT-MATTER AS THE ASSESSEE'S ENTITLEMENT TO A PARTICULAR AMOUNT WHICH HAS BEEN AWARDED TO HIM, SUCH ENTITLEMENT CLEARLY CAN BE SAID TO HAVE CRYSTALLISED ONLY ON THE DATE ON WHICH THE AMOUNT IS AWARDED TO HIM FINALLY WITH NO DISPUTE POSSIBLE IN REGARD THERETO. THE FORMER VIEW PROCEEDS ON THE PRINCIPLE THAT WHERE A RIGHT CLEARLY EXISTS, THE DELAY IN QUANTIFICATION OR EVEN A DISPUTE REGARDING THE SAME IS IMMATERIAL AND IRRELEVANT: A PRINCIPLE SETTLED BEYOND DOUBT IN REGARD TO ACCRUAL OF LIABILITIES BY THE DECISION OF THE SUPREME COURT IN KEDARNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363. THE LATTER PROCEEDS ON THE VIEW THAT AS LONG AS IT IS NOT KNOWN AND CANNOT BE STATED WITH ANY CERTAINTY WHETHER ANY ENHANCED COMPENSATION AT ALL WOULD BE GIVEN OR WHETHER, EVEN IF IT IS GIV EN BY THE DISTRICT COURT OR THE HIGH COURT, IT WILL ULTIMATELY BE SUSTAINED, IT WOULD BE FUTILE AND IMPRACTICAL TO TALK OF ANY INCOME HAVING ACCRUED. THUS, TWO PROPOSITIONS OF LAW EMERGE FROM THIS DECISION REGARDING ARBITRATION AWARD MADE WITHIN THE TERRITORIES OF INDIA, NAMELY, THAT (I) THE ASSESSEE BECOMES ENTITLED TO THE AMOUNT ONLY WHEN NO DISPUTE REMAINS IN REGARD THERETO AND THE AWARD HAD BECOME FINAL, AND (II) THE AWARD ATTAINS ENFORCEABILITY ONLY WHEN IT IS MADE A RULE OF COURT. FROM THE DECISION IN THE CASE OF FUERST DAY LAWSON LTD. VS. JINDAL EXPORTS LTD. (SUPRA), IT BECOMES CLEAR T HAT THE POSITION OF A FOREIGN AWARD IS NO DIFFERENT FR OM THE POSITION OF AN INDIAN AWARD. THEREFORE, THE AFORESAID LEGAL PROPOSITIONS ARE APPLICABLE IN RESPECT OF A FO REIGN AWARD ALSO. COMING TO THE FACTS OF THIS CASE, IT IS SEEN THAT THE LITIGATION WITH M/S KARSAN ENDED ON 14.12.2006. T HUS, IT CAN 14 BE SAID THAT ON THIS DATE, THE AWARD BECAME F INAL. THIS DATE DOES NOT FALL IN THE YEAR UNDER CONSIDERATION , BUT IS FAR REMOVED IN FUTURE FROM 31.3.2004. FURTHER, THE AWARD WAS NOT MADE A RULE OF THE COURT EITHER AT MO NACO OR HYDERABAD IN THE CURRENT YEAR. THEREFORE, NONE OF THE CONDITIONS MENTIONED ABOVE WAS SATISFIED IN TH IS YEAR. THE LEARNED CIT(A) ALSO MENTIONED THAT THE ASSES SEE WAS VIGOROUSLY PURSUING CASES IN RESPECT OF CRIMI NAL BREACH OF TRUST. THIS, TO OUR MIND, HAS NO IMPLICATION IN RESPECT OF ACCRUAL OF INCOME IN THIS YEAR. ACCORDINGLY, WE ARE OF THE VIEW THAT NO ENFORCEABLE RIGHT WAS VESTED IN T HE ASSESSEE IN THIS YEAR, WHICH COULD LEAD TO THE CONCLUSION THAT INTEREST INCOME AND LITIGATION CHARGES ACCRUED TO THE ASSESSEE. 6.6 IT WAS ALSO THE CASE OF THE LEARNED COUNSE L THAT THE ASSESSEE HAS NOT RECEIVED THE PRINCIPAL AMOUNT EVEN AFTER LAPSE OF ABOUT 11 YEARS. IN SUCH CIRCUMSTANCE S, THE ASSESSEE ADOPTED A CONSERVATIVE POLICY REGARDIN G ACCRUAL OF INTEREST AND LITIGATION CHARGES, I.E., TO BOOK THE SAME IN THE YEAR OF THE RECEIPT. THIS POLICY WAS IN CONF ORMITY WITH THE MERCANTILE SYSTEM OF ACCOUNTING, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF UCO BANK VS. C IT (1999) 237 ITR 889. THE QUESTION BEFORE THE COURT WA S WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN CANCELING TH E ORDER U/S 263 OF THE ACT, HOLDING THAT WHEN THE ASSESSMENT WAS COMPLETED, THE ONLY PAPER AVAILABLE WAS BOARDS CIRCULAR DATED OCTOBER 9,1984 AND, THEREFORE, IT CANNOT BE SAI D THAT THE INSPECTING ASSISTANT COMMISSIONERS ORDER OF ASS ESSMENT IN NOT TAXING INTEREST SUSPENSE OF RS. 49,15,435/- IN VIEW OF THAT CIRCULAR WAS ERRONEOUS AND PREJUDICE TO THE IN TERESTS OF THE REVENUE? THE ASSESSEE WAS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNTING. HOWEVER, THE INCOME BY WAY OF INTERE ST PERTAINING TO DOUBTFUL LOANS WAS NOT CONSIDE RED AS REAL INCOME IN THE YEAR IN WHICH IT ACCRUED, BUT ONLY WHEN IT WAS REALIZED. IN ORDER TO SUPPORT ITS CASE, T HE REVENUE HAS PLACED RELIANCE ON THE DECISION IN THE CASE OF KERALA FINANCIAL CORPORATION VS. CIT (1994) 210 ITR 12 9 (SC) AND STATE BANK OF TRAVANCORE VS. CIT (1986) 158 IT R 102 (SC), IN WHICH IT WAS HELD THAT THE INTEREST WHICH HAD ACCRUED 15 ON STICKY ADVANCES HAD TO BE TREATED AS INCOM E OF THE ASSESSEE AND TAXABLE AS SUCH. IF THE ADVANC E TAKES THE SHAPE OF A BAD DEBT, REFUND OF TAX PAID ON THE INTEREST WOULD BECOME DUE AND THE SAME CAN BE CLAIMED BY THE ASSESSEE IN ACCORDANCE WITH LAW. THE HONBLE C OURT POINTED OUT THAT IT WAS NOT IN AGREEMENT WITH THE SAID DECISION. THE RELEVANT CIRCULAR OF THE CENTRA L BOARD CANNOT BE IGNORED. THE QUESTION IS NOT WHETHER A C IRCULAR CAN OVER-RIDE OR DETRACT FROM THE PROVISIONS OF THE A CT. THE QUESTION IS WHETHER THE CIRCULAR SEEKS TO MI TIGATE THE RIGOR OF A PARTICULAR SECTION FOR THE BENEFIT OF THE ASSESSEE IN CERTAIN SPECIFIED CIRCUMSTANCES. SO LONG AS A CIRCULAR IS IN FORCE, IT WOULD BE BINDING ON THE DEPARTM ENTAL AUTHORITIES, IN VIEW OF THE PROVISIONS OF SEC TION 119 TO ENSURE A UNIFORM AND PROPER ADMINISTRATION AN D APPLICATION OF THE ACT. THUS, THE QUESTION W AS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVEN UE. THE LEARNED COUNSEL ALSO RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF SPACE FINANCIAL SERVICES (SUPRA), IN WHICH IT WAS HELD THAT AFTER CAREFUL CONSIDERATION OF TH E ISSUE, IT IS FOUND THAT THERE IS NO POSSIBILITY OF RECOVERY O F LOAN OF RS.1,70,70,000/- FROM SFL AND ASEIL. IN VIEW THEREOF, THE CLAIM OF BAD DEBT IN THIS REGARD WAS A LLOWED AS THE AMOUNT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT . IN VIEW THEREOF, IT WAS FURTHER HELD THAT THE PENAL INTEREST ON THAT AMOUNT WAS ALSO LIABLE TO BE WRITTEN OFF AS I RRECOVERABLE. THEREFORE, THE QUESTION OF PROVIDING FOR PENAL I NTEREST DID NOT ARISE. ACCORDINGLY, IT WAS HELD THAT THE LOWE R AUTHORITIES WERE NOT CORRECT IN MAKING THE ADDITION OF RS. 3,41,400/- ON ACCOUNT OF PENAL INTEREST ON ACCRUAL BASIS. WE HAVE CONSIDERED THESE SUBMISSIONS OF THE LEARNED COUN SEL. WE FIND THAT THE REAL ISSUE IN THE CASE OF UCO BANK WAS REGARDING THE APPLICABILITY OF THE CIRCULAR OF TH E BOARD IN RESPECT OF INTEREST ON STICKY ADVANCES IN RE SPECT OF BANKING COMPANIES. THE CIRCULAR DATED 9.10.1984 INST RUCTED THAT INTEREST IN RESPECT OF DOUBTFUL DEBTS CREDITE D TO SUSPENSE ACCOUNT BY BANKING COMPANIES WOULD BE SUBJECT TO TAX, BUT INTEREST CHARGED IN AN ACCOUNT, WHERE THERE HAS BEEN NO RECOVERY FOR THREE CONSECUTIVE YEARS, WOULD NOT BE SUBJECT TO TAX IN THE FOURTH YEAR AND ONWARDS. IT WAS ALSO PROVIDED 16 THAT IF THERE WAS ANY RECOVERY IN THE FOURTH OR A LATER YEAR, THE ACTUAL AMOUNT RECOVERED WOULD BE SUBJE CT TO TAX IN THE RESPECTIVE YEAR. THE DECISION OF THE HON BLE SUPREME COURT WAS THAT THE CIRCULAR LESSENED THE RIG ORS OF THE STATUTORY PROVISION. SINCE THE CIRCULAR WAS I SSUED IN RESPECT OF ASSESSMENT OF BANKING COMPANIES, TH E SAME IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. HOWEVER, IT IS ALSO A FACT THAT THE ASSESSEE HAS NOT PROVIDE D FOR THE INTEREST IN THE BOOKS OF ACCOUNT BY FOLLOWING C ONSERVATIVE ACCOUNTING POLICY. THUS, THE FACTS ARE DIST INGUISHABLE. IN THE CASE OF SPACE FINANCIAL SERVICES (SUPRA), THE TRIBUNAL HAD ALLOWED THE LOAN AS BAD DEBT AND CONSEQU ENTLY IT CAME TO THE CONCLUSION THAT EVEN IF INTEREST HAD BEEN PROVIDED, THE SAME WAS LIABLE TO BE WRITTEN OFF . THUS, IT WAS ALSO HELD THAT INTEREST INCOME DID NOT ACCRUE TO THE ASSESSEE. IN THE CASE AT HAND, THE ASSESSEE HAS NOT WRITTEN OFF THE PRINCIPAL AMOUNT. THEREFORE, THE RATI O OF THIS CASE IS ALSO NOT APPLICABLE. HOWEVER, WE ARE OF THE VIEW THAT SINCE PRINCIPAL AMOUNT HAS NOT BEEN RECOVERED OV ER A LONG PERIOD, THERE IS NO POSSIBILITY AS OF NOW FOR THE RECOVERY OF THE INTEREST AND LITIGATION COST AWARDED TO TH E ASSESSEE. NO LEGAL RIGHT HAS BEEN CREATED IN FAVOUR OF THE ASSESSEE AS THE AWARD HAS NOT BEEN MADE A RULE OF THE C OURT. IN SUCH CIRCUMSTANCES, THE ASSESSEE WAS RIGHT IN N OT PROVIDING FOR THE INTEREST IN THE BOOKS OF ACCOUNT. 6.7 THE LEARNED COUNSEL ALSO ARGUED THAT THE I NTEREST AND THE LITIGATION COSTS DID NOT PERTAIN TO ONE Y EAR AND, THEREFORE, THE WHOLE OF THE AMOUNT COULD NOT HAVE BEEN TAXED IN THE ASSESSMENT OF THIS YEAR ONLY. IT IS CLEAR FROM THE AWARD THAT THE INTEREST WAS GRANTED AT 5.5% P .A. AND, THEREFORE, THE INTEREST PERTAINED TO VARIOUS YE ARS. HOWEVER, THE DETAILS OF LITIGATION CHARGES HAVE NOT BE EN FILED BY THE ASSESSEE. THEREFORE, WE ARE NOT IN A POSITI ON TO FURNISH ANY FINAL FINDING IN THIS MATTER. 6.8 IN THE RESULT, GROUND NO.2 IS ALLOWED. 17 10. IN THIS DECISION, THE TRIBUNAL HAS ALSO TAKEN A VIEW THAT SINCE PRINCIPAL AMOUNT HAS NOT BEEN RECOVERED OVER A LONG PERIOD, T HERE IS NO POSSIBILITY AS OF NOW FOR THE RECOVERY OF THE INTEREST AND LITIGAT ION COST AWARDED TO THE ASSESSEE, NO LEGAL RIGHT HAS BEEN CREATED IN FAVOUR OF THE ASSESSEE AS THE AWARD HAS NOT BEEN MADE THE RULE OF THE COURT; AND IN SUCH CIRCUMSTANCES, THE ASSESSEE WAS RIGHT IN NOT PROVIDING FOR THE INT EREST IN THE BOOKS OF ACCOUNT. 11. IN THE LIGHT OF THE FINDING GIVEN BY THE TRIBUN AL IN THE ASSESSMENT YEAR 2004-05 AS REPRODUCED ABOVE, IT IS CLEAR THAT THE AWARD ALSO DID NOT BECOME THE RULE OF ANY COURT IN THE PRESENT PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06 AND THEREFORE, NO ENFORCEAB LE RIGHT HAD ACCRUED TO THE ASSESSEE IN THIS YEAR, WHICH COULD LEAD TO THE CONCLUSION THAT INTEREST INCOME HAD ACCRUED TO THE ASSESSEE IN THE YEAR UNDE R CONSIDERATION. 12. SINCE A FINDING HAS ALREADY BEEN GIVEN BY THE C OORDINATE BENCH ON THE SAME SET OF FACTS IN THE ASSESSMENT YEAR 2004-05, W E DO NOT FIND IT APPROPRIATE TO RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR FURTHER EXAMINATION OF THE MATTER AS SUGGESTED BY THE LEARN ED DR. 13. RESPECTFULLY FOLLOWING THE FINDING AND DECISION OF THE TRIBUNAL ON THE SAME SET OF FACTS, GIVEN IN THE ASSESSMENT YEAR 200 4-05, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITIO N ON ACCOUNT OF INTEREST 18 ALLEGEDLY ACCRUED TO THE ASSESSEE. THUS, GROUND NO .1 RAISED BY THE REVENUE IS REJECTED. 14. GROUND NO.2 IS WITH REGARD TO THE ISSUE AS TO W HETHER DEPRECIATION ON UPS IS TO BE ALLOWED AT 60% OR AT NORMAL RATE OF 25 %. 15. THE CLAIM OF THE ASSESSEE OF DEPRECIATION ON LA N/WAN AND UPS @ 60% HAS BEEN REDUCED TO 25% BY THE AO BY OBSERVING THAT LAN/WAN AND UPS ARE NOT ESSENTIAL PART OF COMPUTER SYSTEM BUT C AN ONLY BE TREATED AS PLANT. 16. ON AN APPEAL, THE LEARNED CIT(A) ALLOWED THE AS SESSEES CLAIM AFTER FOLLOWING THE DECISION OF TRIBUNAL, `F BENCH, DELH I IN THE CASE OF EXPEDITORS INTERNATIONAL (INDIA) PVT. LTD. VS. ACIT , 118 TTJ 652 (DEL), WHERE IT WAS HELD THAT PRINTERS, SCANNER, UPS WOULD FORM INTEGRAL PART OF THE COMPUTER AND AS SUCH, THEY ARE ELIGIBLE FOR DEPRECI ATION AT A HIGHER RATE AS APPLICABLE TO THE COMPUTER. 17. BOTH THE PARTIES WERE HEARD AND ORDERS OF THE A UTHORITIES BELOW HAVE BEEN PERUSED. 18. IN THE CASE OF CIT VS. BSES YAMUNA POWERS LTD. (ITA NO.1267/2010), DATED 31 ST AUGUST, 2010, THE HONBLE HIGH COURT HAS UPHELD THE ORDER OF THE TRIBUNAL IN ALLOWING THE DEPRECIAT ION @ 60% ON COMPUTER PERIPHERALS AND ACCESSORIES SUCH AS PRINTERS, SCANN ERS AND SERVER ETC. IN THAT 19 CASE, THE TRIBUNAL HAD FOLLOWED THE DECISION OF COO RDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SAMIRAN MAJUMDAR (2 006) 98 ITD 119 (KOL.) AND IN THE CASE OF EXPEDITORS INTERNATIONAL (INDIA) (P) LTD. (SUPRA). 19. RESPECTFULLY FOLLOWING THE AFORESAID DECISION O F THE HONBLE DELHI HIGH COURT CONFIRMING THE TRIBUNALS ORDER, WE UPHO LD THE ORDER OF THE LEARNED CIT(A) IN ACCEPTING THE ASSESSEES CLAIM OF DEPRECIATION @ 60% ON UPS AD LAN/WAN. THUS, THIS GROUND NO.2 RAISED BY T HE REVENUE IS ALSO REJECTED. 20. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 21. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 15 TH JULY, 2011. SD/- SD/- (SHAMIM YAHYA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 TH JULY, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.