Rajasthan State Beverages Corporation Limited V. Assistant Commissioner of Income Tax, Circle-6, Jaipur

ITA/105/2012

AI Insights

The case involves the Rajasthan State Beverages Corporation Limited (appellant) challenging the decision of the Income Tax Appellate Tribunal, which had confirmed the orders of the Assessing Officer and the Commissioner of Income Tax (Appeals). The dispute centered on whether demurrage charges of Rs. 7,70,806, which were exempted or waived by the appellant during the accounting year, should be considered as income 'accrued' for tax purposes under the mercantile system of accounting. The appellant argued that these charges, not being realized or receivable, should not be taxed as income. The court examined various precedents and the principles of real income taxation to arrive at its decision.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 798462 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 11-09-2017
• Assessment Year: misc
• Other Referred Cases: Godhra Electricity Co. Ltd. vs. Commissioner of Income Tax, CIT vs. Shoorji Vallabhdas & Co., H.M. Kashiparekh & Co. Ltd. vs. CIT, CIT vs. Birla Gwalior (P) Ltd., Poona Electric Supply Co. Ltd. vs. CIT, Shiv Parkash Janakraj & Co. (P) Ltd. vs. Commissioner of Income Tax, Commissioner of Income Tax vs. Balarampur Commercial Enterprises Ltd., Commissioner of Income Tax vs. Giriraj Udyog (P) Ltd., Commissioner of Income Tax vs. Rajasthan Financial Corporation
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K D MATHUR; PRATEEK KEDAWAT; R B MATHUR
• Assessee Lawyers: SANJAY JHANWAR; ARCHANA
• Keywords: Demurrage charges; Income tax appeal; Mercantile system of accounting; Real income; Taxable income
• Section: 271(1)(c)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 105 / 2012 Rajasthan State Beverages Corporation Limited Having Its Principal Office At Vitta Bhawan, D-Block, First Floor, Jaipur Through Its General Manager, Aged About 50 Years, (Finance), Sh. Sarvesh Tiwari S/o Sh. G.l. Tiwari, R/o Milap Nagar, Tonk Road, Jaipur ----Appellant Versus Assistant Commissioner of Income Tax, Circle-6, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sanjay Jhanwar with Ms. Archana For Respondent(s) : Mr. K.D. Mathur and Mr. Prateek Kedawat for Mr. R.B. Mathur _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 11/09/2017 1. By way of this appeal, the assessee has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the assessee confirming the order of A.O. as well as CIT(A). 2. While admitting the matter on 24.09.2012, the Court framed the following substantial questions of law:- “1.Whether under the facts and circumstances of the case and in law the order passed by the learned ITAT is not perverse, arbitrary and without application of mind? 2.Whether the demurrage charge to the tune or Rs.7,70,806/- itself exempted/waived by the assessee during the accounting year itself can be considered to be an income ‘accrued’ to the assessee under mercantile system of accounting for holding it as taxable income of the assessee under the provisions of Income Tax Act, (2 of 13) [ITA-105/2012] 1961? 3.Whether the compass/ambit of the provisions contend under Income Tax Act, 1961 is not restricted to taxing of ‘real income’ of an assessee only and cannot be stretch further to tax an income which has neither received nor receivable and is therefore hypothetical in nature?” 3. Brief facts of the case are that the appellant Corporation is carrying on the business of canalizing the sale of Indian made foreign liquor (IMFL) and Beer and to regulate the liquor distribution in the State of Rajasthan. 4. Counsel for appellant has taken us to balance sheet as at 31.03.2007 and he has also taken us to the page 47 and 50 of Second Annual Report 2006-07 of the assessee which reads as under:- Auditor’s Report Reply (f) Refer Note No. 08 in Notes on accounts during the year company has sold unapproved brands for Rs. 19,81,205/- which is contrary to LSP 2007. Demur-rage charges of Rs. 7,70,806/- not credited to profit & loss account on sale of unapproved brand. Thus the profit are understand by Rs. 7,70,806.00 and consequently Loans and Advanaces are understated by Rs. 5,00,080/- and Current liabilities are overstated by Rs. 2,70,726.00/-. Demurrage charges, if any, upto 31.03.06 on these brands were recovered. Considering slow moving nature of these brands and respective manufacturers are no longer as sociated and registered their brands to Corporation, leave no option to Corporation, but to exempt the demurrage charges, if any. 5. He contended that authority has taken the view contrary to the following judgments of the Supreme Court:- 1. Godhra Electricity Co. Ltd. vs. Commissioner of Income Tax (1997) 225 ITR 0746 which reads as under:- “6. Under the Act income charged to tax is the income that is received or is deemed to be received in India in (3 of 13) [ITA-105/2012] the previous year relevant to the year for which assessment is made or on the income that accrues or arises or is deemed to accrue or arise in India during such year. The computation of such income is to be made in accordance with the method or accounting regularly employed by the assessee. It may be either the cash system where entries are made on the basis of actual receipts and actual outgoings or disbursements or it may be the mercantile system where entries are made on accrual basis, i.e., accrual of the right to receive payment and the accrual of the liability to disburse or pay. In CIT vs. Shoorji Vallabhdas & Co. (supra), it has been laid down: “Income-tax is a levy on income. No doubt, the IT Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt, but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialise.” This principle is applicable whether the accounts are maintained on cash system or under the mercantile system. If the accounts are maintained under the mercantile system what has to be seen is whether income can be said to have really accrued to the assessee-company. In H.M. Kashiparekh & Co. Ltd. vs. CIT (1960) 39 ITR 706 (Bom) : tc 39R. 791, the Bombay High Court had said: “Even so, (the failure to produce account losses) we shall proceed on the footing that the assessee-company having followed the mercantile system of account, there must have been entries made in its books in the accounting year in respect of the amount of commission. In our judgment, we would not be justified in attaching any particular importance in this case to the fact that the company followed mercantile system of accounting. They would not have any particular bearing in applying the principle of real income in the facts of this case.” The said view was approved by this Court in CIT vs. Birla Gwalior (P) Ltd. (supra) where the assessee maintained its accounts on the mercantile system. In that case this Court, after referring to the decision in Morvi Industries Ltd. vs. CIT 1974 CTR (SC) 149 : (1971) 82 ITR 835 (SC) : TC 39R. 720, which was also a case where the accounts were maintained on mercantile system, has said: “Hence, it is clear that this Court in Morvi Industries case did emphasise the fact that the real question for decision was whether the income had really accrued or (4 of 13) [ITA-105/2012] not. It is not a hypothetical arrrual of income that has got to be taken into consideration but the real accrual of the income.” In Poona Electric Supply Co. Ltd. vs. CIT (supra), this Court has said: “Income-tax is a tax on the real income, i.e., the profits arrived at on commercial principles subject to the provisions of the IT Act.” In that case the Court has approved the following principle laid down by the Bombay High Court in H.M. Kashiparekh & Co. Ltd. vs. CIT (supra) : “The principle of real income is not to be so subordinated as to amount virtually to a negation of it when a surrender or concession or rebate in respect of managing agency commission is made, agreed to or given on grounds of commercial expediency, simply because it takes place some time after the close of an accounting year. In examining any transaction and situation of this nature the Court would have more regard to the reality and speciality of the situation rather than the purely theoretical or doctrinaire aspect of it. It will lay greater emphasis on the business aspect of the matter viewed as a whole when that can be done without disregarding statutory language.” An acceptable formula of co-relating the notion of real income in conjunction with the method of accounting for the purpose of the computation of income for the purpose of taxation is difficult to evolve. Besides, any strait-jacket formula is bound to create problems in its application to every situation; it must depend upon the facts and circumstances of each case. When and how does an income accrue and what are the consequences that follow from accrual of income is well-settled. The accrual must be real taking into account the actuality of the situation. Whether an accrual has taken place or not must, in appropriate cases, be judged on the principles of real income theory. After accrual, non-charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee cannot be accepted. In determining the question whether it is hypothetical income or whether real income has materialised or not, various factors will have to be taken into account. It would be difficult and improper to extend the concept of real income to all cases depending upon the ipse dixit of the assessee which would then become a value judgment only. What has really accrued to the assessee has to be found out and what has accrued must be considered from the point of view of real income taking the probability or improbability of realisation in a realistic manner and dovetailing of these factors (5 of 13) [ITA-105/2012] together but once the accrual takes place, on the conduct of the parties subsequent to the year of closing an income which has accrued cannot be made ‘no income’ 7. If the matter is examined in the light of the aforementioned principles laid down by this Court, it must be held that even though the assessee-company was following the mercantile system of accounting and had made entries in the books regarding charges for the supply made to the consumers, no real income had accrued to the assessee-company in respect of those enhanced charges in view of the fact that soon after the assessee-company decided to enhance the rates in 1963 representative suits (Civil Suits Nos. 152 of 1963 and 50 of 1964) were filed by the consumers which were decreed by the trail Court and which decree was affirmed by the appellate Court and the learned single judge of the High Court and it is only on 8th Dec., 1968 that the Letter Patent Appeals filed by the assessee- company were allowed by the Division Bench of the High Court and the said suits were dismissed. But appeal were filed against the said judgment by the consumers in this court and the same were dismissed by the judgment of this Court dt. 26th Feb., 1969. Shortly thereafter, on 19th March, 1969, the Under Secretary to the Government of Gujarat wrote a letter advising the assessee-company to maintain the status quo for the rates to the consumers for at least six months and the Chief Electrical Inspector was directed to go through the account of the assessee-company from year to year and to report to the Government about the actual position about the reasonable returns earned by the assessee-company. On 16th May, 1969 another representative suit (Suit No. 118 of 1969) was filed by the consumers wherein interim injunction was granted by the Court and which was finally decreed in favour of the consumers on 23rd June, 1974. It would thus appear that appear that after the decision was taken by the assessee-company to enhance the charges it was not able to realise the enhanced charges on account of pendency of the earlier representative suits of the consumers followed by the letter of the Under Secretary to the Government of Gujarat and the subsequent suit of the consumers and during the pendency of the subsequent suit the management of the undertaking of the assessee-company was taken over by the Government of Gujarat under the Defence of India Rules, 1971 and the undertaking was subsequently transferred to the Gujarat State Electricity Board. (6 of 13) [ITA-105/2012] It is no doubt true that the letter addressed by the Under Secretary to the Government of Gujarat to the assessee-company had no legally binding effect but one has to look at things from practical point of view. [Sec : R.B. Jodha Mal Kuthiala vs. CIT (supra )]. The assessee- company, being a licensee, could not ignore the direction of the State Government which was couched in the form of an advice, whereby the assess-company was asked to maintain the status quo for at least six months and not to take steps to recover the dues towards enhanced charges from the consumers during this period. Before the expiry of the period of six months the subsequent suit had been filed by the consumers and during the pendency of the said suit the undertaking of the assessee-company was taken over by the Government of Gujarat under the Defence of India Rules, 1971 and subsequently it was transferred to the Gujarat State Electricity Board and, as a result, the assessee-company was not in a position to take steps to recover the enhanced charges. 8. The High Court has observed that the subsequent suit that was filed on 16th May, 1969 related to recovery of enhanced charges for the period subsequent to 31st March, 1969 and not prior thereto. We have, however, perused the judgment of the Joint Judge (Junior Division), Godhra dt. 20th June, 1974 in the said suit which was annexed as Annexure ‘D’ to the statement of the case. The said judgment does not show that the suit was confined to the period subsequent to 31st March,1969. On the other hand, it shows that the plaintiffs in that suit were challenging the enhancement in charges made in 1963 and had sough a declaration that the assessee-company was not entitled to recover more than 31 paise per unit for light and fans and 20 paise per unit for motive power and the trial Court, while decreeing the said had given a declaration in these terms. The said declaration is not confined to the period subsequent to 31st March, 1969. 6. In Commissioner of Income Tax vs. Balarampur Commercia Enterprises Ltd. (2003) 262 ITR 0439 as under :- 15. The assessee cannot escape the liability to tax by omitting to make an entry or making a wrong entry in the accounts. The date of taxability of income is the date when the appropriate entries are made or should be made in the accounts in accordance with the method of accounting regularly employed by the assessee. The substantive part of s. 36(1) (vii) makes it clear that the (7 of 13) [ITA-105/2012] income is to be computed ‘in accordance with the method of accounting regularly employed’. The ITO may include in the computation of income an amount which does not figurre in the accounts but the inclusion of which is required by the assessee’s method of accounting that is to say, the ITO may, without deviating from the assessee’s method, make such adjustment in the P&L a/c as the necessary for giving full and true effect to that method itself. Having adopted a regular method of accounting, the assessee cannot be allowed to change it or depart from it for a particular year or for part of the year or in respect of particular transaction. 17. It is settled that the income of the assessee is to be determined according to the provisions of the Act in consonance with the method of accountancy regularly employed by the assessee. The method of accounting regularly employed by the assessee helps the computation of income, profit and gains under s. 28 of the Act and the taxability of that income under the Act will then have to be determined. The question is, whether the income, which has been computed according to the method of accounting followed regularly by an assessee can be diminuted or diminished by any notion of real income. This has to be judged in the light of the well- settled principles. 22. The concept of real income is now an accepted proposition. But it has to be applied in a given case depending on the facts and circumstances. No strait- jacket formula can be involved. In the mercantile system of accounting, income accrues as soon it is due to accrue. Such accrual of income is required to be reflected in the book of accounts. The system of accounting cannot be altered or changed. Once it is entered in the book of account that the income has accrued, the same becomes chargeable to tax. Such chargebility continues even if the assessee waives or gives up the interest subsequently. But despite the income having accrued under the mercantile system, the income is not entered in the books of account in the relevant previous year, then such non- entry can be construed to establish that the income has not accrued. But this is dependent on the facts and circumstances of the case and the conduct of the assessee. Whether the facts and circumstances of the case and the conduct of the asseessee establish that the income has not accrued is a question of afct. The AO has to decide this question having regard to the facts and circumstances of each case. The subsequent attempt to recover the income will not negative the non-entry in the books of accounts and render the income to have accrued. If the debt becomes bad and the assessee treats (8 of 13) [ITA-105/2012] the same as bad debt and such treatment is apparent from the facts of the case and the conduct of the assessee and it can be so concluded by the AO, in that event, subsequent attempt to recover the bad debt would not mean that the income had accrued in that particular previous year. It is not when the amount becomes recoverable and not when the assessee gives up the claim that the debt becomes bad. It is not that if the debt is not easy to recover, the debts become bad. A debt becomes bad when the recovery is commercially inviable. At the same time, it is not that when the debt becomes irrecoverable, the debt becomes bad but depends on the facts of each case to ascertain whether the debt was bad. This bad debt is to be determined on the basis of the evidence that might be on record with relation to the facts as well as the conduct of the parties as to how it was treated. If it appears that after a debt is treated to be a bad debt and then in the subsequent year the debt appears to have been recovered, then it would be treated to be deferment of income to avoid taxability in a particular year. By introducuing the concept of real income, an assessee cannot be allowed to defer an income to the subsequent previous year in order to avoid taxability of the income in the relevant previous year. But filing of suit for recovery of the amount would definitely be a factor coupled with the conduct of the parties to establish that the debt has become bad debt and requires to be recovered through a long drawn proceedings of a suit. When the assessee treats a debt to have become bad and waives the accrual of the income by omitting to enter the income in the books of account, then the concept of real income comes into play. The accounting is finalized at the end of the previous year, therefore, even if a decision is taken after the end of the previous year, but within a reasonable proximity pursuant to a consideration, which weighed with the assessee during the course of the previous year fructifying into a formal resolution after the close of the previous year, then the decisions cannot be said to be inapplicable in respect of the relevant previous year for which the decision was taken. If in case there was nothing to indicate that this question was not under consideration of the assessee before closing of the previous year, then the question might be otherwise the concept of reality of the income and the actuality of the situation depending on the conduct of the parties are relevant factors which go to the making of the accrual of the income. But one accrual takes place and income accrues, the same cannot be defeated by any theory of real income. (9 of 13) [ITA-105/2012] 23. In the present case, it appears that the decision was taken on 1st Aug, 1987, yet it would be applicable in respect of previous year beginning from 1st July, 1986, as it appears from its implementation from January, 1988. A subsequent failure was not conceived of by the assessee at the time when the decision was taken. Therefore, the same would not be relevant for the purpose of treating the situation differently when one kind of treatment was given by the assessee to the accrual of the income. In the present case, the assessee had omitted to enter the accrual of the income in the books of accounts and, therefore, the conduct had supported his case that the assessee had treated that there was no income in reality. In the present case, even though income had accrued, yet it cannot be said to have been accrued in reality even if the mercantile system is followed when it reality no interest had accrued and subsequent revival would not make the same liable to tax and for that particular year it may be liable to tax after it succeeds and the amount is received by the asessee. But it is to be seen whether having regard to the facts and circumstances of the case, the assessee was abusing or misusing the concept of real income or not. In the present case, there is no allegation that there is any male fide on the part of the assessee for postponing or shifting the income to subsequent years for the purpose of taxation. In fact, the suit is still pending and it is yet to be decided. 24. Applying the test as discussed above, in the present case, in our view, the income cannot be treated to have been accrued as was rightly found by the learned Tribunal. We, therefore, answer the question in the affirmative in favour of the assessee. 7. In case [A] Shiv Parkash Janakraj & Co. (p) Ltd. vs. Commissioner of Income Tax (1987) 112 ITR 872 (P&H) as under:- 11. The submissions made by Mr. Awasthy are not wholly without force but we are of the view that the decision of the case stands concluded against the Revenue by a recent judgment of their Lordships of the Supreme Court in CIT vs. Birla Gwalior (P) Ltd. 1973 CTR (SC) 349: (1973) 89 ITR 266 (SC). In that case, the assessee- respondent was a managing agent of the National Bearing Co. Ltd. And Gwalior Rayon & Silk Manufacturing Co. As managing agent of the former company it was entitled to receive a commission of 12 1/2percent. on the net profits of the managed company together with a sum of Rs. 18,000 as office allowance. In the case of the latter (10 of 13) [ITA-105/2012] company it was entitled to get an office allowance of Rs. 30,000 per year in addition to the agreed managing agency commission. In the relevant accounting years the assessee gave up the managing agency commission due from both the managed companies. It also gave up the office allowance due from Gwalior Rayon & Silk Manufacturing Company. The question arose whether the amounts of Rs. 30,00 representing the office allowance, it was held by the Tribunal that because of the sacrifices made by the assessee-company, the finances of the managing company improved subsequently as a result of which the assessee-company was able to earn more profits in the later years. On the basis of this finding, the Court held that the Tribunal was fully justified in coming to the conclusion that the expenditure incurred came within the scope of s. 10(2)(xv) of the Act. With regard to the other matter, the Court observed as under: “Now turning to the question regarding giving up of the commission, as mentioned earlier, the assessee was maintaining its accounts on the basis of the mercantile system. Its accounting year was the financial year. It gave up the commission after the end of the financial year.On the basis of these facts it was contended on behalf of the Revenue that the commission had accrued before it was given up. Hence, it cannot be said that the assessee had not earned the commission in question. Therefore, the assessee’s case cannot be considered under s. 10(1). We are unable to accept this conception as correct. As mentioned earlier, no due date was fixed for the payment of the commission under the managing agency agreements. The commission receivable could have been ascertained only after the managed company made up its accounts. Hence, the mercantile system cannot lead to the conclusion that the commission had accrued to it by the end of the relevant accounting year.” 12. As observed earlier, no interest had actually been paid to the assessee-company nor had it made any debit entries in its account books. No date was fixed in the agreement of loan regarding the payment of the interest. In these circumstances, even if the assessee-company had adopted the mercantile system of accounting, it cannot be said that income from interest had actually accrued to it on October 31, 1970. 13. Mr. Awasthy then relied upon CIT vs. Dr. Sham Lal Narula (1972) 84 ITR 625 (Punj), for the proposition that where the rate of interest is specified, it must be deemed to accrue at the end of the year. That case is also distinguishable. Because the assessee in that case had been paid accumulated interest on the amount awarded by the Land Acquisition Collector as compensation to (11 of 13) [ITA-105/2012] him, and the Division Bench clearly observed that the interest on the compensation amount was paid to the assessee in order to compensate for the loss of income which would have accrued to him year after year. The analogy of that case cannot be extended to the case of a loan advanced under an oral agreement. 8. In case of Commissioner of Income Tax vs. Giriraj Udyog (P) Ltd. (2005) 273 ITR 495 (All) as under:- “However, on scrutiny of the facts as found by the Tribunal, we are of the considered opinion that the judgment of the Supreme Court given in the case of Birla Gwalior (P) Ltd. (supra), is nearer on the facts than to the judgment given in the case of Shiv Prakash Janakraj & Co. (P) Ltd. (supra). At this stage it is apt to recapitulate the facts, as found by the Tribunal, to which no dispute was raised by the Department. The Tribunal has found that no date was fixed for payment of interest. Secondly the borrowers were agriculturists or stores who stored potatoes in the cold storage of the assessee. The genuineness of the money advanced by the assessee to the stores, etc., was also not in dispute. The Tribunal has also come to the conclusion that the Department has failed to discharge the burden to prove that interest, in fact, accrued to the assessee and, as such, the inclusion of interest income were unjustified. The assessee decided not to charge the interest before the end of the accounting year relevant to the assessment year in question. In the case of Shiv Prakash Janakraj & Co. (P) Ltd. (supra), the finding of the Tribunal, which heavily weighed in the Supreme Court was that the assessee-compnay made advances to the firm in which the directors/shareholders of the assessee-company were interested and it was a case of collusion between them to evade tax liability. In the case in hand there is no such finding by any of the authorities including the Tribunal. In contra the finding is that the loan transactions were genuine transactions. The sundry debtors stored potaotes in the storage of the assessee- company. In the absence of fixation of any date or accrual of interest it cannot be said that any interest accrued to the assessee-company. Also the assessee- company before the close of the accounting year decided not to charge any interest from its debtors whose outstandings were for more than six months. 7. In the absence of any finding that waiver of interest was actuated by any other consideration other than the (12 of 13) [ITA-105/2012] business expediency on the totality of the facts of the case, the view taken by the Tribunal is legally correct 8.Therefore, the finding of the Tribunal that even if the assessee is maintaining the accounts in the mercantile system, the interest did not accrue to it, is on terra firma. We find no illegality in the order of the Tribunal. The question of law is decided in the affirmative, i.e., against the Revenue and in favour of the assessee.” 9. In case of Commissioner of Income Tax vs. Rajasthan Financial Corporation (1994) 205 ITR 0478 as under :- “We have considered over the matter. Normally, we would have agreed with the submission of the learned counsel for the Revenue that in the absence of written communication the interest will be deemed to have accrued irrespective of the fact that it has no been received. The assessee has produced the copy of the minutes which was recorded by the Secretary of the assessee with regard to his discussion with Jt. Secretary, Govt. of India in which the Jt. Secretary had informed him that the assessee’s claim for interest had been rejected. The said minutes have been recorded in the regular course of its business by the assessee-company and have not been disbelieved. It is mentioned in the order that there was a charge in the policy of the Govt. of India with regard to the payment of interest subsequently which covers even the period under dispute. In these circumstances, the Tribunal was justified in upholding the order of CIT with regard to deletion of the amount of rs.56,493 which was added by the ITO as interest accrued in the income of the compnay.” 10. Learned counsel has further taken us to the order of AO which reads reads as under:- “4. Demurrage charges:- It is also mentioned in the annexure to he audit report that during the year the company has sold unapproved brands for Rs. 19,81,205/- which was contrary to liquor supply policy 2007. Demurrage charges of Rs. 7,70,806/- were not credited to the profit and loss account on account of sale of unapproved brands. Thus the profits of the company were under stated by Rs. 7,70,806/-. The A/R of the assessee could not furnish any convincing reply to the same. Accordingly, the same is added to the returned income of the assessee. Penalty proceeding u/s (13 of 13) [ITA-105/2012] 271(1)(c) are intiated for concealing the particular of this income.” 11. He has further invited our attention to the order of Tribunal which is as under:- “7. We have heard both the parties. The assessee is following the mercantile system of accounting. In this system, one has to ascertain as to whether any item of profit or expenditure has accrued or not. An entry in the books of account is not conclusive to decide the issue. Sutlej Cotton Mills Ltd. V CIT 116 ITR 1 (S. C.) CIT V Shoorgi Vallabhdass arcl Co. 46 ITR 144 (S.C.) CIT V India Discount Co. Ltd. 75 ITR 191 (S.C.) Tuticorin Alkali and chemicals and Fertilisers Ltd. V CIT 227 ITR 172 (S.C.)” 12. We have heard learned counsel for the parties. 13. Taking into consideration the judgment in Godhra Electricity Co. Ltd. vs. Commissioner of Income Tax (1997) 225 ITR 0746, the issue is required to be answered in favour of assessee and against the Department. 14. The appeal stands allowed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Chouhan/46 "