JUDGMENT
1. The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law Under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as the Act, for opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the amount of Rs. 1,00,298 had not accrued to the assessee and could not be taxed as its income for the assessment year 1975-76 ?"
2. Briefly stated facts giving rise to the present reference are as follows:
The assessee is a firm carrying on business of purchase and sale of fertilisers at Kanpur. During the year under consideration, the distribution of fertilisers was controlled by the State Government and the assessee could charge the sale price as fixed by the U. P. Government from time to time. With effect G from June 14, 1974, the Government of Uttar Pradesh issued an Ordinance through which the fertiliser dealers were required to sell their stocks as on May 31, 1974, at the old rates. The fertiliser dealers challenged this order of the U. P. Government but the High Court upheld it. The dealers then went to the Supreme Court which by an interim order allowed the dealers to sell the H fertilisers at the new rates provided the extra amount so realised by them was deposited in a separate account with the district magistrate and the bank passbook of the savings bank account was pledged with the district magistrate, Kanpur. The Income-tax Officer, while examining the case, found that as a result of the aforesaid order of the Supreme Court, the assessee had deposited only Rs. 10,000 out of the cost price, with the post office and the balance of Income Tax Reports 22-11-2004 44 Rs. 1,00,298 was not deposited with the post office but was shown as a Iiability in the balance-sheet. After examining the assessee's reply, he came to the conclusion that the liability of Rs. 1,00,298 was not accepted by the assessee nor this amount was deposited in the saving bank account in pursuance of the order of the Supreme Court. He, therefore, added this amount of Rs. 1,00,298 as the income earned by the assessee during the year under consideration.
3. The assessee challenged the addition before the Commissioner of Income- tax (Appeals), Kanpur, who deleted this addition following the order dated March 26, 1977, of the Appellate Tribunal in I. T. A. No. 2126 (All) of 1975-76. He held that the amount of Rs. 1,00,298 was not taxable in this year as the assessee had no right to the sale proceeds in this year.
4. Aggrieved by this order of the Commissioner of Income-tax (Appeals), the Department came up in appeal before the Appellate Tribunal which vide its order dated January 15,1983, held that the facts and circumstances of the case being identical with those in the case of Govind Prasad Prabhu Nath, Sultanpur, and following its earlier decision dated March 26, 1977, in that case dismissed the defendant's appeal.
5. We have heard Shri A. N. Mahajan, learned counsel for the Revenue, and Shri Vikram Gulati, learned counsel for the respondent-assessee. At the outset it may be mentioned here that the matter in this case of Govind Prasad Prabhu Nath, Sultanpur, came up for consideration of this court in the reference filed by the Commissioner of Income-tax. This court has held that the amount rea- E lised and deposited by the fertiliser dealer with the district magistrate did not accrue in that year and could not be taxed. The said decision is reported in CIT v. Govind Prasad Prabhu Nath [1988] 171 ITR 417 (All).
6. Shri A. N. Mahajan, learned counsel relying upon the decision of the hon'ble apex court in the case of K. C. P. Ltd. v. CIT [2000] 245 ITR 421, submitted that any amount which is realised as sales price is a trading receipt whether or not it is shown in the account books of the assessee or is got deposited under the orders of this court and, therefore, the Tribunal has committed an error in holding the receipt of Rs. 1,00,298 being the excess amount of price on the sale of fertilisers as on stock on May 31, 1974, to be not the income of the assessee.
7. It may be mentioned here that the apex court in the case of K. C. P. Ltd. [2000] 245 ITR 421 was considering the case where a sugar mill had challenged the fixation of levy price of sugar by the Government of India. By an interim order dated March 31, 1970, passed by the Andhra Pradesh High Court the operation of the said notification had been stayed. It has further passed a mandatory order permitting the petitioners therein to sell sugar at the rate prevailing prior to the said notification pending further orders on the petition. The apex court found that the excess amount realised by the sugar company was in the ordinary manner of its business activities, the amount A was retained by the assessee as price of the sugar sold by it though the right of the appellant-company to realise the amount was the subject of dispute. The interim order of the High Court, looking to the phraseology employed therein, would not make any difference in the nature of receipts by the assessee. It distinguished the decision of the Karnataka High Court in the case of CIT v. Mysore Sugar Company Ltd. [1990] 183ITR113 and the Andhra Pradesh High Court in the case of CIT v. Chodavaram Co-operative Sugars Ltd. [1987] 163 ITR 420 on the ground that from the facts stated by the High Court that in each case the assessee has the right to realise the excess price was the subject matter of dispute pending in the High Court and the High Court has passed different interim orders pursuant to which respective assessees were collecting the excess price and though the interim orders of the High Court differently worded phrases, one common view of all the orders is that the realisation of the excess price by the respective assessee was hedged by several conditions, one of which was that the assessee shall refund the amount received in excess of the price fixed in the event of the pending dispute being decided adversely against the assessee by the court. Thus, the receipt of the amount by the assessee was clearly associated with a liability to refund the amount which was ascertainable and quantified. Applying the principle laid down by the apex court in the case of K. C. P. Ltd. [2000] 245 ITR 421 to the facts of the present case, we also find that in terms of the interim order passed by the apex court, the assessee was required to deposit the entire amount of excess price with the district magistrate in a bank account specifically opened for that purpose and the pass book had to be pledged with the district magistrate.
8. In this view of the matter, the assessee had no right to the amount so realised and was the subject matter of the final orders which may be passed by the apex court. Thus, the amount did not accrue to the assessee and, therefore, it cannot be treated as a trading receipt for the assessment year in question.
9. In view of the foregoing discussions, we answer the question of law referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. However, there shall be no order as to costs.