Judgment:
U.L. Bhat, C.J.
1. The Income-tax Appellate Tribunal has, at the instance of the Revenue, referred the following question under Section 256(1) of the Income-tax Act, 1961 (for short, 'the Act') :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the right to receive the transport charges relatable to the assessment year 1978-79 would be assessed only in the year in which the dispute was finally settled and thereby setting aside the order of the Commissioner of Income-tax under Section 263 of the Income-tax Act, 1961 ?'
2. The assessee, an association of persons, was carrying on the business of milling and supplying wheat to the Army Purchase Organisation under a specific agreement. Thereby the assessee was to receive transportation charges for carrying wheat and wheat products at the agreed rates. The contract commenced on May 1, 1976. The assessee submitted a bill for transportation charges treating the distance covered as 5.5 kms. Subsequently, the assessee found the actual distance was more than 5.5 kms and prepared a supplementary bill for Rs. 1,96,906. This was for the previous year corresponding to the assessment year 1978-79. The assessee, which followed the mercantile system of accounting, did not include the amount covered by the supplementary bill in its account for the relevant year and submitted the return accordingly. The Income-tax Officer accepted the return and passed an order of assessment. The Commissioner, invoking his power under Section 263 of the Act, cancelled the assessment order taking the view that the amount of the supplementary bill accrued during the relevant year and directed the Income-tax Officer to make a fresh
assessment in accordance with law. In appeal by the assessee, the Tribunal accepted the assessee's contention that it did not acquire the right to receive the amount from the Army Purchase Organisation when the supplementary bill was made and the Organisation had disputed the bill. The Tribunal also took notice of the fact that the dispute between the assessee and the Army Purchase Organisation was referred to arbitration, who held in favour of the assessee and the organisation continued the challenge in the civil court and ultimately the matter went to the High Court which held in favour of the assessee. The Tribunal held that the amount of the supplementary bill was not to be treated as income of the relevant year. It was found that the amount was shown in the return of the year in which the amount was received. The Tribunal held that the amount was not liable to be included in the total income of the assessee for the assessment year 1978-79.
3. Copies of the agreement between the assessee and the Army Purchase Organisation, the supplementary bill, the award, the civil court judgment and the High Court judgment are not before us. We are, therefore, guided by the facts as disclosed in the order of reference and the order of the Appellate Tribunal. These records show that the claim of the assessee was disputed by the Army Purchase Organisation and the dispute was ultimately settled by the High Court several years later. In the light of these facts, the view taken by the Tribunal that it cannot be said that the assessee had acquired the right to receive the amount even when the supplementary bill was submitted and the mere filing of a claim cannot give rise to a right to receive the amount, appears to be correct.
4. We, therefore, answer the question in the affirmative, that is, in favour of the assessee and against the Revenue. There shall be no direction as to costs.
5. A copy of this judgment under the signature of the Registrar and the seal of the High Court will be transmitted to the Income-tax Appellate Tribunal, Gauhati Bench, Gauhati.