Law: Income Tax Act, 1961

Section: 256,41(1)

Section 4 of the Income-tax Act, 1961 - Income - Chargeable ass - Assessment year 1976-77 - Assessee-firm dealt in fertilizers, prices of which were increased with effect from 1-6-1974 - UP Government by notification ordered that in respect of existing stock on 31-5-1974, old rates would be applicable for sale - In a writ petition challenging such notification, High Court and Supreme Court by interim orders permitted dealers to charge enhanced price on sale of fertilizers in stock on 31-5-1974 with a direction to deposit difference between increased price and old price after sale in an account pledged with District Magistrate, disposal of which would be decided by Court - ITO added such difference to assessee's business income - Whether Tribunal was justified in holding that amount of difference between enhanced price and old price of fertilizers in stock on 31-5-1970, sold during previous year, had to be treated as a mere deposit with District Magistrate, and, therefore, it could not be treated as assessee's income - Held, yes HELD The assessee realised the enhanced price in pursuance of the interim order passed by the High Court and the money was to be deposited in an account to be pledged with the District Magistrate. Therefore, the assessee's right to retain the money as its income had not been perfected. A similar controversy arose in regard to the price of levy sugar and the matter came to the High Court in Dhampur Sugar Mills Ltd. v. CIT [1991] 188 ITR 787/ 55 Taxman 182 wherein it was held that the difference in the price of sugarcane directed by the High Court to be deposited in a separate account and the price fixed under the notification was taxable under section 41(1) in the year in which the assessee actually realised the amount and that the difference could not be treated as income of the assessee in which such difference was realised as purchase price. [Para 7] Following that decision, the order of the Tribunal was to be upheld. CASES REFERRED TO Govind Prasad Prabhu Nath [IT Appeal No. 2126 (All.) of 1975-76] [Para 6] and Dhampur Sugar Mills Ltd. v. CIT [1991] 188 ITR 787/ 55 Taxman 182 (All.) [Para 7]. JUDGMENT 1. The Income-tax Appellate…

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