The Hyderabad bench of the ITAT in G V Narasa Reddy v. ITO( 125taxman) held that if there is any dispute with respect to an income, the said income cannot be said to accrue or arise unless the dispute is finally settled either by the process of law or by mutual agreement. In a further note the bench held that the assessee could even reclaim tax paid on any such incomes. In fact the assessing officer is duty bound to suo motu exclude such incomes from the computations provide on the basis of the fact available on records. Following Apex Court decision in 358 ITR 295 the Gujarat High Court held that the entire income would not be taxable in assessee’s hand in current year when contractee disputed liability to pay amount under contract. In this case the assessee raised bill as per the contract. However, on account of some dispute with ONGC, the assessee showed only 50% of the contractual amount as its income in its return on the ground that the remaining amount has not been accrued. The SC earlier emphasized on the point that one has to look at things from a practical point of view quoting from 82ITR570 as well as left an advisory for the revenue stating that there was need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers given that dispute was resolved in the subsequent accounting year and the assessee did pay tax thereon.
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