1999 (6) TMI 23 - HC - Income Tax

Summary

Issues:
1. Whether the amount credited by the assessee to the "Enhanced Levy Sugar Price Account" was chargeable to income tax for the relevant assessment year.
2. Whether the interest on excess amount received on delivery of levy sugar was deductible in the computation of profits and gains of the business.

Issue 1:
The High Court considered whether the amount credited by the assessee to the "Enhanced Levy Sugar Price Account" was chargeable to income tax for the relevant assessment year. The assessee collected the amount pursuant to an interim order of the High Court and contended that it did not constitute income until the dispute was finalized. The Court referred to previous decisions and held that where the right to receive payment is in dispute, no income will arise or accrue. The Court concluded that the amount collected by the assessee was not assessable as income until the dispute was resolved in favor of the assessee. Therefore, the Court answered question No. 1 in favor of the assessee and against the Revenue.

Issue 2:
The controversy in question No. 2 involved the deductibility of interest on the excess amount received by the assessee on levy sugar in two assessment years. The assessee claimed the interest as a deduction after the dismissal of the writ petition by the High Court. The Income-tax law distinguishes between actual liability and contingent liability. The Court analyzed whether the liability continued to be contingent even after the dismissal of the writ petition. It was established that in the years under consideration, the liability to pay interest was an actual liability and not contingent. The Court referred to the Supreme Court decision and held that if there is an actual liability, deduction cannot be denied even if the assessee disputes the liability. Therefore, the Court concluded that the assessee was entitled to a deduction of the interest amount in the years under consideration. As a result, question No. 2 was answered in favor of the assessee and against the Revenue.

In conclusion, the High Court resolved both issues in favor of the assessee based on legal principles and previous decisions. The judgment provided clarity on the treatment of the amount credited by the assessee and the deductibility of interest, ensuring a fair interpretation of the Income-tax law.