1997 (3) TMI 47 - HC - Income Tax

Summary

Issues Involved:
1. Treatment of reserve created from sales for construction of molasses tank under Molasses Control Order, 1961.
2. Allowance of bonus to agricultural staff without initial claim before Assessing Officer.

Issue 1: Treatment of Reserve from Sales:
The High Court considered whether the reserve created by the transfer from sales for the construction of a molasses tank, in compliance with the Molasses Control Order, 1961, should be included in the income of the assessee. The assessee argued that the reserve made from sales was not income but a statutory obligation. The Assessing Officer viewed it as a liability on the assessee. The Commissioner of Income-tax (Appeals) accepted the claim for certain years as diversion of income by overriding title at source. However, for other years, it was considered as application of income. The Tribunal concluded that it was diversion of income by overriding title at source due to the mandatory provisions of the Molasses Control Order, 1961. The High Court, based on a previous decision, held that the amount utilized for the statutory discharge under the Molasses Control Order was a revenue receipt and assessable to tax. Therefore, the first issue was decided in favor of the Revenue.

Issue 2: Allowance of Bonus to Agricultural Staff:
Regarding the claim of bonus to agricultural staff for specific assessment years, the assessee did not initially claim it before the Assessing Officer. The claim was raised for the first time before the Commissioner of Income-tax (Appeals) and later before the Tribunal. The Tribunal, following a relevant judgment, allowed the deduction of bonus paid to agricultural staff. The High Court noted that there was no prohibition on the Tribunal to entertain additional grounds for a just decision. Consequently, the Tribunal's decision on the second issue was upheld in favor of the assessee.

Therefore, the High Court ruled in favor of the Revenue for the first issue concerning the treatment of the reserve from sales, while deciding in favor of the assessee for the second issue regarding the allowance of bonus to agricultural staff.