1952 (1) TMI 25 - HC - Income Tax

Summary

Issues: Determination of evidence for expenditure incurred before a specific date for tax deduction.

Analysis:
The judgment pertains to a reference under Section 66(1) of the Indian Income-tax Act, focusing on the question of whether there was evidence to prove that an expenditure of Rs. 1,39,561 on coal purchase was incurred before 31st October, 1943, and the liability of the assessee to pay was ascertained before that date. The account year in question was from 1st November, 1943, to 31st October, 1944. It was established that the coal amount was supplied in June, July, and August 1943, and consumed before 1st November 1943. The assessee sought a deduction under Section 10(2)(xv) for the amount, arguing that the price was not payable until invoices were received after 31st October 1943 due to an agreement with a pool association. However, the Appellate Tribunal found no evidence to support this claim, emphasizing that the liability to pay could have been ascertained before the relevant account year.

The judgment delves into the application of Section 32 of the Indian Sale of Goods Act, which states that unless agreed otherwise, delivery of goods and payment of price are concurrent conditions. It was noted that there was no agreement to the contrary between the pool association and the assessee. Additionally, it was highlighted that the assessee maintained accounts on a mercantile basis, indicating that the expenditure was indeed incurred in the preceding year. The court clarified that the question at hand was solely regarding the existence of evidence proving the expenditure was from the previous account year. The admission that coal was purchased and consumed in the year before the relevant account year served as sufficient evidence for this finding. The responsibility fell on the assessee to provide evidence if claiming an agreement to delay payment. Thus, the court concluded that the expenditure was indeed incurred in the previous account year, as per the evidence presented.

In conclusion, the court answered the reference by affirming that evidence existed to prove the expenditure was incurred in the previous account year. The Department was granted costs amounting to Rs. 400. The judgment underscores the importance of providing concrete evidence to support claims of expenditure timing and liability ascertainment for tax purposes, particularly in cases involving agreements and concurrent conditions of goods delivery and payment.