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- Whether recovery of excise duty is allowable as a deduction under section 37 of the Income-tax Act in computing the income of the assessee for a specific assessment year. Analysis: The judgment by the High Court of Calcutta pertains to a case where the Tribunal referred a question of law regarding the deduction of excise duty under section 37 of the Income-tax Act for the assessment year 1973-74. The assessee had claimed a deduction of Rs. 17,61,161 representing central excise duty payable on manufacturing tea for various calendar years. The Tribunal found that the assessee had incurred a liability and made a physical outgoing of cash, although the amount did not reach the correct destination due to various uncertainties. The Commissioner of Income-tax (Appeals) allowed the deduction, stating that the payment was directly related to the business operation and was an allowable expenditure under section 37 of the Act. Regarding the contention raised by the Revenue that the assessee cannot claim double deduction for the same liability, the Court opined that in this unique case, where the excise duty payment was made twice under coercion of law, the assessee could claim the amount as a deduction. The Court highlighted that if the challans were fictitious and the money was not deposited, the assessee had effectively spent the money twice. The Tribunal also noted that any recovery made in the future would be taxable, and any refund or compensation received would also be accounted for accordingly. The Court further emphasized that the assessee's case was genuine, and there was no finding that the amount was paid twice to the State Bank of India. The loss incurred due to embezzlement by the assessee's agents was deemed to be part of the business operation, justifying the deduction claimed. Citing the case of CIT v. Malayalam Plantations Ltd., the Court reiterated that payments made under coercive processes of law to protect business assets or comply with statutory obligations are allowable deductions. In conclusion, the Court ruled in favor of the assessee, allowing the deduction of the excise duty amount. The judgment highlighted the unique circumstances of the case, where the payment was made twice under coercion, justifying the allowance of the deduction. The Court also emphasized the genuineness of the assessee's case and the broader scope of expenses considered allowable under section 37 of the Income-tax Act.
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