1991 (6) TMI 3 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal's finding was perverse in law in applying the decisions of CIT v. Orient Supply Syndicate and Shalimar Chemical Works Pvt. Ltd. v. CIT for allowing a deduction of market fees.
2. Whether the Tribunal was justified in holding that the claim of deduction of market fees was an allowable deduction in the assessment year 1983-84.

Summary:

Issue 1: Tribunal's Finding and Application of Precedents
The Tribunal's finding was challenged on the grounds that it was perverse in law for applying the decisions in CIT v. Orient Supply Syndicate [1982] 134 ITR 12 (Cal) and Shalimar Chemical Works Pvt. Ltd. v. CIT [1987] 167 ITR 13 (Cal) to allow a deduction of market fees amounting to Rs. 3,07,334. The Tribunal held that the liability became enforceable in the assessment year 1983-84 because the demand was made during the accounting period by the Collector on March 4, 1983. The Tribunal relied on the judgments of this court in the cases of CIT v. Orient Supply Syndicate and Shalimar Chemical Works Pvt. Ltd. v. CIT, which allowed similar deductions when the liability became real and enforceable in the relevant year, even if it was referable to earlier years. The court found that the principles laid down in these cases were applicable to the present case and thus answered the question in the negative, in favor of the assessee.

Issue 2: Justification of Deduction in Assessment Year 1983-84
The Tribunal justified the deduction of Rs. 3,07,334 as market fees in the assessment year 1983-84. The Tribunal accepted the contention that the liability became enforceable in this assessment year because the demand was made during the accounting period by the Collector on March 4, 1983. The court noted that the statutory liability was created when the Government of Haryana issued the Ordinance and when the Market Committee of Sirsa asked the assessee to deposit the amount by December 10, 1980. However, the liability became real and enforceable in the subsequent year, making it an allowable deduction for the assessment year 1983-84. The court affirmed the Tribunal's decision and answered the question in the affirmative, in favor of the assessee.

Conclusion:
Both questions were answered in favor of the assessee, with the court affirming that the Tribunal's application of previous judgments was appropriate and that the deduction of market fees was justified in the assessment year 1983-84. There was no order as to costs.