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Issues:
1. Whether there was a remission of liabilities and if the addition made by the Income-tax Officer was justified. 2. Whether the interest paid by the assessee on arrears of cane cess and cane purchase tax was admissible as a deduction. Analysis: 1. The first issue revolves around the remission of liabilities and the addition made by the Income-tax Officer. The assessee transferred liabilities to the general reserve account, including amounts disallowed in previous years. The Income-tax Officer taxed the balance as income, alleging remission of liabilities. The Appellate Assistant Commissioner reduced the addition, but the assessee challenged it. The Appellate Tribunal found that the liabilities were not written off but transferred to the general reserve account, indicating no remission. Citing legal precedents, the court held that remission cannot occur unilaterally and without creditor agreement. As there was no evidence of remission, the addition was deleted, upholding the Tribunal's decision. 2. The second issue concerns the deductibility of interest paid on arrears of cane cess and cane purchase tax. The court referred to precedents Mahalakshmi Sugar Mills Company v. CIT and Triveni Engineering Works Ltd. v. CIT, where it was held that such interest payments are allowable deductions as revenue expenditure. Relying on these judgments, the court ruled in favor of the assessee on both aspects, directing the Appellate Tribunal to pass an order in line with the judgment. The decision was made against the Revenue, and no costs were awarded in the case.
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