9911796707
|
Home
Issues Involved:
1. Accrual of liability for the sum paid to Ahmedabad Textile Industry Research Association. 2. Validity of the addition to the book results of the Pondicherry Unit by the Appellate Tribunal. Summary: Issue 1: Accrual of Liability for the Sum Paid to Ahmedabad Textile Industry Research Association The assessee, a public limited company engaged in the manufacture of cotton yarn and cloth, claimed a deduction of Rs. 18,533 paid to Ahmedabad Textile Industry Research Association for the year ended March 31, 1958. The payment was made in the previous year relevant to the assessment year 1960-61 due to a dispute. The ITO disallowed the claim, stating the expenditure's nature was unknown and it related to a different period. The AAC agreed it was of a revenue nature but upheld the disallowance based on the period mismatch. The Tribunal also disallowed the claim, agreeing with the revenue authorities. The court held that in the mercantile system of accounting, a liability based on contractual obligation arises only when it is ascertained. The court cited several cases, including Kedar Nath Jute Mfg. Co. Ltd. [1971] 82 ITR 363 (SC) and Swadeshi Cotton and Flour Mills P. Ltd. [1964] 53 ITR 134 (SC), to support its view. The court concluded that the assessee's claim was allowable as the liability accrued when the dispute was settled. Thus, the court disagreed with the Tribunal's view. Issue 2: Validity of the Addition to the Book Results of the Pondicherry Unit The assessee disclosed a net loss of Rs. 10,19,684 for the Pondicherry unit. The ITO found discrepancies in the stocks and added Rs. 15,77,643 to the book results. The AAC confirmed this addition. The Tribunal reduced the addition to Rs. 6,81,643, applying a gross profit rate of 3% on estimated sales. The court examined whether the Tribunal considered irrelevant material or omitted relevant material. The assessee argued that the Tribunal ignored a chart explaining the discrepancies. The court noted that the discrepancies were in raw materials, stock-in-process, and finished products, and the Tribunal had accepted the explanation partially but required further justification for the entire discrepancy. The Tribunal's decision was based on a detailed examination of facts and was consistent with findings from the previous year. The court concluded that the Tribunal's finding was a pure finding of fact, which could not be questioned in a reference before the court. Thus, the court upheld the Tribunal's decision. Conclusion: The court answered question No. 1 in the affirmative, in favor of the assessee, and question No. 2 in the negative, in favor of the department. No order as to costs was made due to the divided success and failure of the parties.
|
