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Issues:
1. Dispute over deduction claim for price difference in wheat purchase. 2. Determining the timing of liability crystallization for deduction eligibility. Analysis: 1. The appeal involved a limited company operating a flour mill, disputing a deduction claim of Rs. 1,70,595 in its business income calculation for the assessment year 1983-84. The company, a licensee of the Food Corporation of India, faced an increased purchase price of wheat, leading to a demand for a price difference payment. Despite a stay order from the High Court, the Supreme Court eventually ruled in favor of the company, upholding the High Court's decision to quash the price difference demand. The company argued that the liability to pay the price difference arose when demanded, while the Income Tax Officer (ITO) contended that the liability had not crystallized as the company had not accepted it by the end of the relevant previous year. 2. The CIT(A) sided with the company, allowing the deduction claim, emphasizing that the liability arose when the amount was demanded by the Food Corporation of India under government direction. The Department's representative cited a similar case from the Calcutta High Court, suggesting that deductions should only be permitted when matters are conclusively decided. The company's representative countered that the liability arose upon the demand, regardless of pending litigation. The Tribunal analyzed the precedents cited, noting that deductions were typically allowed when amounts were demanded and became enforceable, as seen in previous cases. However, it distinguished the present case from the cited precedent, as the company had claimed the amount based on a demand made by the authority in the earlier assessment year, leading to the conclusion that the statutory liability was rightly claimed as a deduction for the relevant assessment year. 3. Ultimately, the Tribunal dismissed the appeal, affirming the admissibility of the Rs. 1,70,595 deduction in computing the business income for the assessment year 1983-84. The decision was based on the timing of the demand for the statutory liability, supporting the company's claim for the deduction. The Tribunal found no grounds to interfere with the CIT(A)'s decision in favor of the company.
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