1976 (9) TMI 57 - AT - Income Tax

Summary

Issues:
1. Whether the addition of Rs. 13,643 claimed towards cess payable to the Marketing Committee was rightly deleted by the Appellate Assistant Commissioner.
2. Whether the liability accrued to the assessee for payment of cess to the Marketing Committee was contingent or had already accrued.

Detailed Analysis:
1. The Departmental appeal challenged the deletion of the addition of Rs. 13,643 claimed as cess payable to the Marketing Committee. The Appellate Assistant Commissioner held that the liability of the assessee to pay the cess collection was not contingent but had already accrued. The Appellate Assistant Commissioner relied on the decision in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT to support this conclusion. The Appellate Assistant Commissioner emphasized that the pending Writ Petition filed by the assessee did not affect the accrued liability. Consequently, the Appellate Assistant Commissioner deleted the addition of Rs. 13,643.

2. The Department contended that the Appellate Assistant Commissioner erred in deleting the addition and should have considered the decision in the case of Chowringhee Sales Bureau P. Ltd. vs. Commissioner of Income-tax. The Department argued that since the assessee was disputing the liability, the amount was not allowable as a deduction. On the other hand, the assessee maintained that the liability had accrued during the year under consideration and should be deductible as per the Mercantile basis of accounting followed by the assessee. The assessee pointed out that the High Court's order dismissing the Writ Petition confirmed the liability to pay the cess collections to the Marketing Committee. The assessee also referenced the case of M/s. T. Nagireddy & Co., where a similar claim was decided in favor of the assessee. The Appellate Tribunal upheld the decision of the Appellate Assistant Commissioner, emphasizing that the liability had statutorily accrued against the assessee and was not contingent. The Tribunal differentiated between the cases of Kedarnath Jute Mfg. Co. Ltd. and Chowringhee Sales Bureau P. Ltd., stating that the latter was concerned with income receipt, not deductibility. The Tribunal upheld the Appellate Assistant Commissioner's decision, ultimately dismissing the appeal.