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Issues Involved:
1. Whether the CIT(A) was justified in deleting the addition of Rs. 31,70,412 representing the liability for the additional cane price payable during the assessment year 1981-82. Issue-wise Detailed Analysis: 1. Justification of Deleting the Addition of Rs. 31,70,412: The primary issue in this case was whether the CIT(A) was justified in deleting the addition of Rs. 31,70,412, which represented the liability for the additional cane price payable during the assessment year 1981-82. The case involved a difference of opinion between the learned Accountant Member and the learned Judicial Member, leading to a referral to a Third Member. Arguments of the Assessing Officer and Accountant Member: The assessing officer, supported by the learned Accountant Member, argued that the liability to incur the additional cane price did not arise in the accounting year. They contended that the additional cane price became payable only when the competent authority passed an order in writing after the end of the accounting year. The Accountant Member emphasized that under the mercantile system of accounting, a provision made without the accrual of liability could not qualify for a deduction. They also referred to a previous instance where a similar claim was allowed in a later assessment year when the amount was actually paid. Arguments of the Commissioner(A) and Judicial Member: The Commissioner(A), supported by the learned Judicial Member, held that the liability for the additional cane price accrued in the accounting year itself. They argued that the additional cane price was a statutory liability linked to the purchase of sugarcane, determined by a formula under the Sugarcane Control Order, 1966. The Judicial Member emphasized that the quantification of an accrued liability did not postpone its accrual. They relied on the scheme of the IT Act and various judicial precedents, including decisions of the Allahabad High Court, which supported the view that the liability accrued in the accounting year. Third Member's Conclusion: The Third Member concluded that the view taken by the learned Judicial Member was correct and in accordance with the law. They emphasized that the liability to pay the additional cane price arose when the sugarcane grower supplied more than 85 percent of the contracted quantity. The quantification of the liability by the competent authority did not postpone its accrual. The Third Member relied on several judicial precedents, including decisions of the Allahabad High Court, which consistently held that the liability for additional cane price was a liability in praesenti and not contingent. Relevant Legal Provisions and Judicial Precedents: The judgment extensively discussed the relevant clauses of the Sugarcane Control Order, 1966, particularly clauses 3 and 5A, which dealt with the minimum and additional cane price. The judgment also referred to several judicial precedents, including: - Kedarnath Jute Mills Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC) - CIT vs. Janki Sugar Mills Ltd. (1972) 84 ITR 348 (All) - Kundan Sugar Mills vs. CIT (1977) 106 ITR 704 (All) - Motilal Padampat Sugar Mills vs. CIT (1977) 106 ITR 988 (All) - Addl. CIT vs. M.P. Sugar Mills (P) Ltd. (1984) 38 CTR (All) 112: (1984) 148 ITR 203 (All) - CIT vs. Swadeshi Mining & Mfg. Co. Ltd. (1978) 112 ITR 276 (Cal) Final Decision: The Third Member agreed with the view of the learned Judicial Member, holding that the liability for the additional cane price accrued in the accounting year. The matter was directed to be disposed of by the regular Bench according to the majority opinion.
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