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1991 (12) TMI 25 - ALLAHABAD HIGH COURTExtract: .......can be made only in the year in which the liability to pay accrues. And it accrues only when the liability crystallises or becomes ascertained. In the premise, we answer the question referred for our opinion in the affirmative, in favour of the assessee and against the Revenue. The assessee shall be entitled to his costs which we assess at Rs. 250.
Issues involved:
The judgment addresses the issue of whether salary and wages amounting to Rs. 18,813, relating to earlier years, were allowable as a deduction in the assessment year 1974-75. Details of the Judgment: The dispute arose from the assessee's claim for deduction of Rs. 18,813 for extra salary and wages paid to employees in the relevant year. The Income-tax Officer disallowed the claim, stating that the amount related to earlier years and should have been provided for in those years. The Appellate Assistant Commissioner accepted the assessee's contention that the disputes regarding the payment were settled only in the relevant year, allowing the deduction. The Tribunal, relying on Supreme Court decisions, concluded that the amount could be deducted in the relevant year as it was quantified and ascertained then, dismissing the Department's appeal. The High Court upheld the Tribunal's decision, citing the Supreme Court case of CIT v. Swadeshi Cotton and Flour Mills Pvt. Ltd., which emphasized that the liability to pay accrues when disputes are settled. The Court noted that the liability to pay the extra salaries only materialized when the Assistant Labour Commissioner passed the order, making the deduction legitimate in the relevant year. The Court distinguished other cases cited by the Revenue, emphasizing that in the present case, the liability became quantified only after the Assistant Labour Commissioner's decision. It reiterated that in the mercantile system, deductions can only be made when the liability to pay accrues and becomes ascertained. In conclusion, the Court answered the question in favor of the assessee, allowing the deduction of Rs. 18,813 in the relevant assessment year. The assessee was awarded costs amounting to Rs. 250.
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