9911796707
TMI Blog1980 (3) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... k and treated as income, an amount of Rs. 1,57,000 with reasoning as under: "Power and Fuel expenses includes D.B. Rs. 57,000 Estimated provision... Rs. 1,00,000 . Rs. 1,57,000 (Vide ledger folio 169, later transferred to ledger folio 123). I allow the actual expenses and disallow the D.B. and estimated provision as amounts not related to the year of account. Rs.1,57,000" 5. In appeal before the CIT (A), it was contended on behalf of the assessee-company, that the company had prolonged litigations with the Assam State Electricity Board and during the accounting period 1973-74 relevant to the asst. yr. 1974-75, the assessee-company paid an amount of Rs. 57,000 to the Assam State Electricity Board under protest and the amount was not charged to the Power and Fuel account as it had been paid under protest and was neither claimed nor allowed in the 'asst. yr. 1974-75: That after prolonged litigations, there was a decision of the Assistant District Judge No. 1 at Gauhati as on 3rd June, 1975 and according to the judgment of the Court, the assessee had to make a deposit of Rs. 50,000 as first instalment and pay the balance in instal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Authorised Representative has also contended that the amount of Rs. 996,288.44 related to the period which fell in the accounting period relevant to the assessment year under appeal and accordingly the liability for making all these payments arose, qua the assessee during the accounting period and accordingly this claim of Rs. 96,288.44 merited to be allowed, since the assessee has made a provision of Rs. 1,00,000 in its account books for the said purposes. Concludingly, the learned Authorised Representative relied upon the ratio of the decision of the Hon'ble Supreme Court of India in the case of Kedar Nath Jute Mfg. Co. Ltd. vs. CIT (Central), Calcutta (88 ITR 363). 9. Shri D. Majumdar made a categorical statement that the assessee was not interested in contacting the disallowance of Rs. 57,000 since made and sustained by the lower authorities for the assessment year under appeal in lieu of Power and Fuel expenses, the amount represented opening balance in the books of accounts of the assessee. Shri D. Majumdar, the learned Authorised Representative has made the following endorsement on the Memo of appeal since filed by the assessee with the Tribunal: "The claim regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period beginning on 12th March, 1974 and ends with 17th July, 1974 and together with arrears-previous balance, the bill is billed for a total amount of Rs. 2,81,964.20. The second bill relates to the period from 4th March, 1975 to 7th April, 1975 and along with the arrears-previous balance, the bill is billed for a total amount of Rs. 3,78,262.64. 15. From the simple reading of the bills, it follows that certain period in the bills does fall within the accounting period relevant to the assessment year under appeal since the accounting period of the assessee is the Financial year 1974-75. 16. In its normal meaning, the expression 'expenditure' denotes something that does out of the coffers of the assessee but does not necessarily involve the actual delivery of parting with the money. The expenditure which is deductible for income-tax purposes is one which is towards a liability actually existing at the time and in a mercantile system of accounting if the liability for a particular sum has been incurred during the accounting year the sum is allowable, then whether the sum has been actually paid or not is immaterial and the liability incurred has to be allowed. 17. In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise in the computation of assessment and business profits is to arrive at the true profits of the year in which these were liable to tax and accordingly, the expenditure to be allowed and deducted has to pertain to the relevant accounting year and in the case of the assessee, the bills for consumption of power do relate to the period which fell in the accounting period relevant to the assessment year under appeal. 21. If a liability arises in a particular relevant accounting period, then an assessee maintaining books of account on mercantile system, is entitled to claim a deduction in the year in which the liability arises notwithstanding the fact that he is taking steps to dispute the liability and also fails or omits to make entries in the books of account and even though deduction was not claimed before the ITO. This is the essence of mercantile system of accounting and in the case of the assessee, the assessee has rightly made a provision. 22. Since the copies of the bills as have been placed on our file fell within the period from 12th March, 1974 to 17th July, 1974 and from 4th March, 1975 to 7th April, 1975, a part of the period mentioned in the bills does not fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessment. The assessee, which followed the mercantile system of accounting, was entitled to deduct from the profits and gains of its business liability to sales-tax which arose on sales made by it during the relevant previous year. The assessee was entitled to the deduction of the sum of Rs. 1,49,775 being the amount of sales-tax which it was liable under the law to pay during the relevant accounting year. That liability did not cease to be a liability because the assessee had taken proceedings before higher authorities for getting it reduced or wiped out as long as the contention of the assessee did not prevail. Further, the fact that the assessee had failed to debit the liability in the books of accounts did not debar it from claiming the sum as a deduction either under s. 18(1) or under s. 10(2)(xv). Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights; nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter". 24. In the result, for statistical purposes, the appeal by the assessee shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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