9911796707
TMI Blog1987 (12) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome at nil as per his assessment order dt. 23rd Mar., 1985. Questioning the disallowance of Rs. 11,669 and some other additions the assessee went in appeal before the learned CIT(A). In the grounds raised before the CIT(A) as regards the point at issue the ground taken is as follows: "The ITO should not have made the addition of Rs. 11,669 on the ground that it represents expenses relating to the previous year. The appellant contends that the liability having arisen during the year, the expenditure is rightly allowable". The learned CIT(A) dealt with this subject at para 2 of his impugned order. It was pointed out before him that this sum of Rs. 11,669 represented interest payable to the AP Industrial Infrastructural Corporation, Moula Ali, Hyderabad, in respect of the appellant s unit named Sri Venkateswara Crowns. It was also urged that though the liability relates to the past years, since it has been quantified and communicated to the appellant, for payment before the finalisation of accounts for the year ending 31st Mar., 1982 it should be allowed. In para (3) the learned CIT(A) did not accept this contention. He held that the assessee has been following the mercantile sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the shed No. C1 at Industrial Estate, Moula Ali allotted to M/s. Hyderabad Bottling Co. Pvt. Limited, inclusive of principal, interest etc. This is for your favour of information." Yours faithfully, Sd/- INDL. Development Officer" On the strength of the said letter the following clarification was given. "Assessment Year 1982-83 The amount of Rs. 11,669 represents interests payable to the Andhra Pradesh Industrial Infrastructural Corporation, Moula Ali, Hyderabad, in respect of Sri Venkateswara Crowns, which is one of our Unit. Though, this actually relates to the earlier years, it has been quantified and communicated to us for payment before sale of this Unit. As the amount has been quantified and communicated before the finalisation of our accounts for the asst. yr. 1982-83, this figure has been shown and claimed in the accounts for this year. It is, therefore, allowable in this year." From the above two pieces of evidence we can fairly gather that Shri Venkateswara Crowns is one of the units belonging to the assessee-company and it was housed in shed No. C-1 in the Industrial Estate, Moula Ali. That the shed was taken on hire purchase agreements entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest paid was claimed as deduction for asst. yr. 1970-71 as the entry making the payment of interest was made in November 1968 in the books of the society. The ITO as well as the AAC disallowed the payment of interest as deduction on the ground that due date viz., 24th Jan., 1968 fell within the accounting year relevant to asst. yr. 1969-70 and not 1970-71. The Tribunal found that the assessee recorded payment of interest in its books only after getting confirmation from the Director of Handlooms and without reference to the actual date of accrual of liability for interest and that this method of accountancy has been accepted as reflecting the true profits by the Revenue in the earlier years and that the claim for interest payment also had been allowed by the Revenue accordingly and therefore it is not open to the Revenue to contend for asst. yr. 1970-71 that the method of accounting followed by the assessee is such that it is difficult to arrive at the true profits. A division Bench of the Madras High Court held confirming the decision of the Tribunal as follows as per the head-note of the decision: "Held, that it is well established that even apart from two systems of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the relevant subsequent years. The position was clarified by the High Courts upholding the validity of the explanation of the statute after which the assessee was called upon to discharge its liability. From a commercial point of view the assessee was at that stage entitled to treat the demand of the ESI authorities as final and enforceable and the liability as having accrued on the said demand at this stage. Therefore, the sum of Rs. 45,191 was allowable as deduction for asst. yr. 1975-76". Shri G. Rajagopala Rao in his arguments contended just like in the Calcutta case the assessee felt that the demand for Rs. 11,699 towards interest payment relating to earlier years made by the Industrial Infrastructural Corporation through its letter dt. 29th Mar., 1982 as final and enforceable and it had treated the said letter as the date when the liability accrued on the said demand. Therefore it became liable during asst. yr. 1982-83. Another decision to which reference to made by the learned departmental representative was that of the AP High Court in the case of CIT APII vs. Sri Sarvaraya Sugars Ltd. (1987) 163 ITR 429 (AP). In that case there was a scheme drawn by the State Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
