1977 (4) TMI 86

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..... ounting year is the calendar year. For the asst. yr. 1974-75 its previous year ended on the 31st Dec., 1973. During that previous year, on 30th April, 1973 the Industrial Tribunal, Gujarat gave an award sanctioning certain additional wages to the Company s workers. Though the assessee did not accept the award and though it preferred an appeal before the Gujarat High Court, it worked out its probable liability on the basis of the said award and claimed a deduction for an amount of Rs. 5,50,000 in the computation of its total income for the asst. yr. 1974-75. The ITO refused to admit the assessee s claim for the deduction on the ground that the assessee had not accepted the award of the Industrial Tribunal and on the further ground that the l .....

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..... e assessee s learned counsel in support of his case has relied upon a number of decisions of the Supreme Court as well as the High Courts. 5. There is no dispute between the parties that the assessee has been following mercantile system of accounting. In Calcutta Co. Ltd. vs CIT West Bengal(1),the Supreme Court held that if a liability has accrued then the estimated expenditure which would be incurred in discharging the same could be deducted from the profit and loss account of the business and any defect in the estimation of the said accrued liability would not covert the accrued liability into a conditional and contingent one because it was always open to the IT authorities to arrive at a proper estimate thereof having regard to all the .....

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..... l, Gujarat, gave an award dt. 30th April, 1973 sanctioning additional wages to the assessee company s workers. The assessee was bound by that award unless it was reserved in appeal. As on the date of the wage the assessee was liable to pay the additional award to the workers and in that sense there was accrued liability. It is true that the assessee contested the award in an appeal before the High Court. That however does not convert the accrued liability in an contingent one. In Shri Kant Textiles vs. CIT, Bombay City-II(4) it was contended before the Bombay High Court by the Revenue that the assessee in that case having not accepted the liability to pay excise duty was not entitled to the deduction of the excise duty as demanded by the Ex .....

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