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TMI Blog2012 (5) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... (8) TMI 4 (SC)), directly applies to the facts of the case. - Decided in favor of assessee. - Tax Case (Appeal) No.712 of 2005 - - - Dated:- 23-4-2012 - Chitra Venkataraman and Ravichandra Baabu, JJ For Appellant: Mr T Ravikumar Standing Counsel for Income Tax For Respondent: Mr R Kumar JUDGEMENT Per: Chitra Venkataraman, J: The following substantial questions of law arise for consideration in this Tax Case Appeal, relating to the assessment year 1994-95: 1. Whether in the facts and circumstances of the case, the Tribunal was right in allowing a deduction of the amounts spent on purchase of overhead travelling cleaner? 2. Whether in the facts and circumstances of the case, the Tribunal was right in holding that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the deductability of a liability: "(i) For an assessee maintaining his accounts on the mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. It is not as if such deduction is permissible only in the case of amounts actually expended or paid; (ii) Just as receipts, though not actual receipts but accrued due are brought in for income-tax assessment, so also liabilities accrued due would be taken into account while working out the profits and gains of the business; (iii) A condition subsequent, the fulfilment of which may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to cover the past obligation/shortfall, you may represent under clause 8(4) of the Textiles (Development and Regulation) Order, 1993 to the Textile Commissioner, Post Bag No.11500, Bombay 20, as early as possible but in any case not later than 15.3.94, along with your proposal indicating your programme for fulfilling your past obligation(s) in quarterly instalments so as to fulfill the obligation latest by 31.3.95 in the prescribed proforma given overleaf." 7. As far as the present case is concerned, admittedly, the assessee had the time of discharging its obligation till 31.3.1995 as by way of an extended period, but for which, it should have discharged its obligation by 31.3.1994. Thus, with the liability already accrued, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal pointed out that when there is a statutory obligation attached to the assessee to fulfil the hank yarn obligation, though the purchase price, as such, might not have been known to the assessee, yet, whatever be the shortfall of the price, would always be determined at the time when the agreement was entered into by the assessee. This, however, did not stand in the way of the assessee making a provision on the basis of market price, which could not be weighed as a hypothetical one. In the light of the above, the Tribunal allowed the assessee's case. Aggrieved by this, the Revenue has come on appeal before this Court. 9. As already seen, it is not denied that the assessee's obligation to produce the hank yarn was very much there dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uantification in terms of the market price of hank yarn, which the assessee would have to pay by way of discharging his obligation, stood postponed to the next year, we do not think that the assessee's claim for the year under consideration should be rejected. 10. As pointed out by the Apex Court, when the liability admitted is of reasonable certainty, the mere fact that the actual quantification might take place in the next year, per se, would not stand in the way of the assessee being granted the deduction. The assessee, admittedly, is maintaining the account on mercantile basis. In that event, the decision of the Apex Court reported in [2000] 245 ITR 428 (Bharat Earth Movers Vs. C.I.T.) (S.C) , directly applies to the facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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