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TMI Blog2006 (8) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... 1981-82, the following questions for opinion of this Court; "1.Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs.28,646/- paid as guarantee commission was on capital account and disallowable as such? 2.Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that an amount of Rs.6976/- in respect of exchange loss was disallowable as capital expenditure? 3.Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the claim of assessee for Rs.1,34,05,048/- was not allowable? 2. The short facts necessary for disposal of the present Reference are that the assessee is a limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from Sarabhai Chemicals, a sister concern to whom the Streptomycin was sold and the liability could not be quantified in the absence of difference between selling price and the retention price. It was also observed that the assessee company had contested the demand made by the Government by throwing a challenge in form of a writ application before the High Court of Delhi in January, 1981. The Assessing Officer observed that the said demand had not been entered into the books of account, therefore, the claim of the assessee could not be granted. Being dissatisfied with the said assessment order, the assessee appealed before the CIT (Appeals), the same grounds were raised and it was submitted that liability to pay the aforesaid demand of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax V. Akkamamba Textiles Ltd and 227 ITR 465, Commissioner of Income Tax V. Sivakami Mills Ltd. In both of the said judgments, the Supreme Court has observed that the guarantee commission paid to the banker and the insurance company for ensuring deferred payment of purchase consideration of machinery would constitute revenue expenditure. In light of the said two authoritative pronouncement of the Supreme Court, the question No.1 is necessarily to be answered in favour of the assessee. 4. So far as question No.2 is concerned, learned counsel for the assessee submits that looking to the smallness of the amount, the assessee does not propose to press the said question. In view of the said submission, question No.2 is not answered. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is held that the income tax cannot be counted for the assessment year in dispute, then the income will have to be aggregated with the income of the year in which the Delhi High Court decided the matter. We have put a query to the learned counsel for the assessee that in either of the case, the assessee would be obliged to pay the tax. Mr. R.K. Patel, learned counsel for the assessee prayed for a short adjournment to seek further instruction in the matter. We accordingly listed the case today for further hearing. Mr. Patel at the first opportunity, informs the Court that the assessee is not agreeable to either of the proposal made by the Court and the Court may decide the matter in accordance with law. 7. In the matter of Kedarnath Jut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to law. The Supreme Court was candid in observing that existence or absence of entries in the books of account would not be decisive or conclusive in the matter. The fine distinction sought to be carved out by the CIT (Appeals) and the Income Tax Tribunal that the said judgment in the matter of Kedarnath Jute Manufacturing Co. would not be applicable, runs contrary to the very judgment of the Supreme Court. The Supreme Court has observed that in a given case, the liability may not be enforced till quantification was effected by assessment proceedings, but the liability for payment of tax would be independent of the assessment. In the said matter, the Supreme Court observed that the deduction ought to have been allowed in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment is not an authority on the question that despite quashing of the demand and pendency of an appeal at the instance of the revenue, the deduction is still to be granted in favour of the assessee. If the submission of learned counsel for the assessee is accepted, then on one side, he would be entitled to deduction for the assessment year 1981-82 and at the same time, he would not be answerable to pay any tax even in the year, in which the demand has been quashed, he would be entitled to retain the entire amount of Rs.1,34,05,048.00 and would also be not paying tax on it either in the assessment year 1981-82 or in the accounting year 1-4-2002 ending on 31-3-2003. The judgment of the Supreme Court is to be applied to the given set of facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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