9911796707
TMI Blog2007 (9) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.50,761 stood debited to the raw material account. The explanation of the Assessee was that this amount was payable to M/s. Hindustan Steel Limited for certain purchases which had been made on 22.10.1975 but in respect of which the Assessee had disputed its liability. According tot he Assessee the liability stood accrued in the financial year ending 31.3.1979 since a suit for recovery had been filed by Hindustan Steel Limited against it on 18.8.1978. The Assessing Officer disallowed the claim on the ground that the said amount did not relate to any purchases made during the previous year 1978-79 relevant to the Assessment Year 1979-80. The appeal filed by the Assessee was allowed by the Commissioner of Income Tax (Appeals) ['CIT (A)']. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in time the suit was dismissed, the Petitioner would be required to offer the said amount to tax in terms of Section 41 (1) of the Income Tax Act, 1961. 5. Appearing for the Revenue, Mr. Sanjeev Sabharwal, learned senior Standing Counsel, submitted that the liability in instant case was contractual and not an ascertained liability. As held by the Tribunal, the criteria for determining the nature of a statutory liability, as explained in Kedarnath Jute Manufacturing Company Limited, [1971] 82 ITR 363(SC) could not be applied to the instant case. 6. In Kedarnath Jute Manufacturing Company Limited [1971] 82 ITR 363 the Hon'ble Supreme Court was dealing with the case where the assessee company, which followed the mercantile system of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1960-61. Although the liability was not a statutory one, it was held that the said liability, relateable to the period 1.4.1957 to 31.3.1958, had accrued only in the previous year relevant to the Assessment Year 1960-61 and hence should be allowed in that year. 8. The Hon'ble Supreme Court in Bharat Earth Movers v. Commissioner of Income Tax (2000) 245 ITR 428 reiterated the principles for deciding whether a business liability is an ascertained or a contingent one. The Hon'ble Supreme Court held (p. 431-432) : "The law is settled: If a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot only the payments actually made to his employees but also the present value of any payments in respect of their services in that year to be made in a subsequent year if it can be satisfactorily estimated.? 9. The liability in the instant case was capable on being estimated with reasonable certainty when a recovery suit was filed by Hindustan Steel Limited against the Assessee on 18.8.1978. Merely because the liability was not a statutory one it could not be said that the liability that was not an ascertained one but a contingent one. 10. In view of the settled law and in the facts of the present case, we are of the view that the claim of the Assessee for deduction of Rs.50,761 towards disputed liability should be allowed in the Assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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