9911796707
TMI Blog2005 (4) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... crued during the assessment year in question and has rightly been allowed - Tribunal was justified in allowing a deduction - - - - - Dated:- 27-4-2005 - Judge(s) : R. K. AGRAWAL., RAJES KUMAR. JUDGMENT The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for opinion to this court: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in allowing a deduction of Rs. 6,02,125 in the assessment year 1978-79?" The reference relates to the assessment year 1978-79. Briefly stated, the facts giving rise to the present reference are as follows: The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1976-77. Subsequently, the Government amended the scheme under which the amount of Rs. 6,30,000 which was previously to be treated as a grant was converted into loan. Thus, a grant of Rs. 6,30,000 was withdrawn in the year 1977-78. Out of the total amount of the grant, an amount of Rs. 4,02,125 was credited to the profit and loss account. The amount of Rs. 6,30,000 was subsequently withdrawn and, therefore, the amount of Rs. 6,02,125 which had been offered for assessment in the assessment year 1976-77 and which was in the nature of a debt to the Government was claimed in the assessment year 1978-79 as a deduction, because the debt was repudiated by the Government and became irrecoverable. Before the Inspecting Assistant Commissioner (Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the assessee-corporation before the Tribunal that the amount was deductible against the income for the assessment year 1978-79 as it was in the assessment year that the amount was declared by the Government to be a loan, in spite of the fact that in the assessment year 1976-77 it had been given as a grant. This contention was opposed on behalf of the Department. The conclusion of the Tribunal was as follows: "We find that on facts the loss sustained by the assessee was incidental to its business during the assessment year 1978-79 since the U.P. Government had converted the grant into a loan. The fact that the book entries were not passed in the assessment year 1980-81 would, in our view, not materially affect the position. The G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. It is well settled that if the assessee followed the mercantile system of accounting, deduction has to be claimed when the liability accrued and is not dependent upon the passing of the entries in the books of account as held by the apex court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363. Thus, on the finding recorded by the Tribunal that the Government D.O. dated March 31, 1977 and December 27, 1977, issued by the State Government converting the grant into loan was received by the assessee during the assessment year in question, the liability accrued during the assessment year in question and has rightly been allowed. It may be mentioned that the competence or the jurisdiction of the State Government in convertin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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