9911796707
TMI Blog2005 (3) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessment year is 1982-83 and the accounting period is the previous year commencing on July 1, 1980, and ending on December 31, 1981. The assessee, in the return of income filed on January 10, 1983, claimed deduction of a sum of Rs. 20,78,000 being the liability towards purchase loss payable to Army Purchase Organisation. According to the assessee, it had entered into a contract to supply 4,600 MTs of Vanaspati (Hydrogenated Oil) to the Army Purchase Organisation as per purchase order dated October 3, 1980. As the market price of the goods went up in comparison to the price at which the assessee had agreed to supply the goods, the assessee chose not to supply 1,150 MTs of the goods remaining to be supplied as per the tender. Thereupo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had supplied the goods, it would have incurred loss as the market rate prevailing at the relevant point of time was much more than the rate quoted in the tender. The Revenue challenged the decision of the Commissioner of Income-tax (Appeals) before the Tribunal, which upheld the order of the Commissioner of Income-tax (Appeals) vide its order dated September 30,1991, by assigning the following reasons: "We find from the assessment order that accounting period ended for this year on December 31, 1981, that means the letter creating the demand had been issued before the close of the financial year. This is relevant to decide whether if at all the liability arose during this year or not. Undoubtedly, it is a contractual liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the assessee and a deduction thereof was allowable on revenue account. In support of the submissions made, she placed reliance on the following decisions: (1) Alembic Chemical Works Ltd. v. Deputy CIT [2004] 266 ITR 47 (Guj); (2) CIT v. Shree Digvijay Cement Co. Ltd. [1983] 144 ITR 532 (Guj); (3) Indian Smelting and Refining Co. Ltd. v. CIT [2001] 248 ITR 4 (SC); (4) Tripty Drinks P. Ltd. v. CIT [1978] 112 ITR 721 (Orissa); (5) Standard Mills Co. Ltd. v. CIT [1998] 229 ITR 366 (Bom); and (6) Addl. CIT v. Rattan Chand Kapoor [1984] 149 ITR 1 (Delhi). Mr. S.N. Soparkar, learned senior advocate appearing on behalf of respondent-assessee, submitted that the assessee's previous year ended on December 31, 1981, and the demand had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submit that even if a liability was disputed, pendency of litigation was not relevant and in this context, the provision of section 41(1) of the Act was pressed into service to submit that if a disputed liability is not allowed, section 41(1) of the Act would become redundant. The last contention may be disposed of at the outset. Applicability or otherwise of the provision of section 41(1) of the Act is not part of the controversy referred to this court. The question which is raised and referred for the opinion of this court is only in relation to allowability or otherwise of the sum of Rs. 20,78,000 as revenue expenditure. In the circumstances, the court is not required to expand the scope of controversy and render its opinion in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability and had not been discharged during the year under consideration, committed an error in law in holding that it was a business loss allowable for the year under consideration. It is necessary to take note of the fact that out of various decisions cited on behalf of the applicant-Revenue, the following decisions pertain to statutory liability and can have no bearing in relation to the dispute in the present case: (1) Addl. CIT v. Rattan Chand Kapoor [1984] 149 ITR 1 (Delhi); (2) Standard Mills Co. Ltd. v. CIT [1998] 229 ITR 366 (Bom); and (3) Indian Smelting and Refining Co. Ltd. v. CIT [2001] 248 ITR 4 (SC). Similarly, the decision in the case of Tripty Drinks P. Ltd. v. CIT [1978] 112 ITR 721 (Orissa) also is not a decision w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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