9911796707
TMI Blog2001 (10) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment year and subsequently on remission or cessation thereof, the assessee obtains some benefit as regards the same in a subsequent year. We, therefore, hold that the assessee was entitled to the deduction of Rs.1,00,000 debited in the accounts as payable to Chunilal Pranjivandas and Co. for the use of their office, telephone, staff and other facilities and the Tribunal was not justified in denying such claim. The question referred to us is, therefore, answered in the affirmative, i.e, in favour of the assessee and against the Revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... d letter: "However compensation from January 1980 to October 1980 is yet to be agreed and to be received", and relying upon the same, concluded that the claim of the assessee was not in relation to an accrued liability, but it was only a contingent liability. The Commissioner of Income-tax (Appeals) upheld the action of the Income-tax Officer stating that it was an unascertained liability which had not been quantified and hence, as no demand was made by the Bombay firm, it cannot be said that any liability to make payment had arisen. The Tribunal confirmed the decision of the lower authorities on the footing that in the year under appeal there was no evidence of any oral or documentary claim and that there were no facts to show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of these submissions, reliance was placed on the decisions of the apex court in the case of Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 and in the case of Bharat Earth Movers v. CIT [2000] 245 ITR 428. Mr. Shah also submitted that section 70 of the Contract Act which fell in Chapter V pertaining to "quasi contracts" bearing heading of "of certain relations resembling those created by contract" made it apparent that once it was established that the Bombay firm had not permitted user of the premises and the facilities gratuitously and that the assessee-firm had enjoyed the benefits, the assessee-firm was bound to compensate the former in respect of availing of such benefits. In reply, Mr. Kureshi, learned counsel emphasised the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re concerned, the assessee had not debited in its books of account because the assessee was under an impression that the Bombay firm had possibly permitted the assessee to use the premises and facilities gratuitously, but immediately when the demand was made in 1979 by issuance of debit note, the assessee had debited the entire sum relatable to the three years as on December 31, 1979, and what was more important was that the Tribunal had accepted the explanation tendered by the assessee and that position was no longer in dispute. It was, therefore, submitted that the aforesaid order of the Tribunal pertaining to the assessment year 1980-81 instead of assisting the Revenue supported the stand of the assessee inasmuch as the position was that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: (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 result in the reduction or even extinction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndar years 1977, 1978, 1979; that the assessee had initially provided for Rs.75,000 on the basis of the debit note but subsequently vide letter dated March 31, 1983, made an additional claim of Rs.46,615 over and above the provision made. Thus, the facts available on record go to show that the assessee claimed the liability not only for calendar year 1979 which had already been provided in the books during the assessment year 1980-81, but also liability relating to calendar years 1977 and 1978 on the basis of the demand made for the first time as it was under a bona fide belief till that point of time that it was permitted user of the premises and the facilities gratuitously. Therefore, there is no inconsistency in the stand adopted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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