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TMI Blog1994 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... on rent for the purpose of business, on an agreement dated October 27, 1966, for a period of four years, paying a rent of Rs. 3,000 per mensem. This agreement provided that on termination, the tenant should vacate the premises, and in default, he would pay an amount of Rs. 5,000 per mensem till he vacates the property. The assessee, however, provided in the accounts for the earlier years even aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appealed further. The Appellate Tribunal found that the liability to pay these amounts accrued only in the year in question on account of the decree of the court and, therefore, the deduction was admissible under section 37 of the Income-tax Act. At the instance of the Revenue, the following question has been referred : " Whether, on the facts and in the circumstances of the case, the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted the claim of the assessee of the renewal of the lease, the matter had gone to the court, and the additional amount had been decreed. The liability to pay the additional amount had thus accrued only when the court had decreed the suit. It is stated that when the matter was taken up on appeal, the assessee had subsequently compromised by accepting payment of rent for these years, and on the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 43(2) to mean actually paid or incurred according to the method of accounting on the basis of which the profits and gains of the business are computed. Since, admittedly, the assessee was following the mercantile method of accounting, and the liability to pay the additional amount accrued only on the basis of the order of the court, which was during the previous year relevant to this asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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