9911796707
TMI Blog1992 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... be settled and crystallised ?" The brief facts of the case are that the assessee is a partnership firm and carries on the business as a liquor contractor. During the previous year relevant to the assessment year 1968-69 (ending on July 31, 1968), the assessee entered into a contract with the Government of Rajasthan to carry on business in country liquor under the guarantee system. The liquor contracts are given by the Excise Department of the State Government in public auction and the contract was for a period of one year. Under the contract, the contractor has to lift goods of the value for which the guarantee is given and if such quantity is not lifted and lesser purchases are made, then the difference amount becomes recoverable from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iency of Rs. 12,91,250 and, therefore, it cannot be said that the liability crystallised in the financial year 1967-68 relevant to the assessment year 1968-69. It can be said to have crystallised only in the year when either the assessee admits the liability or the dispute is settled by the High Court in the pending writ and, therefore, it was held that though the liability in respect of the shortfall is a trading liability, it cannot be claimed as it is yet to be settled and crystallised by the High Court where the writ petition is pending. The submission of learned counsel for the assessee is that this court in CIT v. Shri Chunnilal Tak [1986] 160 ITR 617, has held that the difference between the minimum guaranteed amount and the actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee is entitled to a deduction when the liability accrues and the liability accrues as soon as a transaction of sale or purchase took place. In CIT v. Investigation and Security Service (India) P. Ltd. [1990] 182 ITR 358, the Andhra Pradesh High Court has held that "where the assessee is following the mercantile system of accounting and even if the liability is disputed and challenged in the court and the appeal is pending against that judgment in the High Court, no finality is reached and, therefore, the deduction has to be allowed". It was further observed that "if the matter is decided in favour of the assessee finally and no liability remains, it will be open to the Department to invoke the provisions of section 41(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rajasthan and the same was decreed on May 18, 1973, wherein it was held "the forfeiture of the security deposits was not justified because the Government failed to perform its duty of supplying the liquor. The Income-tax Officer thus found that there was no liability at all and on the other hand a decree has been given in favour of the assessee against the forfeiture of the security deposits in which it has been held by the District and Civil judge, Kota, that the assessee is entitled to refund of the amount forfeited along with the interest payable thereon. Thus, on the basis of the document produced by the assessee, an opinion was formed that there was no liability in existence at all which could be allowed as a trading loss. It has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter could have given the jurisdiction for invoking the provisions of section 41(1). The Income-tax Appellate Tribunal has proceeded on the basis of documents produced by the assessee and it was found that there is no liability in existence since the decree has already been passed by the court in favour of the assessee. According to the submission of learned counsel for the petitioner, the petitioner has filed another writ petition in the High Court wherein it was submitted that the mistake was on the part of the Government in not supplying the country liquor and, therefore, there is no liability and till then the decision was not given. It is possible that the assessee might have claimed deduction in the subsequent years. No document ..... X X X X Extracts X X X X X X X X Extracts X X X X
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