9911796707
TMI Blog1992 (7) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... puting net income ? " Pursuant to the direction, the Tribunal has stated a case and referred the aforesaid question for opinion. The background facts necessary for adjudication of the question referred are as follows : The assessee, a partnership firm, filed its returns for the assessment year 1983-84 relating to the accounting period ending on September 30, 1982. A sum of Rs. 1,20,000 was claimed as deduction under the heading " Forest compensation ". The said amount was shown as an outstanding liability in the balance-sheet. On being asked to justify the claim, the assessee replied that, on the basis of interim reports received by the assessee from the forest authorities, the provision for " forest compensation " payable was made. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the appellate authority, i.e., the Conservator of Forests, and, therefore, the liability not having crystallised in a definite figure, the view of the Assessing Officer was correct. The assessee filed an application under section 256(1) of the Act which was rejected by the Tribunal on the ground that the order did not give rise to a referable question of law. Thereafter, on being moved, this court directed the Tribunal to state a case as indicated above. Learned counsel for the assessee has urged that the liability was statutory one and merely because there was no quantification, it cannot be said that the liability did not accrue during the year in question. It was urged that the liability was an accrued one and a mere difficulty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystallised only when there was quantification and at no point of time earlier to that. Where a scheduled rate is prescribed, the liability can be fixed with precision. When there is no quantification by the concerned authority, the situation may be different. There must be an actual liability and not one which may arise in future. Contingent liability which may or may not arise cannot be allowed as a deduction. The service of the report in terms of rule 26 of the Rules do not straightaway create any liability in the person on whom the reports are served. As indicated above, they are in the nature of an intimation about infractions. In that view of the matter, we are of the considered opinion that the view of the Tribunal is in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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