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TMI Blog1989 (6) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the damages payable for committing breach of the contracts accrued on the passing of the award in arbitration proceedings ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the liability under the award passed in arbitration had accrued in spite of the fact that no decree had yet been passed by the court in which the awards were filed ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the liability crystallised on the passing of the award, in spite of the fact that the assessee had written to one of the parties pleading for reduction of the amount payable ? (4) Whether, on the facts and in the circumstances of the case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, of a sum of Rs. 1,25,762 paid as commission to Messrs. K. N. Pai, Bombay, and Messrs. Eastern Export Trading Co., Bombay. The Income-tax Officer disallowed the claim on the ground that the payments were made in India and not outside India. In appeal, the Commissioner of Income-tax (Appeals) allowed the claim of the assessee regarding the damages held payable by the assessee as per the awards. The weighted deduction claimed was also allowed. The Revenue appealed to the Income-tax Appellate Tribunal. The Appellate Tribunal held that the nature of the liability under the arbitration award in the instant case is one for unliquidated damages as in Asuma Cashew's case (I. T. A. No. 249 (Coch) of 1982) and that the liability to pay th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue, Mr. P. K. R. Menon and counsel for the respondent-assessee, Mr. Balachandran. Broadly, two questions arise for consideration : "(i) Whether the assessee is entitled to deduction of the amounts covered by the award ? and (ii) Whether the assessee is entitled to weighted deduction under section 35B of the Act ?" It is common ground that the awards were passed on August 9, 1977, and November 21, 1977, against the assessee for payment of two sums aggregating to Rs. 42,47,875, which was during the relevant accounting period. The claim, which finally resulted in the award, is one for unliquidated damages. In Asuma Cashew's case (ITA No. 249 (Coch) of 1982), the Tribunal held that, in cases where the claim is for unliquidated damages, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that the above plea is without force. As stated, the claim is for unliquidated damages. The moment the amount is adjudicated or admitted, it becomes a debt. Here, the claim for unliquidated damages was adjudicated by the passing of an award by the arbitrator. The assessee maintains accounts on the Mercantile basis. In such circumstances, the claim made against the assessee in respect of unliquidated damages was ascertained and determined when the award was made. The liability was incurred or had accrued on that day. The award is a final adjudication of a Tribunal at the parties' choice. Till it is set aside in appropriate proceedings by a competent court, it is conclusive and valid. There can be no doubt that a right is created in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndorsement of the said view by the Appellate Tribunal is valid and justified in law. Our answer to question No. (1) is in the affirmative. Our answer to question No. (2) is also in the affirmative. Our answer to question No. (3) is also in the affirmative. All the three questions are answered against the Revenue and in favour of the assessee. The only other question is regarding the entitlement to weighted deduction under section 35B of the Income-tax Act. The Income-tax Officer held that the assessee paid the amounts of Rs. 1,25,762 and Rs. 14,708 in India and since the payments were not made outside India, the assessee is not eligible for deduction under section 35B of the Act. In appeal, the Commissioner of Income-tax (Appeals) noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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