9911796707
TMI Blog1982 (3) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... l as by the AAC The Tribunal, in the appeal by the assessee, referred to condition No. 50 in the M.E.S. contract in which the penalty for delay in execution of the contract was described as compensation payable to the M.E.S. for the contractor's failure to complete the work and clear the site on or before the dates prescribed for the said completion. The amount of compensation was to be adjusted and set off against any sum payable to the contractor either in the same contract or in other contracts. Having found that the notices seeking to levy penalty were served on the assessee and the assessee maintained the mercantile system of accounting, and that the sum of Rs. 30,800 was shown as liability which had accrued on account of the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be levied. No liability, according to the learned counsel for the revenue, had accrued and the amount could not be claimed as deduction merely because a claim bad been made against the assessee-company. Mr. Patil appearing on behalf of the assessee has contended that the assessee follows the mercantile system of accounting and in the accounts for the assessment year in question the liability of Rs. 30,800 which was accepted by the assessee had been taken into account in the profit and loss account.: The learned counsel has, contended that irrespective of the fact that the amount of compensation was adjusted in the year 1971, since the assessee was following the mercantile system of accounting, the assessee was entitled to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany also debited an estimated sum of Rs. 24,809 as expenditure for the developments it had undertaken to carry out even though no part of that amount was actually spent. The department was disputing the liability of expenditure of Rs. 24,809. The Supreme Court has held that the unconditional undertaking to carry out the development within six months from the dates of the deeds of sale imported a liability which accrued on the dates of the deeds of sale though that liability would be discharged on a future date. The liability was thus held to be an accrued liability and it was held that the estimated expenditure, which would be incurred in discharging the same, could be deducted from the profits and gains of the business and the amounts ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness is several commodities and had submitted tenders to the B.B. and C.I. Railway and undertook to supply certain commodities. A security for properly carrying out the contract in accordance with the terms was, however, forfeited as the assessee could not carry out the contract. The question was whether the assessee was entitled to claim the amount of the forfeited deposit as a trading loss. The Division Bench in that case held that as the assessee was already carrying on business and the tender was only a transaction in the business and it was in order to put through that transaction that it made the deposit and it was made solely for the purpose of earning profit in the course of the business, the forfeited amount was a trading loss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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