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TMI Blog1995 (12) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... ions were claimed as deductions during the relevant Assessment years. During the year under appeal, the assessee wrote back the amount of Rs. 1,60,171.39 in its books of account. In the statement of income, the assessee-company placed a note as under :---- " Rs. 1,60,171 being brought forward in the account of Gujarat Electricity Board for electricity duty is written back during the previous year relevant to Assessment Year 1988-89. The provision was created and allowed as deduction in following years : Accounting Assessment Amount year year Rs. ----------------- ----------------- ----------------- 1974-75 1976-77 51,877.44 1975-76 1977-78 55,377.71 1976-77 1978-79 13,195.44 1977-78 1979-80 39,720.80 ---------------------- 1,60,171.39 ---------------------- The aforesaid sum of Rs. 1,60,171 is not included in total income in the above statement of income as the same is not taxable in Assessment Year 1988-89. It is submitted that there is neither cessation nor remission of liability in view of the fact that subsequent order of Collector of electricity duty has established that on the basis of the facts of the case there could not have been additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment years 1976-77 to 1979-80 and the same was allowed by the Assessing Officer. During the year under appealdue to the order of the Collector of Electricity Duty, the assessee was under no obligation to pay such amount and it clearly amounted to cessation of liability and the Assessing Officer rightly invoked the provisions of section 41(1). In support of his contentions he relied upon the following authorities : (1) Motilal Ambaidas v. CIT [1977] 108 ITR 136 (Guj.) (ii) K. V. Moosa Koya Co. v. ITO [1989] 175 ITR 120 (Ker.) (iii) Baroda Traders Ltd. v. CIT [1965] 57 ITR 490 (Guj.) (iv) Banswara Electric Supply Co. v. CIT [1986] 160 ITR 127 (Raj.) (v) Panyam Cements Mineral Industries Ltd. v. Addl. CIT [1979] 117 ITR 770 (AP) (vii) Baropharn Chemicals Ltd. v. Dy. CIT [1995] 51 TTJ (Ahd.) 595. 5. Shri Dilip Vadodaria, the learned counsel for the assessee submitted that section 41(1) applies only in cases of loss, expenditure or trading liability incurred by the assessee. In the present case, the assessee has always been an industrial company and this fact has subsequently been accepted by the concerned authority. Therefore, the electricity duty leviabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is an industrial undertaking and hence the higher rate of electricity duty is not leviable was also not received during the year but in fact was received in the year 1981. The learned counsel therefore concluded that the Assessing Officer has without enquiring into the facts, merely on the basis of the book entry, taxed the amount in question in the year under appeal, which is not correct. On the facts, the amount in question even if deemed to be profits and gains under section 41(1), cannot be considered as profits and gains of the year under appeal." 6. We have considered the rival submissions and perused the facts on record. From the facts of the case as reproduced it is evident that the assessee-company did make provisions aggregating to Rs. 1,60,171.39 for the assessment years 1976-77 to 1979-80 and the same amount was allowed as deduction by the Assessing Officer. At the same time, the assessee contested the levy of electricity duty before the Collector of Electricity Duty and the Collector of Electricity Duty vide his order dated 29-12-1981 (placed at page 13-A of the paper book), after taking into consideration the contentions made by the assessee-company and the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the respective Acts constitute the machinery for computation and levying of tax and should be so read as to effectuate the intention of the Legislature, which is to make the charge effective and, further, the provisions should be so read as to make the machinery of assessment workable. As section 41(1) is not a charging section, it has to be construed in such a manner so as to make the levy of the tax effective and to make the machinery of assessment workable. Ikrahnandi Coal Ltd. Co. v. CIT [1968] 69 ITR 488 (Cal.) and CIT v. Saraswati Industrial Syndicate Ltd. [1973] 91 ITR 501 (Puni.) relied on. Under the circumstances, the amounts of sales-tax collections which the assessee firm was bound to show on the credit side when received and was entitled to claim as deduction when sales-tax was paid, must be treated as deductions which ought to have been made. The words at the commencement of section 41(1) ' Where an allowance or deduction has been made in the assessment for any year ' should be read as ' Where an allowance or deduction ought to have been made in the assessment for any year ' so far as the facts of this case are concerned and, so reading that provision, it must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount was made, the assessee made a provision for this liability by debiting its profit and loss account and by making a contra credit entry in the royalty reserve account. Subsequently, the Government of Rajasthan by its order dated 2-2-1962 reduced the amount of royalty payable by the assessee to a sum of Rs. 17,976. On these facts, the Rajasthan High Court held that reduction in the amount of liability i.e. royalty amounted to cessation of liability and the provisions of section 41(1) were attracted. The case of the assessee is on all fours with the case decided by the Rajasthan High Court. There is a direct case of remission of electricity charges decided by the Hon'ble Andhra Pradesh High Court in the case of Panyam Cements Minerals Industries Ltd. The assessee, engaged in the manufacture of cement, had claimed deduction in respect of electrical charges paid by it. Thereafter, the State Government issued an order approving the recommendation of the Committee constituted by it, directing that concession should be granted on power tariff in respect of certain industries, including the assessee's industry, which were to be entitled to concessional rate of power tariff (rangi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's liability by its own conduct ceased and it was no longer obliged to pay any amount as and towards electricity duty to the Collector of Electricity Duty. 7. Now, we take up the judgments relied upon by the assessee's counsel i.e. the judgments in the cases of India Cements Ltd. and General Industries Corpn. We find that the facts in those judgments are distinguishable from the facts of the case before us. In India Cements Ltd.'s case in calculating the remuneration payable to the managing agent of the assessee-company for the year ended March 31, 1960, depreciation on the basis of the rules in force on that date was deducted from the total profits. The amount arrived at on that basis was actually paid to the managing agent. However, by a subsequent notification issued on September 23, 1960, the rules relating to the calculation of depreciation were amended with retrospective effect from 1-4-1960. In the assessment proceedings for the assessment year 1960-61, the Assessing Officer took note of the amended rules and held that on the basis of the amended rules a higher amount of depreciation will have to be deducted from the total profits to arrive at the net profits for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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