TMI Blog2014 (8) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... show-cause notices were dropped - the liability claimed by the assessee as a liability on account of excise duty was merely a contingent liability which cannot constitute expenditure for the purposes of income-tax – Decided against Assessee. - Income Tax Reference No. 7 of 1997 - - - Dated:- 20-8-2014 - S. C. Dharmadhikari And A. K. Menon,JJ. For the Appellant: None For the Respondent : Mr. Suresh Kumar ORDER P. C. 1. For the assessment years 1983-84 and 1984-85 the tribunal has passed the common order on 1st February, 1995 in Income Tax Appeal No.4697 and 6746/Bom/89. 2. The orders were passed in the assessee's appeals which arose out of two separate orders of the Income Tax (Appeals). 3. One of the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period 1.4.82 to 31.3.83 payable pursuant to the Gujarat High Court order dated 6.4.1984 ? 4. We do not have any benefit of any argument from the assessee. Though reference was made at the assessee's instance, the advocate for the assessee as also the assessee are absent. The Tribunal has referred to the stand of assessee, namely, that it has followed mercantile system of accounting, therefore, the interest on refund of money is liable to be allowed as deduction. They relied on the judgments rendered by the Hon'ble Supreme Court in CIT Vs. T.N.K. Govindarajuly Chetty (165 ITR 231) and by the Division Bench of this court in CIT Vs. A.A. Dehgamwala (195 ITR 28). However, the revenue pointed out that the liability had not arisen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is claimed only on the basis of show cause notice issued by the Excise authorities. This very issue was considered in the case of Standard Mills Co. Ltd. Vs. C.I.T. (1998) 229 ITR 336. The following observations of the Division Bench concludes the issues and in favour of the revenue and against the assessee : We have carefully considered the rival submissions. The question referred to us for our opinion is whether the assessee is entitled to deduction of the amount in question as a liability merely on the strength of the show-cause notices issued by the excise authorities. This court had occasion to deal with identical controversy in Standard Mills Co. Ltd. v. CIT [1998] 229 ITR 366. In that case also, the assessee claimed deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system of accounting in the accounting year, the amount so demanded would be deductible as an accrued liability even though the assessee objects to it and seeks to get the order of the concerned authority reversed, subject, however, to any statutory provision to the contrary (viz., section 43B of the Income-tax Act, 1961, as inserted by the Finance Act, 1983, with effect from April 1, 1984, which provides that certain liabilities can be deducted only on actual payment) (emphasis supplied) On consideration of the facts of that case, it was held that there was no actual liability in praesenti. It was observed (page 371): No demand was raised against the assessee of any amount. What was served on the assessee by the Collector was me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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