TMI Blog1999 (6) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome which had accrued in that year and was not, therefore, chargeable to income-tax for the asst. yr. 1979-80 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that interest of Rs. 69,529 and Rs. 1,30,097 on excess amount received on delivery of levy sugar in pursuance of the interim order of the High Court dt. 17th May, 1974, constituted deductible liability in the computation of profits and gains of the business of the assessee for the asst. yrs. 1978-79 and 1979-80 respectively ?" 2. This reference pertains to the asst. yrs. 1978-79 and 1979-80, the relevant accounting years being the years ended on 30th Sept., 1977, and 30th Sept., 1978, respectively. The material facts giving ris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uant to the interim order of the High Court subject to several conditions did not constitute its income until finalisation of the dispute by the High Court. The ITO did not accept this contention and included the amount of Rs. 5,56,366 in the income of the assessee. The assessee appealed to the CIT(A), who accepted the contention of the assessee and directed the ITO not to include the said amount in the income of the assessee. The above order of the CIT(A) was upheld by the Appellate Tribunal ("Tribunal"). At the instance of the Revenue, the Tribunal has referred question No. 1. 3. We have heard the learned counsel for the parties. The controversy in question No. 1 stands concluded by the decision of this Court rendered today in IT Ref. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the assessee. " Following the above decisions, question No. 1 is answered in the affirmative i.e. in favour of assessee and against the Revenue. 4. The controversy in question No. 2 pertains to deductibility of the interest from the differential amount received by the assessee on levy sugar in two assessment years viz. 1978-79 and 1979-80 which became repayable together with interest at the rate of 12 per cent per annum in the years under consideration. As stated earlier, the assessee collected certain amounts in excess of levy sugar prices fixed by the Central Government and retained the same as deposit pursuant to the interim order of the Allahabad High Court dt. 17th May, 1975, on condition that in the event of dismissal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection to refund the amount along with interest at the rate of 12 per cent per annum. The question that arises for consideration is whether even after the dismissal of the writ petition by the High Court the liability continued to be contingent liability. 6. We have carefully considered this controversy. The Income-tax law makes a distinction between actual liability in praesenti and a liability de futuro which, for the time being, is only contingent. The former is deductible but not the latter. The controversy to be decided in this case, therefore, is whether present liability accrued against the assessee in the assessment years under consideration. This has to be decided by taking into account all the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Allahabad High Court dismissing the writ petition with direction to the assessee to pay the amount which interest at the rate of 12 per cent per annum, the liability on account of interest assessee was maintaining mercantile system of accounting. In such a situation, deduction cannot be denied to the assessee on the ground that the assessee was disputing the liability in appeal before the Supreme Court. The assessee is entitled to get a deduction on account of interest in the years in which the liability ceased to be liability de futuro. It was no more a contingent liability. That being so, the assessee was entitled for deduction of the amount of interest in the years under consideration. The Tribunal was justified in allowing the deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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