TMI Blog1984 (10) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... sible deduction for 1973-74 and 1974-75 ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee was entitled to deduction under section 36(1)(iii) in respect of interest on purchase tax loan for the assessment years 1973-74 and 1974-75 ? (3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the amount of Rs. 8,75,277 did not belong to the assessee and that it was not a trading receipt for the assessment years 1973-74 and 1974-75?" So far as questions Nos. 1 and 2 are concerned, learned counsel for the assessee submits that they are covered in his favour by the decisions in Mahalakshmi Sugar Mills C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government have no power to fix the price in respect of the levy sugar and they should be permitted to sell the sugar at the rates existing prior to the introduction of the control order. The assessee in this case had also filed a similar writ petition in the Supreme Court. The Supreme Court admitted the writ petition and passed conditional order that the assessee may collect the price of sugar at the rates existing prior to the introduction of the control order, but that the difference in price collected should be deposited in a separate account, or a bank guarantee of an equal amount should be furnished to the Registrar of the Supreme Court in respect of the excess collection made. It is not denied that pursuant to the above condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uents entitles the assessee to claim by way of deduction the sum of Rs. 8,75,277 as business expenditure following the mercantile system of accounting employed by the assessee. The Income-tax Officer declined to accept the above contentions of the assessee and treated the sum of Rs. 8,75,277 as the assessee's income, constituting a trading receipt. Aggrieved by the above addition, the assessee carried the matter in appeal The Appellate Assistant Commissioner held that the assessee was clearly governed by the Levy Sugar Price Equalisation Fund Act, 1976, under which there was an obligation to pay the money to the constituents if eventually the price fixed by the control order was upheld. The Appellate Assistant Commissioner also held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed the same with the character of the liability which should be deducted even if the amount is treated as a trading receipt. According to the learned counsel, the trading receipt and the corresponding liability offset each other with the result that no part of the sum of Rs. 8,76,277 falls to be included in the total income of the assessee. We consider that the Tribunal was justified in its conclusion that the amount of Rs. 8,76,277 did not partake of the nature of a trading receipt and on that ground itself the amount fell to be excluded from the total income of the assessee. It may be pointed out that the right to collect the amount in excess of the price fixed by the control order was saddled with the obligation to deposit the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the obligation to repay the amount based on the final decision on the validity of the control order. As eventually the validity of the control order has been upheld, the obligation to repay the moneys to the constituents from whom the amounts were collected entitled the assessee to claim the impugned sum by way of business expenditure, so that the so-called trading receipt is offset by corresponding liability which is fastened on the assessee during the previous year relevant for the assessment year under consideration. It is not denied that the assessee has been maintaining its accounts in the mercantile system and that the excess collections relate to the transactions concerning the assessment year 1974-75. Irrespective of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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