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2002 (8) TMI 26 - HC - Income TaxThe only issue for our consideration in this appeal is whether the Tribunal was justified in restoring the view taken by the Income-tax Officer regarding disallowance of the expenses accrued on account of agreement with the State Government regarding restoration of the land in its original shape. - Considering the clause in the agreement, i.e., as far as possible the lessee shall restore the surface land so used to its original condition, the moment the assessee digs pits, he is bound under the agreement to fill those pits and the liability does accrue on the date when the pits are dug. Therefore, in our view, the Tribunal has committed an error in disallowing the claim of the assessee in the year in hand, i.e., 1991-92. We agree with the view taken by the Commissioner of Income-tax (Appeals) that the moment the assessee digs the pits, the liability does arise and it is entitled for deduction of the expenses which it is supposed to incur for filling those pits, as the assessee is following the mercantile system of accounting. – Question answered in negative - we restore the view taken by the Commissioner of Income-tax (Appeals). The appeal stands allowed.
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