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2009 (3) TMI 132 - HC - Income TaxLiability on account of arbitration award - Whether the liability of Rs. 7,14,824 arising under the arbitration award against the appellant declared in the assessment year 1988-89 had not accrued in that year only because the award was challenged in appeal by the assessee and, therefore, was not allowable in the assessment year 1988-89? – Held that - Admittedly, the assessee is following the mercantile system of accounting. On May 28, 1987, when the Trade Association made an award for damages for breach of contract the liability to pay such damages had already been incurred by the assessee. Merely because the award was challenged in appeal by the assessee cannot be a ground for holding that the liability had not been incurred – ITAT has committed an error - the liability arose in the hands of the assessee and merely because the award was challenged that fact did not make the award unenforceable in law. The assessee was accordingly held entitled to claim deduction in the said case – decided in favor of assessee
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