TMI Blog2002 (10) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... had a right to renew the licences for a further period of 10 years. After the expiry of the original lease, a fresh agreement was signed between the assessee and the NDMC authorities on23-9-1980by which the annual lease amount was increased from Rs. 5,51,111 to Rs. 13,50,000 which was to be paid in 12 equal monthly instalments. The assessee paid the monthly instalments for the month of October and December, 1980 under protest and also filed a suit in the Court of Sub-judge First Class,Delhi. The Sub-Judge videhis order dated10th April, 1981restrained the NDMC authorities from termination of the lease and eviction of the assessee. The NDMC authorities were further directed to refrain from the recovery of the enhanced amount of licence fee from the assessee till the final disposal of the suit filed by the assessee. Subsequently, the Additional Senior Sub-judge,Delhivide its order dated11-2-1985vacated the aforesaid injuction. Against this decision, the assessee filed a petition before the Delhi High Court. Delhi High Court vide its order dated 14-1-1987 set aside the order of Senior Sub-judge dated 11-2-1985 and directed that the assessee will be entitled to the status quo regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted the assessee's renewal by not raising any objection and by acquiescence. This led the assessee to invest Rs. 12 lakhs in the construction and setting of 'Fantasia' restaurant atChanakyaTheatresBuildingwith the written approval of the NDMC dated14-1-1980. 3. That the Directors of the company were forced to write and sign a letter dated18-9-1980and make an offer of the Licence fee at the rate of Rs. 13.50 lakhs per annum and made to sign a fresh agreement dated23-9-1980under coercion. 4. That the assessee paid monthly licence fee of Rs. 1,12,500 for the months of October, 1980 to March, 1981 strictly under protest and in order to get the licence renewed from the government authorities so that the Cinema could be run and made a simultaneous request to NDMC to keep the amount in excess of the original Licence fee separately to the credit of the assessee. 5. That the agreement of enhancement dated23-9-1980having been got signed by NDMC authorities from the directors under undue influence and coercion is illegal and not enforceable in law. 6. That in accordance with Hon'ble High Court's judgment dated14-1-1987, the assessee is liable to pay only the original licence fee pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of Supreme Court in CIT v. Swadeshi Cotton Flour Mills (P.) Ltd. [1964] 53 ITR 134. Further reliance is placed on the following decisions: (i) Swadeshi Cotton Mills Ltd v. CIT [1980] 125 ITR 33 (All.) (ii) CIT v. Oriental Motor Car Co. (P.) Ltd [1980] 124 ITR 74 (All) (iii) CIT v. Phalton Sugar Works Ltd. [1986] 162 ITR 622 (Bom.) Regarding the Supreme Court decision in Kedarnath Jute Mfg. Co. Ltd.'s case relied upon by the ld. Commissioner (Appeals), the ld. DR argued that the said decision has been rendered in the context of accrual of sales-tax liability which is a statutory liability whereas in the assessee's case, the liability is contractual liability. 9. Regarding the decision of the Delhi Tribunal in Prestolite of India Limited case cited by the Commissioner (Appeals), the ld. DR submitted that the facts in that case are distinguishable inasmuch as liability on account of interest payable to the Union Bank of India on loans borrowed by the assessee represented the ascertained liability in respect of legal and binding agreement which was not disputed by the assessee. All that the assessee pleaded in the said case was for waiver or reduction of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the agreement dated 23-9-1980 signed by the assessee with the NDMC authorities was vitiated by coercion of undue influence are to be adjudicated by the Sub-judge. A serious dispute has thus been raised by the assessee against the enhanced liability on account of licence fee and such liability cannot be treated as ascertained liability which has crystallized before the adjudication of the disputes by the courts. To a specific query by the Bench regarding the present status of the dispute before the courts, ld. Counsel stated that a compromise had now been reached with the NDMC. However the relevant particulars of the compromise and the date when the same has been reached could not be furnished by the ld. Counsel. The proposition is well established that a liability based on a contractual obligation crystallized only when the dispute is settled amicably or by judicial adjudication. The claim of deduction of enhanced licence fee as well as interest on arrears made by the assessee for the assessment years under reference before us cannot be treated as ascertained liability incurred by the assessee under the mercantile system of accounting. The word "ascertained" is defined to mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction in respect thereof would be allowable. The case of Kedarnath Jute Mfg. Co. Ltd is an instance where the liability arose as a result of statutory provision. The sales tax liability created by the sales tax authorities for assessment year 1955-56 was disputed by the assessee and no provision in the books had been made for the payment of the disputed amounts. The view taken by the Supreme Court was that the assessee was entitled to the deduction of that sum being the amount of sales tax which it was liable under the law to pay during the relevant accounting year. That liability did not cease to be a liability because the assessee had taken proceedings before the higher authorities for getting if reduced or wipe out so long as the contention of the assessee did not prevail. The principle laid down by the Hon'ble Supreme Court: "Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relevant thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. 12.2 On the other hand, Kanpur Tannery Ltd v. CIT [1958] 34 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility which would be allowed on the basis of the principle enunciated by the Hon'ble Supreme Court in Kedarnath Jute Mfg. Co. Ltd. 's case. The decision is thus clearly distinguishable and would not apply in the case of disputed contractual liability. 17. The next decision cited by the ld. Counsel is Dalmia Dairy Industries Ltd.'s case. This decision involving deduction of disputed sales tax liability has been rendered by the Hon'ble Delhi High Court following the Supreme Court decision in Kedarnath Jute Mfg. Co. Ltd.'s case. The decision is distinguishable since it deals with the statutory liability and not a contractual liability. Similarly other decision cited by the ld. Counsel, namely Investigation Security Service (India) (P.) Ltd 's case and Madira Kraya Vikraya Sangh 's case deal with the deduction of statutory liabilities and not contractual liabilities. These decisions are, therefore, clearly distinguishable. 18. Ld. Counsel has next referred to the decision of Delhi Bench of the Tribunal in the case of Prestolite of India Ltd. In this decision, as rightly urged by the ld. DR, the liability on account of bank interest was a certain liability in terms of legal and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the provisions of law. The view being taken by us is amply supported by decisions of different High Courts to which reference has been made by us earlier. For example, Swadeshi Cotton Mills Co. Ltd's case, Oriental Motor Car Co. (P.) Ltd.'s case, Phalton Sugar Works Ltd's case and Swadeshi Cotton Flour Mills (P.) Ltd.'s case. The observations of the Hon'ble Special Bench of the Tribunal are, therefore, contrary to the established legal position as borne out from the aforesaid judicial pronouncements. 20. Another argument raised by the ld. Counsel which remains to be considered is based on the doctrine of res judicata or estoppel of record. He argued that enhanced licence fee as well as interest on arrears of such fee provided in the books had been allowed by the Assessing Officer in the earlier assessment years and, therefore, a contrary view taken in the assessment years under appeal before us is not sustainable. We are not persuaded to accept this argument. It is well settled that the doctrine of res judicata is not applicable to assessment proceedings and if any issue has not been examined by the Assessing Officer in the preceding assessment years, that would not by itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid firm has been let out, show room by the assessee on payment of rent of Rs. 20,000 per annum for carrying out jewellery business. As per the agreement dated 18-4-1984 the assessee agreed to advance a sum of Rs. 1,50,000 on interest @ 10% and security deposit of Rs. 10,00,000. The Commissioner (Appeals) further noted that the closing balance of Rs. 1,55,434 in the account of M/s. Mukhamal Ram Narain Jewellers comprises brought forward amount of Rs. 1,12,483 as well as interest of Rs. 20,000 plus interest debited @ 10 per cent. M/s. Mukhamal Ram Narain is carrying on jewellery business in the aforesaid premises of the assessee and the amounts have been advanced under the lease agreement. The said agreement has been accepted as genuine by the revenue authorities. On these grounds, the Commissioner (Appeals) deleted the disallowance. 24. We see no good ground to interfere with the conclusion of the Commissioner (Appeals) and uphold the same. This ground is, therefore, dismissed. 25. In the ITA No. 6509/91, the revenue has taken one more ground being ground No. 3 against deletion of the disallowance of Rs. 94,962 on account of expenditure incurred on construction of toilets in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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