TMI Blog2006 (2) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had lost its case before the Hon'ble Rajasthan High Court when the court ordered payment of this duty with interest. Though the assessee filed appeal before the Hon'ble Supreme Court, but it had partly paid the amount during the year and a sum of Rs. 62,38,464 remained to be paid out of the above referred interest amount of Rs. 1.45 crores. The Assessing Officer came to hold that the interest payable on bottling fee was in the nature of bottling fee itself and the non-payment of interest would attract the provisions of section 43B. He, therefore, made disallowance, which was confirmed in the first appeal. 4. We have heard both the sides and perused the relevant material on record. The disputed amount of Rs. 62.38 lakhs and odd being the interest on bottling fee remained unpaid at the end of the year which, in the Assessing Officer's opinion, partook the character of such bottling fee or Excise duty and hence, the provisions of section 43B were attracted. There is no dispute about the fact that the said amount was interest on the bottling fee. In reference to interest on sales tax being part of the sales tax, it has been held by the Hon'ble Jurisdictional High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . First ground of Revenue's appeal is against the deletion of disallowance of Rs. 1,39,28,685 under section 43B on account of bottling fee. 10. As discussed in one of the foregoing paras that the assessee-company had paid bottling fee pertaining to earlier years amounting to Rs. 1.39 crores as a result of the judgment of the Hon'ble Jurisdictional High Court deciding the issue against the assessee. The Assessing Officer noted that in such earlier years a total of such liability to the extent of Rs. 1,24,25,297 had been disallowed as claimed by the assessee. He, therefore, held that this liability was not allowable now for the reason that the assessee was following the mercantile system of accounting according to which the amount could have been deducted only when liability accrued and got crystallized. As the assessee had assailed the decision of the Hon'ble Rajasthan High Court, it was, therefore, held that the liability could not have been said to have been finally adjudicated and settled. He, therefore, made addition of Rs. 1.39 crores. In the first appeal, the ld. CIT(A) accepted the assessee's contention that the Assessing Officer had himself made disallowance under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty cess or fee and hence, the orders passed by the Tribunal in the earlier years, being in conformity with this view, have full binding force. The position that now emerges is that the addition so made by the Assessing Officer by invoking the provisions of section 43B in the earlier years was wrongly made and has been rightly deleted. Insofar as the accrual of liability of Rs. 1.39 crores and odd towards payment of bottling fee for the earlier years is concerned, we find that the same has to be decided in accordance with the regular method of accounting followed by the assessee. The assessee being a limited company, is following the mercantile system of account as per which the amount becomes deductible when liability to pay finally arises. It has been held by the Hon'ble Bombay High Court in the case of CIT v. Phalton Sugar Works Ltd [1986] 162 ITR 622 that where a liability arising out of contractual obligation is disputed, the assessee becomes entitled to claim deduction in that behalf only in the assessment year relevant to previous year in which dispute is finally adjudicated upon or settled. As is clear from the facts of the instant case that the assessee had not accepted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was following mercantile system of accounting and hence, the creation of liability of sales tax was an event happening in this year and was, therefore, allowable irrespective of the actual payment. We are not inclined to accept this point of view for the reason that the crystallization or otherwise of the sales tax liability, as a condition for grant of deduction has become redundant after insertion of section 43B, according to which such amount can be allowed only when it is actually paid. The incurring of liability as per the method of accounting regularly employed by the assessee is now no more relevant. In the post insertion era of section 43B the amount of sales tax can only be deducted in which it is actually paid by the assessee irrespective of the method of accounting, viz., cash or mercantile, followed by the assessee. In our considered opinion, the ld. CIT(A) was not correct in deleting this addition simply on the ground that the liability was incurred in this year. The material thing to be taken into consideration is the year in which the amount was paid. Since the necessary details are not available on record as regards the amount of sales tax payment in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer justifying deviation from the earlier stand taken by the Revenue in accepting this payment of lease rent as per the agreement. In our considered opinion, the ld. CIT(A) rightly dealt with the matter in allowing assessee's claim on this count. We, therefore, dismiss this ground of appeal. 19. Last effective ground is against the deletion of addition of Rs. 6,35,825 on account of Dharmada receipts. 20. It was observed by the Assessing Officer from the copies of sale vouchers that the assessee-company was charging Re. 1 on sale of IMFL as 'Dharmada'. The Assessing Officer made addition for this sum by observing that the amount of Dharmada was not earmarked by customers as Dharmada while making payments. In the first appeal, the ld. CIT(A) deleted the addition. 21. We have heard both the sides and perused the relevant material on record. Insofar as the taxability of Dharmada receipt is concerned, we find the same to be fully settled in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Bijli Cotton Mills (P.) Ltd. [1979] 116 ITR 60 in which it was held that the amount cannot be characterized as trading receipt. The Assessing Officer has embarked upo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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