TMI Blog2005 (10) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... pute between the assessee and its workmen on a charter of demands. When the labour dispute was going on, the said division of M/s. Hindustan Ciba Geigy Limited, was separated from the said company as an independent unit. The demerger scheme was approved by the Bombay High Court by its Order dated 25-7-1997 pursuant to which the erstwhile division of M/s. Hindustan Ciba Geigy Limited has been converted to the assessee-company as a separate legal entity. As the company has become a separate legal entity severed from M/s. Hindustan Ciba Geigy Limited, the liability of labour dispute was inherited by the assessee-company. As the labour dispute was persisting for so many years, assessee-company was making provisions for the liability towards add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal. The assessee took up the matter of such disallowance made by the assessing authority in the normal channel of appeal before the CIT(A). When the disallowances made by the assessing authority was thus subjudice before the CIT(A), the Commissioner of Income-tax called for the records of the assessment in the case of the assessee-company and examined them. On the basis of the examination made by him, he came to a conclusion that the assessing authority has erroneously allowed as deduction an amount of Rs. 37,58,063 claimed by the assessee towards payments of wages. The said amount related to two periods, for the period from 1-1-1994 to 31-3-1996 and the period from 1-4-2000 to 30-8-2000, the amounts being Rs. 30,41,226 and Rs. 7,16,837 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Counsel appearing for the assessee. The learned Counsel submitted that the labour dispute was finally settled during the previous year relevant to the assessment year under appeal and as such, the assessee-company was legally bound to pay off the agreed wages to its workmen and as such the liability to pay such wages should be treated as having been crystallized during the very same previous year and in the light of the above position, the Assessing Officer has rightly allowed the deduction claimed by the assessee-company. The learned Counsel submitted that the only ground relied on by the Commissioner to revise the Order is that the settlement agreed to by the assessee-company before the outcome of the Award of the Labour Tribunal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax appearing for the revenue supported the Order of the CIT(A) in a very forcible manner relying on the decision of the Pune Bench of the Tribunal in the case of Ambika Agro-Suppliers v. ITO [2005] 95 ITD 326 wherein it was held that acceptance of explanations offered by the assessee without any enquiry renders the assessment order erroneous as well as prejudicial to the interest of the revenue and as such in the present case the Commissioner has rightly revised the assessment order under section 263. The learned Commissioner further relied on the decision of the Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 wherein the Court has held that non-application of mind by the assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Tribunal and endorsed by way of its Award. Therefore, but for the technicality of the chronology of the events, the ultimate fact is that the assessee-company was liable to make payments of the settlement wages to its workmen. 10. As such,the liability was ultimately crystallized during the relevant assessment year under appeal. The quantum of liability was also ascertained during the same previous year. The payment was also made during the year. Therefore, in all these circumstances, it has to be seen that the assessee-company was under a contractual obligation to make the agreed payments to its workmen during the impugned previous year. It is to be further seen that these amounts were not claimed by way of deduction in any o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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