TaxTMI 
TaxTMI 
2012 (5) TMI 368
X X X X Extracts X X X X
X X X X Extracts X X X X
....ances of the case, the Tribunal was right in holding that the provision for hank yarn obligation is allowable as a deduction in this assessment year when the assessee has not fulfilled its obligation and textile commissioner had extended the time for fulfilment till 31.3.95? 2. As far as the first substantial question of law is concerned, both counsel agree that the said issue is covered by the decision reported in [2003] 262 ITR 375 (Commissioner Of Income-Tax vs Sakthi Textiles Ltd.) in favour of the assessee. The only other question which remains for consideration is as regards the deductability provision made in respect of hank yarn obligation to be performed by the assessee. 3. In the decision reported in [2000] 245 ITR 428 (Bharat E....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... subsequent, the fulfilment of which may result in the reduction or even extinction of the liability, would not have the effect of converting that liability into a contingent liability; (iv) A trader computing his taxable profits for a particular year may properly deduct not only the payments actually made to his employees but also the present value of any payments in respect of their services in that year to be made in a subsequent year if it can be satisfactorily estimated." Keeping the law declared by the Apex Court on the background, the facts herein need to be seen. 5. The assessee herein is a textile mill. As per the Textile Commissioner's order, the assessee had to produce certain percentage of yarn in the form of hank. Admittedly....
X X X X Extracts X X X X
X X X X Extracts X X X X
....already accrued, the assessee made a claim of deduction. The Assessing Authority, however, rejected the said claim on the ground that the assessee's obligation did not come into being during this year. Since the liability crystallized only in the next year for finalising the agreement on purchase obligation, the claim for deduction was rejected. The assessee filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) viewed that when the Textile Commissioner had allowed the assessee to perform its obligation by 31.3.1995, the obligation to purchase from various producers would vary, depending upon the market rate at the time of purchase. Thus in the absence of definiteness as to the price that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yarn was very much there during the relevant assessment year. But for the Textile Commissioner's circular dated 22.2.1994, the assessee would have had to fulfil the statutory obligation during the accounting year relevant to the assessment year under consideration either by producing the hank yarn by itself or purchase the obligation performed by other mills. Admittedly, the correctness of the decision of the Textile Commissioner imposing a liability of making hank yarn, was a subject matter of litigation before the Courts and on the Courts upholding the circular of the Textile Commissioner, many of the mills which could not perform their obligation within the time stipulated, had to approach the Textile Commissioner for postponing the obli....