TMI Blog2015 (3) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... crystallized at higher amount of ₹ 5.50 crores. Even though assessee has not claimed higher amount at the time of assessment, it could have reduced its taxable income as the A.O. made certain additions to the returned income. Assessee has limited its claim to the amount provided in the books of accounts. We are of the opinion that the amount is ascertained liability and not a contingent liability. Even though the same was reported in the notes to the account as one of the contingent liability and disclosed as a material fact, the amount is not contingent liability and therefore, we are of the opinion that order of Ld. CIT directing the A.O. to disallow is not correct on the facts of the case. Moreover, as seen from the record, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to payment of ROC fee. Assessee is contesting the direction of the Ld. CIT in disallowing the brand owner s surplus in its grounds raised from 1 to 9. Even though ground No.10 pertaining to disallowance of ROC Fee was raised, Ld. Counsel fairly admitted that they are not pursuing this ground. 2. Briefly stated facts of the case are that assessee is a company manufacturing IMFL, entered into an agreement with M/s. Shaw Wallace Distilleries Ltd which inter alia permitted license to manufacture IMFL. As per agreement, the assessee company has to manufacture IMFL of Shaw Wallace brands and collect sale proceeds from AP Beverages Corporation Ltd. Out of sale proceeds, after deducting manufacturing and establishment expenses at a fixed rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt raised to M/s. Shaw Wallace Distilleries Ltd. In response to the direction of Hon ble High Court Receiver has taken the custody of the factory unit. As on date, the unit continues to remain under the custody of the Receiver. 2.2. In the impugned year, assessee has claimed an amount of ₹ 5.59 crores as an allowable expenditure payable towards brand owners surplus by virtue of its agreement for IMFL. Originally the return filed for the A.Y. was not taken-up for scrutiny. Assessment was reopened under section 147 and an order under section 143(3) read with section 147 was passed on 29.12.2010 determining total income at ₹ 1,18,94,790/- as against original admitted income of ₹ 58,19,672/-. Later, assessee filed revised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jute Manufacturing Co. Ltd., vs. CIT 82 ITR 363 (SC) (iii) Morvi Industries Ltd., vs. CIT 82 ITR 835. 2.4. Ld. CIT however, did not agree. He was of the opinion that in the notes to the accounts it was clearly stated that liability is contingent liability. He was also of the opinion that A.O. has not called for any details nor made any investigation or verification before allowing the claim. In view of this, he directed the A.O. to disallow the amount in the order. Assessee is aggrieved and raised the grounds. 3. Referring to the annual report placed on record in the paper book, Ld. Counsel submitted that there Ld. CIT has erred in not considering the notes forming part of the accounts in its entirety. It was submitted that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contingent liability and even though it was only categorised as contingent liability in the annual accounts when the facts are placed before the Ld. CIT, he should have examined the issue rather than directing the A.O. to disallow the amount without giving any opportunity to the assessee. He relied on various case law on the issue. 4. Ld. D.R. however, submitted that as on the date of signing the audit report, the liability was unascertained because of dispute and accordingly, the same cannot be allowed. He relied on the Order of Ld. CIT. 5. We have considered the rival contentions and perused the paper books placed on record. There is no dispute with reference to the fact that as per the agreement assessee was entitled to a fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although the liability may have been estimated and discharged at a future date as held by the Hon ble Supreme Court in the case of Poona Electric Supply Co. Ltd., vs. CIT (1965) 57 ITR 521 (SC). Even in the case of Kedarnath Jute Manufacturing Co. Ltd., vs. CIT 82 ITR 363 (SC), the Hon ble Supreme Court held that liability though disputed in appeal etc., is allowable in the year in which such liability has accrued in law. Considering the principles on the issue, we are of the opinion that though there is dispute with reference to quantification of the amount, there is no dispute with reference to basic liability. What assessee was entitled was already determined by way of agreement and any excess collections made by the assessee are to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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