TMI Blog1999 (8) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... : "1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in confirming that a contingent liability which is not acknowledged even as a debt by the assessee qualifies for deduction under the Income-tax Act ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the principles laid down by the Supreme Court in the case of Indian Molasses Co. (P.) Ltd. [1959] 37 ITR 66, are not applicable to this case and the case is covered by the principles laid down in Kedarnath Jute Mfg. Co. Ltd. [1971] 82 ITR 363 by ignoring the material fact that excise duty in this case is neither determined nor owed as a debt b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 21, 1980, which is in the form of a demand notice for payment of basic excise duty and special excise duty for the years 1976-77, 1978-79 and 1979-80, in all demanding a sum of Rs. 92,98,805. The assessee challenged the levy of excise duty under item No. 17(2) by filing Civil Writ Petition No. 634 of 1980. Pending the writ petition, the assessee filed a revised return claiming the amount of Rs. 92,98,805 as deduction. The Income-tax Officer disallowed the claim of the assessee for the assessment year 1980-81 on the ground that only a show-cause notice was issued in the said assessment year. In respect of the subsequent assessment year 1981-82, the claim of the assessee was rejected by the Income-tax Officer on the ground that as the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty and special excise duty for the said years on the basis of trade notice issued in October, 1979. The assessee admittedly was following the mercantile system of accounting and, therefore, he claimed deduction for the said amount for the assessment year 1981-82. Prior to that assessment year, there was no demand as, for the excise duty, the carbon paper manufactured by the assessee was classified under tariff item No. 68. It is true that he has objected to the said demand and has filed writ petition challenging the said demand, but, at the same time, obligation to pay the said excise duty arose in that assessment year, although the liability to pay the said amount might not have been enforced pending the petition. The liability had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quire much consideration as similar contention was negatived by this court in Kedarnath's case [1971] 82 ITR 363, by holding thus : "Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating 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. The assessee who was maintaining accounts on the mercantile system was fully justified in claiming deduction of the sum of Rs. 1,49,776 being the amount of sales tax which it was liable under the law to pay during the relevant accounting year." Learned counsel for the appellant, however, relied upon the decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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