TMI Blog2016 (12) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... n the litigation is not yet finalized, it cannot be said with authority that the provision made will never be categorized as expenditure for the concerned assessment year. That apart, if the Supreme Court finally declares that the curtailment notification of 27.03.2008 is legally unsustainable, the revenue will not suffer any prejudice since the department can bring the provisional amount to tax, under Section 41(1) of the IT Act. Therefore we are of the considered opinion that the substantial question of law framed in this proceeding has to be answered in favour of the assessee and against the revenue. - Income Tax Appeal No. 4 of 2014 - - - Dated:- 24-11-2016 - Hrishikesh Roy And Nelson Sailo, JJ. For the Petitioner : Dr. Ashok Saraf (Sr. Adv.), Mr. A. Goyal, Mr. K. Choudhury, Mr. P. Baruah, Mr. Z. Islam. Advocates For the Respondent : Mr. S. Sarma, SC, Income Tax. Advocate JUDGMENT [ Hrishikesh Roy, J. ] Heard Dr. Ashok Saraf, the learned Senior Counsel for the appellant (assessee). Also heard Mr. S. Sarma, the learned Standing Counsel, Income Tax Department for the respondent. 2. This appeal is under Section 260-A of the Income Tax, 1961 (hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceptable to the Excise Authorities and they filed the WA No.243/2009 and thus finality on the litigation on the extent of central excise exemption, is yet to be reached. Our Division Bench passed the first interim order on 11.08.2009, whereby the refund in terms of the verdict in the WP(C) No.1707/2008 was directed to be limited, to the amount offered by the excise authorities or in other words, the judgment of the learned Single Judge was rendered inoperative, during the pendency of the Appeal. 8. However in similar litigations emanating from the Gujrat High Court, the Supreme Court on 13.01.2012 in the SLP(C) Nos.28194 28201/2010 passed a different type of interim order on the following terms:- We have heard learned counsel for the parties on the question of stay of the impugned judgment. Having done so, we direct that operation of the impugned judgment shall remain stayed till further orders, subject to the petitioners releasing to the respondents 50% of the amount due to them in terms of the impugned judgment on the respondents furnishing solvent surety to the satisfaction of the jurisdictional Commissioner, within four weeks of their furnishing the said surety. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total duty payable, w.e.f. 01.04.2008. Thus resulting in lower refund of ₹ 3,43,18,499/- for the assessment year under consideration. The assessee had made provision in their accounts, to take care of the excise tax liability in the event the departmental challenge is upheld by the higher Court. This was perceived by the assessing officer to be only provisional and not ascertained liability and thus the show-cause notice was issued on 15.11.2011 to seek explanation as to why, the claim on account of provision for central excise duty for ₹ 3,97,62,512/-, should not be disallowed, for the assessment year 2009-10. 14. In their reply letter of 23.11.2011 the assessee mentioned about the departmental challenge to the decision of the learned Single Judge, who in the WP(C) No.1707/2008 had quashed the curtailment notification of 27.03.2008 and hence contended that, the statutory liability can be claimed in the year, in which dispute arises. However, the assessing authority considered the provision made by the assessee as contingent liability and opined that putting aside money which may become expenditure on the happening of an event, is not expenditure as the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the books of accounts can be said to be a conservative practice of a prudent assessee. In Kedarnath Jute MFG. Co. Ltd. Vs. Commissioner of Income-Tax reported in (1971) 82 ITR 363 (SC), the Supreme Court opined that the assessee maintaining accounts on the mercantile system, was fully justified in claiming deduction of the tax amount, for which it became liable under the law during the relevant accounting year and the situation is no different even when the issue of tax liability is litigated, in the higher forum. 19. The Andhra Pradesh High Court in Commissioner of Income-Tax Vs. Investigation and Security Service (India) P. Ltd. reported in (1990) 182 ITR 358 was examining the business expenditure claim in the accounts of the assessee, where the liability issue of the assessee under the ESI Act was pending in the Court. In that context, the Division Bench opined that when the appeal is pending and finality is not reached on the liability of the assessee, the provision made towards the statutory liability during the assessment year under consideration, is entitled to deduction of the sum kept aside by the assessee. 20. For another assessee following the mercantile system o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantified finally and the liability is being disputed in a court of law. 22. While the above decisions support the case projected by the appellant, the Revenue relies on Ideal Sheet Metal Stampings Pressing (P) Ltd.(supra), where the Gujarat High Court opined that only when the tax amount is paid by the assessee, the same becomes deductible and keeping aside the taxable amount for the disputed liability, will not entitle the assessee to claim deduction. On scrutiny of facts of the cited case, we find that, the disallowance of business expenditure under Section 43B of the IT Act was under consideration, where the assessee collected the excise duty but had not paid the same to the govt. treasury. Thus the recovery of excise duty was considered to be trade receipts in the hands of the assessee, but since the amount was not paid to the Government Treasury, the unpaid amount was found to be disallowable to deduction, under Section 43B by the Court. But the Gujarat case in our considered opinion is distinguishable in as much as, the decision there was in the context of the claim under Section 43B of the IT Act. It was not a case of making provision for un-finalised tax liability, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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