TMI Blog2017 (4) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Court, the mere fact that the said judgment and decree was stayed by a DB would not relieve NAFED of its obligation to pay interest in terms thereof to Alimenta. Such liability commenced in the previous year in which the said judgment and decree was passed by the learned Single Judge. To borrow the phraseology of the Supreme Court in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association [ 1992 (4) TMI 183 - SUPREME COURT] held a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal are that the Appellant entered into an Agreement with Alimenta SA Switzerland ( Alimenta ) on 12th January, 1980 and 3rd April, 1980 for export of 5,000 and 4,000 MT HPS groundnut during the years 1979-80 and 1980-81. 4. The disputes that arose from said agreements were referred to arbitration. 5. An Award dated 14th September, 1990 was passed in favour of Alimenta and against NAFED whereby NAFED was required to pay Alimenta a sum of US$ 45.26 lakhs as principal together with US$ 48.81 lakhs as interest from 13th February, 1981 till the date of the Award. 6. Alimenta initiated proceedings for recognition and enforcement under Section 5 of the Foreign Awards (Recognition and Enforcement) Act, 1961 in this Court. By an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. The claim of interest payable to Alimenta on the amount awarded was disallowed by the AO by holding that the liability was contingent and not even acknowledged in the books of accounts. 11. As regards the assessments for AYs 1996-97 to 1998-99, NAFED s appeals were dismissed by the ITAT by an order dated 25th January, 2008 holding that the interest liability crystallised only in the AY 2001-02 and as such deduction of interest could not be allowed in any of the AYs earlier thereto. 12. Notwithstanding the above order dated 25th January, 2008, the Commissioner of Income Tax (Appeals) [ CIT (A ] by an order dated 31st March, 2008 for AYs 2001-02 and 2002-03 upheld the disallowance of interest as ordered by the AO. 13. Aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a certainty. A distinction has been drawn between a contractual liability and a statutory liability. The latter is said to be incurred on the mere issuance of a demand notice which becomes deductible with the issuance of such notice. In such a case, the fact that the Assessee may have raised a dispute against such a demand does not ruin the incurring of liability. It arises only when such a claim is either acknowledged or in a case of non-acceptance when a final obligation to pay is fastened coupled with the claimant acquiring a legal right to receive such an amount. It is further noted that a legal obligation to pay is attached on an Assessee when a competent court passes order and a suit is decreed against him and not during the pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. (emphasis supplied) 20. In Haji Lal Mohd. Biri Works v. CIT (1997) 3 SCC 659 SC it was explained by referring to the decisions in Kedarnath Jute Mfg. Co. Ltd. v. CIT (1972) 3 SCC 252 and CIT v. Kalinga Tubes Ltd. (1996) 2 SCC 277 that when the assessee is following mercantile system of accounting, in case of sales tax payable by the assessee, the liability to pay sales tax would accrue the moment the dealer made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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