TMI Blog1998 (8) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ade or in the year in which the actual settlement took place ?" The facts, as found by the Tribunal, are that the assessee --a partnership firm---engaged in the business of transportation of goods, made a provision of Rs. 9,58,532 in its books following the mercantile system of accounting in the previous year relating to the assessment year 1985-86 and claimed deduction in respect of the said amount. The provision represents the loss claimed by claimants for non-delivery or short-delivery of their goods. On verification, the Assessing Officer found that though the claims were made by the parties, they were not, at any rate, accepted by the assessee at the end of the previous year, relevant to the assessment year 1985-86 ; that in many c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been accepted. If so, there is no need for the appellant to dispute the claims. The contention of the representative that the liability is a statutory one under the 'Carriers Act' will not also be of any help to the appellant. As already mentioned earlier, in my opinion, the liability arises only if and when the carrier fails to prove that the loss or damage did not arise due to any criminal act or negligence..." The dispute was carried further in appeal before the Appellate Tribunal by the assessee. The Tribunal, allowing deduction as per the provision made by the assessee in his books, held as follows : "In our considered opinion, the occurrence of a liability is one thing and the quantification of the same is another thing and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claims preferred by the consignors was either unreasonable or excessive or on an ad hoc basis..." The Tribunal, adverting to section 9 of the Carriers Act, found as under : "A bare reading of the above section would show that the person claiming the damages or loss need not prove that such loss or damage or non-delivery was owing to the negligence or criminal act of the carrier, his agents or servants. In other words, there is a rebuttal presumption as against the carrier that the loss or damage arose out of negligence on his part, his agents or servants. Of course, the carrier can recluse itself from the liability if the presumption against it is rebutted. Till that stage is reached, the liability primarily lies on the assessee. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier to make loss good to the claimants is absolute as that of the insurer under section 9 of the Carriers Act and, therefore, the assessee was fully justified in making a provision in the books as per the claims made by the claimants, not exceeding the invoice value at any rate. It is urged for the assessee that its liability is statutory and that the assessee becomes liable to pay damages to the claimants immediately upon occurrence of the loss and that such liability will not attenuate or extinguish simply because the assessee continued to negotiate with the claimants regarding the quantum of damages even after the expiry of the previous year. In Kedarnath Jute Manufacturing Co. Ltd. v. CIT [1971] 82 ITR 363, the Supreme Court, dealing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as settled by the Supreme Court seems to be that under the sales tax law, the moment a sale or purchase is effected under the relevant statute, legal liability to sales tax arises. Whether that liability is discharged by actual payment or provision for meeting that liability in the books of account are irrelevant considerations. In order to consider the question of legal liability of the assessee in the mercantile system of accounting, the only concern can be that of the legal liability arising in the relevant assessment year. The fact that the liability has not been quantified for payment, which the law enjoins an assessee to do, cannot, therefore, be said to be relevant. The above-stated is the rule relating to a statutory liability. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e [1971] 82 ITR 363 (SC), The only difference is that in the case of the former, a statutory liability arises under the Carriers Act, whereas, in the case of the latter, liability is to pay the sales tax. The principle laid down in Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363 (SC) is squarely applicable to the case at hand, and applying the same, it must be held that the assessee was entitled to make a provision in respect of the demand made by the claimants for loss of their goods in the relevant previous year and to claim deduction in respect thereof, notwithstanding the fact that it continued to negotiate with the claimants during or after the expiry of the previous year and that upon settlement of the negotiations, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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