TMI Blog1997 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation [1998] 232 ITR 138, dated May 14, 1997. We have answered the question in that case that the Tribunal was right in law in deciding that the deduction under section 36(1)(viii) of the Income-tax Act be allowed at the prescribed percentage of the total income computed before making deduction under Chapter VI-A and also before taking into account the deduction allowable under section 36(1)(viii) itself. Following the said judgment, we answer the question holding that the Tribunal was right in its view that the deduction under section 36(1)(viii) of the Act is allowable at the prescribed percentage of the total income before making deduction under section 36(1)(viii) itself. The second question to be considered by us is whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d followed the Madras case. The Commissioner of Income-tax (Appeals) upheld the order of the assessing authority. On second appeal, the Tribunal rejected the contention of the assessee and accepted the contention of the Revenue. We have been taken through the judgment of the Madras High Court in CIT v. Madras Industrial Investment Corporation Ltd. [1980] 124 ITR 454, which has been considered by a judgment of the Madhya Pradesh High Court in M. P. Financial Corporation v. CIT [1987] 165 ITR 765. We have also perused the judgment of the Supreme Court in India Cements Ltd. v. CIT [1966] 60 ITR 52. We can straightaway point out that the judgment of the Supreme Court has no relevance in the present case. No doubt, the Madras High Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sabyasachi Mukharji J. (as he then was), who delivered the judgment of the court observed as follows: 'The expression "expenditure" is not defined in the Act, as such. In the context of different statutes, the expression "expenses" has been construed. For example, in Stroud's Judicial Dictionary, third edition, Vol II, page 1030, it is noted that in the case of Jones v. Carmarthen Corporation [1841] 10 LJ Exch. 401, the expression "expenses" meant actual disbursements not allowances for loss of time. Therefore, a charge by a town clerk for preparing lists of parliamentary voters was not "expense incurred" by him within the Parliamentary Voters Registration Act, 1843. But, again, in the case of R. v. Marsham [1892] 1 QB 371, 379 (CA), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the question as to whether the assessee was entitled to deduct the 'rent forgone' in the circumstances of that case. It was held, following the decision in Usher's Wiltshire Brewery Limited v. Bruce [1915] AC 433, that 'rent forgone' would, in the circumstances of that case, amount to money wholly and exclusively laid out or expended for the purposes of the trade of the assessee. Therefore, our answer to question No. 2 is that though the entire amount of discount amounting to Rs. 94,875 was not an allowable expenditure in the assessment year in question, the said amount of discount has to be spread out proportionately over the number of years for which the bonds are issued and the proportionate amount of discount would be allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be deemed to have accrued in terms of the agreement between the corporation and the parties concerned because allowance of interest during the pendency of a suit was matter of discretion with the concerned court. There appears to be some force in this contention. However, we are not in a position to determine the exact figures of interest accruing to the assessee during the relevant accounting years because sometimes the interest accruing during earlier years was also debited to the party's account on 1st April, in accordance with the changed system of accounting and in some cases it was conceded that the suits had been filed for recovery of the amounts during the years under consideration. May be that after filing of the suits, accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the Tribunal has only remanded the matter to the file of the assessing authority for fresh decision on the quantum regarding addition to be made in each year in the light of its observations. The Tribunal has referred to the judgment of the Supreme Court in CIT v. T. N. K. Govindarajulu Chetty [1987] 165 ITR 231. The Supreme Court held that the method of accounting of the assessee being the mercantile system, the interest accrued to the respondent when the compensation amount due to him under the land acquisition proceedings had not been paid in each of the years and had to be spread over between the date of acquisition and the date of actual payment. The appeal preferred by the Department was rejected on that footing. The court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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