TMI Blog1989 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... t, commenced on March 1, 1975, and ended on February 28, 1976. In the course of the assessment proceedings for the said year, the assessee claimed deduction in respect of rent and cess for the earlier years aggregating to Rs. 4,13,666 in all, payable by it to the Government of West Bengal for its Teesta Valley Tea Garden in terms of an agreement entered into by and between the assessee and the State Government on March 13, 1975. By a notification issued by the State Government under section 4 of the West Bengal Estates Acquisition Act, 1953, agricultural lands forming part of different tea gardens situated throughout the State of West Bengal vested in the State Government with effect from April 15, 1955. The lands forming part of the tea gardens were, however, allowed to be retained by the respective tea garden owners who were in possession of such lands on the date of vesting. These persons were allowed to continue their business of cultivation and manufacture of tea as lessees of the Government of West Bengal in respect of the agricultural lands forming part of such tea estates. Under sub-section (2) of section 42 of the West Bengal Estates Acquisition Act, 1953, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts from the tea gardens has been under consideration of the Government for some time. In May, 1971, the representatives of your association had met the then Minister for Land and Land Revenue Department and the Member, Board of Revenue, when the following formula was considered : (a) The rent as determined under section 42(2) will be realised from the date of vesting, i.e., April 15, 1955. (b) From now on, every year, a garden should pay the current rent plus one year's arrear rent for as many years as it would take the arrears to be wiped out. (c) As a concession to the tea industry, the Government will not charge any interest on arrears of rent up to April 1, 1971, provided the annual payment is made regularly as at (b) above. The Government have accepted the formula and intends to implement it without any further delay. On execution of agreements with individual tea estates on the lines of the aforesaid decisions, fresh leases in Form I(appended to Schedule F of the E. A. Rules) will be issued." The State Government also drew up a form of agreement to be executed by each of the tea garden owners. This decision of the State Government along with the format of the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gate rent and cess amounting to Rs. 4,13,666, which was determined to be payable by it under section 42(2) of the West Bengal Estates Acquisition Act, 1953, for the period April 15, 1955, to April 1, 1971. Deduction in respect of this amount was earlier claimed by the assessee-company in the assessment years 1974-75 and 1975-76 as well. The income-tax authorities, however, did not allow deduction in any of these two years on the plea that the liability did not crystallise in the relevant previous years having regard to the fact that the agreement was executed on March 13, 1975, which fell in the previous year relevant to the assessment year 1976-77, which is now in reference before this court. The Income-tax Officer, however, did not allow this deduction even in the assessment year 1976-77 on the ground that the liability to pay rent and cess had arisen in the earlier years and as the assessee was maintaining accounts-on the mercantile system, it was not entitled to claim the deduction in the year under reference. The Commissioner of Income-tax (Appeals) allowed the claim of the assessee-company, On further appeal by the Revenue, the Income-tax Appellate Tribunal, inter alia, held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its previous year for agricultural incometax purposes too. But the assessee preferred to be taxed for agricultural income-tax purposes on the financial year basis. The court found that, by adopting the method which the assessee had done, it tried to bring into the previous year the income and expenditure for a period prior to the previous year as well as for a period subsequent thereto. The court held that the assessee was not entitled to do so under the provisions of the Maharashtra Agricultural Income-tax Act, 1962. This case, cited on behalf of the Revenue, has no application to the controversy involved in the present case before this court. In CIT v. Phalton Sugar Works Ltd. [1986] 162 ITR 622, one of the issues raised for consideration before the Bombay High Court related to the assessee's claim for deduction of Rs. 67,299.90 in regard to the expenses for the extra staff engaged by the Maharashtra State Farming Corporation Ltd. for loading and unloading trucks and tractors with the sugarcane purchased by the assessee from the said corporation. The amount was covered by five bills raised by the corporation. The assessee disputed its liability in regard to the said five bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the previous year relevant to the assessment I year 1971-72, when the Tribunal passed the appellate order although the original additional demand of sales tax was raised by the Sales Tax Officer in March, 1966. The Orissa High Court held that where the assessee follows the mercantile system of accounting, it can claim deduction in the year when the liability to sales tax was finally determined by the Sales Tax Tribunal in the second appeal. This case, again, far from supporting the case of the Revenue, actually supports the case of the assessee inasmuch as the liability to additional rent and cess was fastened upon the assessee before us in terms of the agreement executed during the previous year under reference between the assessee-company and the Government of West Bengal. We shall now refer to the cases cited on behalf of the assessee. In CIT V. Orient Supply Syndicate [1982] 134 ITR 12, this court was concerned with a statutory liability under the Employees Provident Funds Act, 1952. Such liability related to the years 1957 to 1960. On June 19, 1962, the Regional Provident Fund Commissioner wrote a letter to the assesseecompany to comply with the provisions of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of other courts and demanded contributions from the assessee-company from 1968 onwards. The assessee-company initially objected to the demands but finally agreed to pay the contributions as demanded. The assessee-company claimed deduction of Rs. 45,191 as expenditure incurred on account of contribution under the said Act for the period January, 1968, to June, 1973. This deduction was claimed for the first time in the assessment year 1975-76. This court held that though the statutory liability was created by the Amendment Act of 1966, the liability became real and enforceable in 1974, although the demand was referable to the years 1968-1973. The position was clarified by the High Court upholding the validity of the extension of the statute in several other cases. It, therefore, held that, from a commercial point of view, the assessee was entitled to claim deduction in respect of the liability in question when it became final and enforceable. This case also supports the contention of the assessee inasmuch as the liability to pay rent and cess became enforceable in terms of the contract executed during the relevant previous year between the assessee-company and the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1970-71. The court found that the assessee had approached the creditor for waiver of interest in 1967 and by letter dated March 29, 1968, the creditor had intimated to the assessee-company that such request for waiver was under consideration. Finally, in December, 1968, the creditor rejected the request for waiver and submitted the interest bill. The court upheld the assessee's claim for deduction in the assessment year 1970-71 on the ground that the interest, though relating to the earlier year, actually accrued in this accounting year. It is true that the liability to pay rent and cess was a statutory liability. But, the right of the State Government to enhance the rent with retrospective effect from the date of vesting was all along seriously disputed by everybody including the assessee. Even the State Government felt doubts about its right to revise the rent with retrospective effect from the date of vesting. For this purpose, the Amendment Act was introduced and passed by the State Legislature in 1969 and sub-section (4) was introduced in section 42 of the West Bengal Estates Acquisition Act, 1953. Notwithstanding the introduction of sub-section (4), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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