TMI Blog1989 (9) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... us year ended on December 31, 1971. The assessee is an agent for the sale of Tata motor vehicles. It also carries on business in repairing motor vehicles. The terms and conditions of service of workmen employed by the assessee were governed by awards. On October 7, 1970, the trade union representing the workmen of the assessee gave notice to the assessee terminating the awards with effect from two months thereafter. The assessee's board of directors noted this at meeting held on November 25, 1970. A provision was made for Rs. 1,00,000, in view of the impending liability on account of the change of service conditions of the assessee's workmen, in the accounts for the year under consideration. Negotiations between the assessee and the trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration had accrued during the year under consideration and had to be deducted, being expenditure for the purpose of earning the receipts during the year, even though the liability pursuant to the settlements was discharged in a subsequent year. It is not in dispute that the provision of Rs. 1,00,000 made by the assessee in its accounts for the year under consideration for discharging the impending liability on account of the revision in the service conditions of its workmen had not been allowed as a deduction in its assessment for the year under consideration. Dr. Balasubramanian, learned counsel for the Revenue, submitted that the payment of the aggregate sum of Rs. 76,680 had been made by the assessee after the close of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense. There could be no computation of profits and gains until the expenditure necessary for earning the receipts was deducted there from, whether the expenditure was actually incurred or the liability in respect thereof had accrued but was to be discharged at some future date. In Kedarnath Jute Mfg. Co.'s case [1971] 82 ITR 363 (SC), it was held that the moment a dealer made either purchases or sales which were subject to sales tax, the obligation to pay the tax arose, although the liability could not be enforced till quantification was effected by assessment proceedings. The liability for payment of tax was independent of the assessment. The gravamen of Dr. Balasubramanian's case is that the liability had not accrued to the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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