TMI Blog1988 (12) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the deduction for expenditure of Rs. 4,200 being the rent of the guest house, under section 30 of the Income-tax Act, 1961, for the assessment year 1969-70 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to deduct the expenditure of Rs.2,770 for the maintenance of the guest house under section 37(3) of the Income-tax Act, 1961, for the assessment year 1969-70 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the sum of Rs. 22,275 was not assessable under section 41(1) for the previous year relevant to the assessment year 1969-70 ?" The first two questions raised for the assessment year 1969-70 are identical to those raised for the assessment year 1968-69 except for the amounts mentioned therein. Counsel are agreed that the two common questions are covered by this court's judgment in the assessee's own case for assessment year 1967-68 in Income-tax Reference No. 99 of 1976, dated November 18, 1988 (see [1989] 177 ITR 124) and that following the said judgment both the common questions have to be answered in the affirmative and in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability by debiting the account of Shri Modi and crediting correspondingly the profit and loss appropriation account clearly indicated that it had no intention of making payment to Shri Modi even if it was demanded. According to Shri Jetley, the legislative intention, as regards this provision was clear. It was to tax such amounts which were allowed as deductions and which were ultimately not paid and were not to be paid by the assessee. Assuming there was some lacuna in the provisions of section 41(1), he submitted, this court should fill up the lacuna by supplying necessary words in the provisions. In support of his contention, Shri Jetley relied on a number of decisions of this court and other High Courts to which we propose to refer in the course of our judgment. Shri Khatri, learned counsel for the assessee, on the other hand, reiterated the reasons given in support of the conclusion. In particular, he urged that the question was squarely covered by the decisions of this court referred to by the Tribunal in its order in the assessee's favour. He brought to our notice other decisions of this court and other High Courts which, according to him, supported the Tribunal's o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. CIT [1963] 49 ITR 578. In that case, the income-tax authorities had included the amount of Rs. 30,190 in the income of the assessee on the ground that the liability to pay had ceased by reason of the expiry of the period of three years. The assessee had not written off the liability in its accounts. It was on these facts that this court held that merely because the remedy of the creditors to recover the amount is barred, the assessee's liability did not cease and that, therefore, the amount was not taxable under the provisions of section 10(2A) of the Income-tax Act, 1922, corresponding to section 41(1) of the Income-tax Act, 1961. The second decision is J. K. Chemicals Ltd. v. CIT [1966] 62 ITR 34. In this case, certain amounts were allowed as deduction in the past in respect of wages, salary and bonus payable to the employees. The liabilities in respect thereof were written off during the previous year. The remedy was apparently barred by limitation. The Department's contention that the liabilities had ceased and section 10(2A) of the 1922 Act (corresponding to section 41(1) of the new Act) was applicable was rejected by this court observing at page 41 as under: "..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely because the amount was transferred from "unclaimed balances account" to " reserve for taxation account", it will not become taxable under section 10(2A) of the Act of 1922. That the decision was given on the facts of that case is evident from the emphasis laid on the fact that some payments were made out of these accounts as and when demanded by the parties and for this reason the transfer of amounts from "unclaimed balances account" to "reserve for taxation account" did not mean cessation of liability. The question involved in the case of CIT v. Batliboi and Co. Pvt. Ltd. [1984] 149 ITR 604, was not regarding the remission or cessation of liability at all. It was whether the surplus deposits made by the customers were trading receipts in the hands of the assessee. It was held that the excess deposits were not held by the assessee for the benefit of the depositors. The deposits were in respect of specific transactions of sales and were adjusted towards the purchase price of the machinery sold. It had close connection with the transactions of sales. Since the assessee transferred the excess deposits remaining in its hands to the profit and loss account during the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
