TMI Blog1982 (11) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... iability was an admissible deduction during the year under consideration ? " Briefly stated the facts giving rise to the present reference are that for the assessment year 1967-68, the accounting period of the assessee ended on 30th June, 1966. The assessee which was a public limited company and which carried on the business of manufacture and sale of synthetic materials had made a provision of Rs. 16,00,876 for payment of excise duty on polymer chips. It, however, disputed the liability for payment of this duty in a writ petition filed before the Delhi High Court. That writ petition was decided in favour of the assessee on 23rd August, 1970. However, the Excise Dept. went up in appeal before the Supreme Court which was pending at the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med the order passed by the AAC. At the instance of the Department, the Tribunal has stated the case and referred the aforementioned question for opinion of this court. Having heard learned counsel for the parties, we have no manner of doubt that the order passed by the Tribunal that the case was covered by the principles laid down by the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, is correct and that notwithstanding the decision of the Delhi High Court, the assessee is entitled to claim deduction in respect of the provision for payment of excise duty made by it in the relevant assessment year, inasmuch as the excise dept. had gone up in appeal to the Supreme Court and was questioning the correctnes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is following the mercantile system of accounting and it can legitimately claim deduction in respect of a business liability even if such liability has not been quantified or paid. In Kedarnath Jute Manufacturing Co. v. Commissioner of Income-tax [1971] 82 ITR 363, the Supreme Court held that an assessee who follows the mercantile system of accounting can claim deduction under section 10(2)(xv) in respect of a business liability before it is quantified and even when such liability is being disputed. It has further been held that even if the assessee does not make a provision for such a liability in its books of account, he is still entitled to claim deduction because the question whether the assessee is entitled to a particular deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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