TMI Blog1980 (2) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... te limited company. It is a dealer of Standard Cars, Tractors, Rajdoot Motor Cycles, Scooters and spare parts, etc. In the previous year relevant to the assessment year 1972-73, the assessee had supplied 42 tractors to the Public Works Department. The Public Works Department, in turn, distributed these tractors to various districts. Its principal, M/s. Escorts Ltd., required the assessee to pay infringement commission on the sale of these tractors to its various dealers outside Lucknow as, according to M/s. Escorts Ltd., whose agent the assessee was, the dealers in other districts were entitled to commission on the sale of these tractors. A demand at the rate of Rs. 930 per tractor was made by M/s. Escorts Ltd., but the dealer did not agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount in question, the assessee rightly made provision for this liability as infringement commission and as such the assessee was entitled to deduction of the entire amount especially in view of the fact that the infringement commission in respect of five tractors sold by the assessee in its own area have been offered for taxation in the subsequent years. On these findings, it dismissed the appeal filed by the revenue and allowed that filed by the assessee. It is settled that the mere fact that an assessee keeps his account on the mercantile system does not give him a handle to debit liability of every kind whatsoever. The liability that can be debited is only that which is certain, and which arises in present. In the present case, althoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. In such circumstances, it cannot be said that an ascertainable liability arose to the extent of Rs. 950 per tractor as soon as M/s. Escorts Ltd. had made the claim. In our view, the liability for the amount arose when the assessee admitted the liability at the rate of Rs. 650 per tractor which is evidenced by the letter of the 19th May, 1972. The decision of this court in the case of Sugar Dealers [1975] 100 ITR 424 is also not in point, for, in that case, the security which the assessee had deposited had been forfeited in the previous year on account of the breach of contract by the assessee. Thus, although the assessee in that case had contested the liability and took proceedings for recovery of security amount, that was inconsequenti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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