TMI Blog1992 (1) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... was sent along with the said letter dated 16-2-1979. It was indicated in the said draft agreement that ONGC would revise the price for supply of gas every year. The proposal of the ONGC for increasing the price of supply of gas and its increase every year thereafter was not acceptable to the appellant company along with the other consumers of gas. The appellant company, through the Association of Natural Gas Consumers of Gujarat, represented to the ONGC that the price should not be revised. The ONGC refused to enter into any negotiations about the price of gas. In these circumstances the consumers filed a writ petition before the Hon'ble High Court of Gujarat through the Association of which the appellant company was also a party. In the said writ petition specific prayer was made that the ONGC should be directed not to discontinue the supply of gas and further that they should be restrained from revising the price. The Hon'ble High Court of Gujarat passed an interim order on 28-3-1979 restraining ONGC from discontinuing the supply of gas on the condition that the petitioners including the appellant company continued to pay at the present rate until further orders. Pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can insist on a supply only if they agree to pay the prices fixed by the ONGC. They are not entitled to demand supply as of right, without contracts. But, as they have in fact had the benefit of the supplies under interim orders of the Court, this question does not survive and all that we can declare is that the prices demanded by the ONGC are not unreasonable or capricious and are binding on the respondent (including the appellant). 6. The accounting year of the appellant company ended on 30-6-1981 and 30-6-1982 respectively relating to years under consideration viz. assessment years 1982-83 and 1983-84. In the books of accounts the appellant company made a provision in assessment year 1982-83 of a sum of Rs. 2,57,825 based on the rates proposed by the ONGC in the draft agreement sent along with letter dated 16-2-1979. The details of the provision made in the books of accounts in assessment year 1982-83 is as under : " Period Old Proposed Increase Amt. of rate rate in rate provision 1-4-1979 to 31-3-1980 504.40 529.00 25.20 47,091.54 1-4-1980 to 31-3-1981 504.40 554.00 50.40 93,713.41 1-4-1981 to 30-6-1981 504.40 741.00 237.00 117,019.93 -------------------- Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these two years on the basis of rate proposed by the ONGC cannot be allowed as deduction. 10. The CIT(Appeals) in view of the reasons recorded in the appellate order passed by him confirmed the said addition. 11. The assessee preferred further appeals before the Tribunal. In the grounds of appeal for assessment year 1982-83 it has been submitted that deduction of Rs. 2,57,825 being increase in rates and royalty payable to ONGC for supply of gas to the petitioner company should be allowed as a deduction. In the alternative it was claimed that a sum of Rs. 1,88,879 being the amount of such liability pertaining to the supplies received during the previous year corresponding to assessment year 1982-83 should be allowed as a deduction. 11.1 In assessment year 1983-84 the assessee submitted that deduction in respect of Rs. 4,38,739 representing increase in rates and royalty payable to ONGC should be allowable as deduction. 11.2 Application for entertaining an additional ground for both these years were submitted on 13-5-1991. In assessment year 1982-83 the additional ground relates to grant of deduction in respect of arrears for increase in rates and royalty as also interest of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 70 of the Indian Contract Act would apply as such supplies would be treated as having been received under a quasi-contract and the assessee at all times was under an obligation to pay a reasonable price for the supply of gas received in the years under consideration. The uncertainty about the quantum of price has now been finally settled by the Hon'ble Supreme Court and therefore there is no justification in not granting the desired deduction in respect of the additional purchase price payable to ONGC. 12.1 As regards assessee's claim for grant of deduction in respect of interest, it was pointed out by the learned counsel for the assessee that after the judgment of Hon'ble Supreme Court the ONGC vide its letter dated 8-8-1990 raised a demand for arrears of the purchase price of gas as well as for interest accrued thereon. The total amount of such arrears due on account of price fixation upheld by the Hon'ble Supreme Court was demanded to the tune of Rs. 2,08,10,252 and interest accrued thereon up to 31-7-1990 was claimed by ONGC at Rs. 2,11,83,754. The learned counsel was fair enough to point out that the matter relating to payability of interest by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1980-81 and 1981-82. No fresh event or any fresh order of the Court was passed in the relevant accounting period commencing from 1-7-1980 to 30-6-1981, as the second interim order was passed by the High Court on 29-12-1982. The provision made for the first time in the books of accounts pertaining to assessment year 1982-83 is therefore not valid. This proves that the assessee did not maintain any consistent method of accounting in respect of such transactions. The facts of the decision given by the Tribunal in the case of Gujarat State Fertilizers are distinguishable as in that case out of the total royalty demand raised by the ONGC amounted to Rs. 1,48,68,158 out of which that company had already paid Rs. 22,35,644. In the present case the appellant company did not make any payment in respect of the extra price and royalty demanded by the ONGC in the years under consideration. This is a contractual liability which was a subject matter of pending litigation. The deduction in respect of such liability can be allowed only in the year when such liability has been finally determined by the Hon'ble Supreme Court. It was further argued by the learned Sr. D.R. that the lower authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars under consideration, it would be a case of quasi-contract or implied contract. The claim of the ONGC for payment of purchase price of gas supplied by them to the assessee was not on the basis of any subsisting contract but was based on a different kind of obligation which is known as a quasi-contract or restitution. The High Court vide its interim order directed the ONGC to continue supply of gas to the industrial undertakings owned by the assessee and other such consumers in the interest of continued survival of their business on payment of the old rates provisionally subject to the final decision of the Court relating to such price fixation. The assessee is therefore entitled to grant of deduction in respect of reasonable amount of purchase price as a deduction in the respective years when such purchase of gas was made and that was utilised or consumed in the process of production. The liability for payment of purchase price of gas was obviously an accrued liability and only the quantum thereof had to be finalised in the proceedings pending before the Hon'ble Courts. The appellant company maintains books of account on the basis of mercantile method of accounting as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of increase in the price of gas supplied by the ONGC is not in dispute but only the year of its allowability can perhaps be disputed. In this regard we would like to refer to certain observations made by the Hon'ble High Court in the case of CIT v. Nagri Mills Co. Ltd. [1958] 33 ITR 681 (Bom.) at page 684 : " We have often wondered why the Income-tax Authorities, in a matter such as this where the deduction is obviously a permissible deduction under the Income-tax Act, raise disputes as to the year in which the deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different ; but in the case of income of a company, tax is attracted at a uniform rate, and whether the deduction in respect of bonus was granted in the assessment year 1952-53 or in the assessment year corresponding to the accounting year 1952, that is in the assessment year 1953-54, should be a matter of no consequence to the Department ; and one should have thought that the Department would not fritter away its energies in fighting matters of this kind. But, obviously, judging from the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) on account of the fact that the liability for payment of increased amount of purchase price difference on the basis of which interest was demanded by ONGC was finally decided by the Hon'ble Supreme Court on 4-5-1990. The view which we are adopting for the entertainability of such additional ground for the first time before the Tribunal is clearly fortified by the judgment of Hon'ble Supreme Court in the case of Jute Corpn. of India Ltd. v. CIT [1990] 88 CTR (SC) 66 and decision of Hon'ble Kerala High Courtin the case of CIT v. Kerala State CoOperative Marketing Federation Ltd. [1991] 100 CTR (Ker.) 230. 16. Coming to the merits of the aforesaid claim we are of the view that the assessee's claim for grant of deduction in respect of interest cannot be allowed in the years under consideration. The deduction for such interest claim by the assessee is neither supported by any subsisting contract nor the same is supported by the decision of the Hon'ble Supreme Court by which the issue relating to price fixation has been finally determined. The allowability of deduction in respect of any such interest can be considered on merits only in the year when such interest has been dema ..... X X X X Extracts X X X X X X X X Extracts X X X X
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