COMMISSIONER OF INCOME TAX Vs. JAMNADASS RAM KRISHAN

JUDGEMENT

(1.) ON being moved for reference under S. 256(1) of the INCOME TAX ACT, 1961 (in short 'the Act'), Income -tax Appellate Tribunal, Delhi Bench -B ('Tribunal' in short), has referred the following question for opinion of this Court :

(2.) FACTUAL position as set out in the statement of case is as follows : Assessee is a registered firm dealing in cotton yarn, cotton, thread and jute products. Sales -tax authorities demanded sales -tax on the sale of yarn. Assessee and other dealers dealing with the article questioned the levy. Financial Commissioner considered the case of the assessee and other dealers and allowed their claim. Accordingly, assessee did not make any provision for sales -tax during the asst. yrs. 1973 -74 and 1974 -75. Matter was taken up by the Sales -tax authorities before this Court which reversed the decision of the Financial Commissioner. On that basis STO completed assessment for the asst. yrs. 1972 -73 and 1973 -74 and raised a demand of Rs. 45,547 which was provided for and debited in the P&L a/c for the assessment year in question. The ITO disallowed the claim. In appeal before the CIT(A) order of the AO was reversed. Revenue carried the matter in further appeal before Tribunal. Stand before the Tribunal was that the High Court had passed order some time in October, 1974 and, therefore, liability could not said to have been accrued for the present assessment year. However, on behalf of the assessee it was submitted that the demand was raised by the ST authorities during the assessment year in question and, therefore, the liability accrued during the assessment year. On being moved for reference, the question as set out above has been referred for opinion of this Court.

(3.) ACCORDING to learned counsel for Revenue, assessee was following mercantile system of accounting and order of the High Court was passed in October, 1974, therefore, liability cannot said to have been accrued during the assessment year in question. We find that though High Court passed the order in October, 1974, STO completed assessment during the assessment year in question. Liability on the basis of the assessment order was duly reflected in the accounts and claimed as deduction in the P&L a/c in the year in question. The Tribunal has taken note of this factual aspect. In view of the decision of the apex Court in Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC) : TC 16R.668 the view taken by the Tribunal is irreversible. Accordingly, we answer the question referred in the affirmative, in favour of assessee and against Revenue. The reference stands disposed of accordingly.