COMMISSIONER OF INCOME TAX Vs. SARASPUR MILLS LIMITED

JUDGEMENT

(1.) In this Reference, at the instance of the Revenue, the following questions have been referred to us for our opinion in respect of A.Y. 1980-81 :

(2.) The respondent-assessee, following the mercantile system of accounting, provided for and claimed deduction of sum of Rs. 3,59,755.00 as excise duty liability in the accounting year 1979 relevant to A.Y. 1980-81. The said disputed amount consisted of two parts: Rs.2,31,360/ being deduction for the accounting year 1979 was made on the basis of show-cause notice issued by the Excise Department in December, 1979. The other claim for an amount of Rs. 1,28,359.00 was made on the basis of letter dated 21.8.1980 addressed by the assessee to the Excise Authorities furnishing the details in respect of yarn sized during the period from November, 1979 to January, 1980. In respect of both the claims, the I.T.O. held that liabilities claimed were on the basis of a mere show-cause notice and the same were not finally ascertained. In fact, the assessee had challenged the show-cause notice and the liability in the court of law and hence there was no legally enfoceable liability for the disputed amount of central excise. The I.T.O. disallowed the total claim of Rs. 3,59,755.00 as per the assessment order dated 17.11.1981. In appeal, the Commissioner of Income-tax (Appeals) upheld the contention of the assessee that liability to pay excise duty had already accrued upon manufacture of the concerned goods, but only quntification was not done and, therefore, the decision of the Supreme Court in KEDARNATH JUTE MFG. CO.LTD. v. COMMISSIONER OF INCOME-TAX (CENTRAL), CALCUTTA, (1971) 82 ITR 363 was followed. The C.I.T. accordingly deleted addition of Rs. 3,59,755.00 as per his order dated 4.2.1982. The Tribunal confirmed the order of CIT (appeals). Hence, this Reference at the instance of the Revenue.

(3.) We have heard Mr. B.B.Naik, learned counsel for the Revenue and Mr. J.P.Shah, learned counsel for the assessee.