COMMISSIONER OF INCOME TAX Vs. DAYAL B MISTRY

JUDGEMENT

(1.) AT the instance of the Revenue, the following question has been referred to this court for its opinion under the provisions of Section 256(1) of the Income -tax Act, 1961 (hereinafter referred to as 'the Act'), by the Income -tax Appellate Tribunal, Ahmedabad Bench 'A' :

(2.) THE learned advocate Shri Bharat Naik has appeared for the applicant, whereas nobody has appeared for the respondent -assessee, though the respondent has been served.

(3.) IT is not necessary that the expenditure incurred by the assessee must be actually paid unless, the assessee is following the cash system of accounting. It is not the case here that the assessee was following the cash system of accounting and, therefore, the expenditure could not have been disallowed simply because actual payment was not made in the previous year. The section provides 'any expenditure incurred by him in the previous year'. The concept of 'paid' as read by the Income -tax Officer cannot be substituted for 'incurred' as there is no warrant for doing so on a plain construction of the provision. We have perused the impugned order and we are in agreement with the view expressed by the Commissioner of Income -tax (Appeals) that liability to pay Rs. 5,000 had already been incurred by the assessee in the relevant previous year. In our opinion, the Commissioner of Income -tax (Appeals) and the Tribunal were absolutely right in coming to the conclusion that the deduction of the said amount ought to have been allowed.