CIT Vs. RAMPUR DISTILLERY & CHEMICALS CO. LTD

JUDGEMENT

(1.) IN Income Tax Reference No. 74 of 1986, which relates to assessment year 1979 -80, the Income Tax Appellate Tribunal, New Delhi, has referred the following four questions of law under section 256(l) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), for opinion to this Court: '1. Whether, on the facts and in the circumstances of the case, the Tribunal has been justified in allowing the assessee's claim of interest of Rs. 38,147 on the ground that it was an ascertained liability

(2.) WHETHER , on the facts and in the circumstances of the case, the Tribunal was justified in allowing the assessee's claim for investment allowance of Rs. 2,383 on the ground that the products manufactured by the assessee were not hit by Item 1 of the 11th Schedule to the Income Tax Act, 1961

(3.) WHETHER , on the facts and in the circumstances of the case, the Tribunal was right in upholding the deduction (sic) of Rs. 11,935 being the expenditure on maintenance, repairs, rent, rates and taxes on the guest house belonging to the assessee ?' 2. Whereas in Income Tax Reference No. 129 of 1986, which relates to assessment year 1981 -82, the Income Tax Appellate Tribunal, New Delhi, has referred the following question of law under section 256(1) of the Act for opinion to this Court: 'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the interest liability of Rs. 66,793 was allowable to the assessee ?' 3. As both the references relate to the same assessee, they have been heard together and are being decided by a common order. 4. Briefly stated the facts giving rise to the present References are as follows: The respondent -assessee is a public limited company. It is engaged in the business of manufacturing rectified spirit and Indian made foreign liquor, etc. It used to purchase molasses from various sugar factories. During the assessment years in question, it had purchased molasses from M/s. Raza Buland Sugar Co. Ltd. During the accounting year 1977 -78 because of the financial constraints the assessee requested the said sugar factory to supply molasses on credit and 18 per cent interest per annum on outstanding amount was decided. The Government of Uttar Pradesh passed an Ordinance in the month of April, 1971, namely, U.P. Sugar Factories (Acquisition) Ordinance, 1971. M/s. Raza Buland Sugar Co. Ltd. was also acquired under the said Ordinance. M/s. Raza Buland Sugar Co. Ltd. along with some other sugar companies challenged the acquisition proceedings and the validity of the aforementioned Ordinance before this court by means of a writ petition. Initially an interim order was granted by this court staying the enforcement of the acquisition ordinance but in November, 1979, the writ petition was dismissed, which order was also upheld by the Apex Court. In the meantime the Ordinance was replaced by an Act. After the dismissal of the writ petition and the civil appeals, the sugar undertakings were handed over by the State of UP to the U.P, State Sugar Corporation Ltd., Lucknow. In the handing over note to the Corporation, the sugar companies claimed payments against molasses sold during the pre -takeover period. In such context, M/s. Raza Buland Sugar Co. Ltd, claimed certain amounts from the respondent -assessee and filed a petition before the Company Law Board. On the other hand, U.P. Sugar Corporation also filed a petition before the Excise Commissioner, U.P., Allahabad, for payments against the purchases made by different constituents from the sugar companies taken over by it. The Corporation also gave a formal legal notice to the respondent -assessee claiming outstanding amount in respect of purchases from M/s. Raza Buland Sugar Co, Ltd. as also interest in relation to the amount. The respondent had provided for payment of interest for the period 1977 -78 but credited the amount in outstanding liabilities account' instead of crediting it in the ledger accounts of either Raza Buland Sugar Co. Ltd. or U.P. Sugar Corporation. The assessing officer found a credit balance of Rs. 3,10,555 as on 31 -3 -1979 and Rs. 3,71,074 as on 31 -3 -1981 but did not find any credit of interest in that account and there being no tax deducted at source, refused to allow the claim of interest on the ground that it could not be said to be ascertained liability, which order has been upheld by the Commissioner (Appeals).