COMMISSIONER OF INCOME TAX Vs. KIRLOSKAR CUMMINS LIMITED

JUDGEMENT

(1.) THESE cross references relate to the assessment of assessee for the asst. yrs. 1971 72, 1972 73 and 1973 74. By its order dt. 15th March, 1977, under S. 256(1) of the IT Act, 1961, the Tribunal had referred to this Court the following two questions of law, one each at the instance of the Department and the assessee : R. A. Nos. 354 and 355/(PN) of 1975 76 :

(2.) COUNSEL are agreed that so far as question No. 2 is concerned, the question requires to be answered in the affirmative and in favour of the Revenue in view of the Supreme Court decision in the case of Vazir Sultan Tobacco Co. Ltd. vs. CIT (1981) 25 CTR (SC) 186 : (1981) 132 ITR 559 (SC). The question is so answered.

(3.) PLACING reliance on the Allahabad High Court decision in the case of CIT vs. British India Corporation (P.) Ltd. (1973) 92 ITR 38 (All) and the Kerala High Court decision the case of CIT vs. Periakaramalai Tea and Produce Co. Ltd. (1973) 92 ITR 65 (Ker), it was submitted by Dr. Balasubramanian for the Department that the provision herein represented the assessee's existing liability and the Tribunal was, therefore, not justified in treating the same as a reserve. Learned counsel for the assessee, on the other hand, submitted that though the provision represented some kind of anticipated liability, there was no certainty whether any liability in terms of money will at all be incurred by the assessee, and if incurred, what will be the extent thereof. According to him, this was, thus, a case of a reserve. He also pointed out that the amount represented by the provision was, admittedly, not allowed deduction as a revenue expenditure.