COMMISSIONER OF INCOME TAX Vs. ALIMBEG SALIMBHAI

JUDGEMENT

(1.) EARLIER an application under Section 256(2) of the Income-tax Act, 1961, was filed by the Revenue for calling a reference from the Tribunal and in pursuance of an order dated September 22, 1989, in M. C. C. No. 446 of 1986 (see [1990] 181 ITR 362), the Tribunal has stated the case and referred the following question for answer by this court (at page 363) :

(2.) THE assessee is a partnership firm engaged in manufacture and sale of bidis. THE year of assessment involved is 1976-77, the previous year ending on Diwali of 1975. THE assessee claimed deduction of Rs. 2,03,722 on account of holiday wages and leave with wages under Sections 21, 26 and 27 of the Bidi and Cigar Workers (Conditions of Employment) Act, 1966. THE Income-tax Officer did not actually verify the computation of the claim made by the assessee. However, on scrutiny he found that no actual payment was made. According to him, it was simply a provision made by creating a reserve out of profits. He held that it was not an existing liability but only a contingent liability. THE Income-tax Officer thus made disallowance of the claim. THE assessee went in appeal before the Commissioner of Income-tax (Appeals), who following the earlier orders of the Tribunal allowed the claim of the assessee. THE Revenue came in appeal before the Tribunal and the Tribunal following the judgment of this court in Kalekhan Mohd, Hanif's case [1987] 163 ITR 769 (MP) affirmed the claim of the assessee and allowed deductions in terms of the statutory liability. THEreafter the Department moved this court for calling for a reference and this court directed to make a reference and, accordingly, the aforesaid question has been sent by the Tribunal for answer by this court. Suffice to say that a similar question came up before this court in Kale Khan Mohd. Hanif's case [1987] 163 ITR 769 and this court answered the question in favour of the assessee and against the Revenue. Likewise, in the case of the same party in another case (CIT v. Alim Beg Salim Bhai [1987] 163 ITR 767), the question has been answered in favour of the assessee and against the Revenue. It has been observed thus (at page 768) :