KASHIRAM RADHAKISHAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short " the Tribunal ") has referred the following question for our opinion :

(2.) THE assessee is a firm. For the assessment year 1974-75, its accounting year ended on March 31, 1974. It deals, inter alia, in the purchase and sale of cotton. It gets its cotton ginned and baled from the cotton ginning and pressing factories situated near about Bhadra. Daring the assessment year 1974-75, it got 1,420 bales of cotton baled by Shree Mahalaxmi Cotton Ginning & Pressing Factory, Sri Ganganagar ("the Factory" herein). It had paid to the factory Rs. 26.10 per bale for pressing. This rate was fixed by the Association of Ginning and Pressing Factories of Sri Ganganagar District (hereinafter referred to as " the Association ")-THE Government of Rajasthan made an order (" the Order" herein), vide No. SO/90 dated October 16,1973, in exercise of the powers conferred by Sub-rule (2) of Rule 114 of the Defence of India Rules, 1971, and all other powers enabling it in this behalf, fixing the pressing charges at Rs. 16 per bale. THE order was challenged by the association in this court. A stay order was made on April 3, 1974, i.e., after the accounting period. As the dispute was pending, the assessee-firm debited pressing charges at Rs. 26.10 to the cotton account and credited the same to the provision for pressing charges account. Actual payment to the factory was made at Rs. 26.10 per bale. In the accouning period immediately next following, corresponding to the assessment year 1975-76, the factory paid back to the assessee Rs. 14,200 as the association had decided to charge Rs. Section 16 only with retrospective effect for pressing a bale. THE assessee claimed the entire expenditure as its business expenditure for this year and accordingly filed its return. THE Income-tax Officer (ITO) disallowed the claim of Rs. 14,200 and added the same to the total income of the assessee for the assessment year 1974-75. On appeal, the learned Appellate Assistant Commissioner (AAC) confirmed the aforesaid order of the ITO in this regard. A further appeal was taken to the Tribunal and the Tribunal by its order dated March 31, 1976, dismissed the appeal. So far as the disallowance of the claim of Rs. 14,200 by the ITO was concerned, the Tribunal made the following observations.

(3.) THE question is whether the assessee could claim the expenditure as its business expenditure for the assessment year 1974-75. Section 37 of the I.T. Act, 1961 ("the Act"), occurs in Chapter IV, Part D which deals with " Profits and gains of business or profession ". It is a general provision. At the relevant time, the material part of Section 37(1) of the Act was as follows :