Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business loss/deduction - Allowable as - Assessment year 1959-60 - Pursuant to a Government order dated 17-7-1958 allotting sugar quota for export and demanding supply for a specified number of bags, assessee estimated its price expected to be received and calculated loss which was thereafter debited to profit and loss account - ITO disallowed assessee's claim for loss on ground that it related to an unascertained loss - Tribunal allowed actual loss ascertained by time assessment was finalized - Assessee had valued stock in its account books according to market price while price fixed by Government was lower than market price, thus, a loss was bound to arise - Further, basis of estimation of loss adopted by assessee was not arbitrary - Whether having regard to circumstance that assessee maintained mercantile system of accounting and that it was bound to comply with demand made on 17-7-1958, it could be assumed that sale took place on that date - Held, yes - Whether when in following year price was actually fixed and it was possible to quantify loss suffered by assessee, loss so quantified had to be substituted for loss estimated by assessee, and it was finally quantified figure of loss which alone could be taken into consideration for purpose of claim made by assessee - Held, yes - Whether, therefore, Tribunal rightly allowed amount of actual loss as deduction in assessment year in question - Held, yes FACTS Pursuant to a Government order allotting certain amount of sugar as quota for export and demanding supply of a specified number of bags, the assessee which followed mercantile system of accounting, estimated its price which was expected to be received in respect of the sugar so demanded, and calculated the loss. It then debited the said loss in its profit and loss account for the accounting year relevant to the assessment year 1959-60. The ITO disallowed the claim on the ground that it related to an unascertained loss and was in the nature of a provision only. On appeal, the AAC, allowed the loss, restricting it to the sum being actual loss ascertained by the time the assessment was finalised. On Revenue's appeal,…

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