Law:

Section:

Section 145 of the income-tax act, 1961-Method of accounting-Deduction of liability assessment year 1969-70 relevant for accounting year ended 30-9-1969-Assessee-corporative society took forests on contract from government for exploitation-Cutting work to be finished and material to be removed to government approved sale depot by 15-3-1969-80 per cent share of sale proceeds, calculated on net realisation, was payable to government-Part of timber remained unsold at the close of accounting period-Closing stock valued by assessee at market rate and government's share estimated and shown in profit and loss account at Rs. 7,47,183 and provisional profit worked out-said timber subsequently sold At higher price and actual amount paid to government was Rs. 10,21,849-whether before finalization of assessment said amount actually paid could be substituted for Rs. 7,47,183 and, thereby, assessee's net profit could be reduced by additional share paid to government-Held, on facts, yes Facts The assessee co-operative society entered into an agreement with the Government for exploitation of jungles on royalty. During the assessment year 1970-71 relevant for accounting year ending 30-9-1969, it took two coups for exploitation. The agreement provided, inter alia, (i) that the assessee had to enter upon the concerned coups by 20-11-1968 and to finish the entire cutting work by 15-3-1969 ;(ii ) that the moment the material was cut, removed and stacked by the contractor, it was to be sold under the supervision of forest officer ; (iii) that 60 per cent of the sale price of the removed material had to be paid on account before the removal of the sold material, and after making final accounts, the balance of 20 per cent, making in all 80 per cent, was to be paid to the Government; (iv) that the 80 per cent share of the Government was to be calculated on net realisation of the sale proceeds after deduction of permissible expenses; ( v) that if the Government share actually deposited fell short on finalisation of accounts, the society would have to pay the balance within 30 days ; and (vi) that if on finalisation of account, more amount was found to be deposited that actually due to…

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