Law: Income Tax Act, 1922

Section: 10,10(2A)

Income-tax Act (XI of 1922)---S. 10 (2-A)-Trading liability--Amount of excise duty levied on goods I manufactured by assessee for sale remaining unpaid for a period of three years on expiry of previous year in which it was allowed-Held, rightly added under S. 10 (2-A) in year under appeal-Assesses if made to pay such trading liability in any subsequent year, would be entitled to claim its deduction from profits and gains of relevant year. ORDER MUHAMMAD MAZHAR ALI (PRESIDENT),--This appeal concerns the assess­ment year 1973-74, the relevant accounting year easing 30th September, 1972, and the solo question arises thus. 2. The asses6ec, a private limited Company maintains its account on mercantile system of accounting in the assessment year ]968-69 It claimed deduction of Rs. 12,09,022. In respect of accrued liability for Excise Duty, which was said to have been levied on sapacity basis. This liability, however remained unpaid, and therefore, the L.-T. O. added it to the income of the assessee under section 10 (2-A) of the Income-tax Act, while framing the assessment for the charge year 1973-74. The assessee preferred an appeal against the assessment for the char go year 1973-74, assailing, inter alia, the inclusion of the aforesaid sum of Rs. 12,09,022, in its income. Its case before the first appellate authority was that the unpaid liability in respect of Excise Duty did not fall within the mischief of section 10 (2-A) of the Act. The learned Appellate Assistant Commissioner, however, did not agree with the appellant's contention and uphold the order of the Assessing Officer in this behalf. 3. Mr. Sirajul Haque, the learned counsel for the appellant reiterated the same contentions before us which were made before the first appellate authority, namely, that the Excise duty is a tax and not the trading expense. Ho maintained that the trading liability is one which relates to the trading i. e. the buying and selling of goods or services. Since neither the buying of good or services was involved herein, the liability in question did not fall within the purview of trading liability, It was, according to him, a statutory liability and could not legally be doomed to…

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