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Section 145 of the income-tax act, 1961-Method of accounting-Year in which liability/expenditure deductible-Whether an assesses following mercantile system is entitled to deduction of provision for excise duty liability in the year to which it relates even though it has disputed impugned liability-Held, yes Facts For the assessment year 1967-68, the assessee-company claimed deduction of provision for excise duty liability made in the accounts. The assessee, however, had disputed its liability to pay excise duty in a writ petition and the Delhi High Court had held in the assessee's favour. However, the excise department went up in appeal before the Supreme Court which was pending at the time of making of the assessment for the aforesaid assessment year. The ITO disallowed the assessee's claim in view of the High Court's decision. On further appeal, the AAC, however, upheld the assessee's claim following the decision in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC). The Tribunal affirmed the AAC's order. On reference : Held In the case of this very assessee for an earlier year in J.K. Synthetics Ltd. v. O.S. Bajpai, ITO [1976] 105 ITR 864 ( All.), the High Court had held, following the Supreme Court decision in Kedarnath Jute Manufacturing (supra), that though the company was resisting the claim of the excise authorities for the payment of excise duty, that fact alone did not debar the company from claiming deduction of excise duty being demanded from it, as it had made a provision for it and had been following the mercantile system. Accordingly, the assessee was entitled to the deduction of the impugned excise duty liability in the assessment year 1967-68. Cases referred to Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) and J.K. Synthetics Ltd. v. O.S. Bajpai [1976] 105 ITR 864(All.). Judgment SETH, J.- In respect of the assessee's assessment for the year 1967-78, the Tribunal has, at the instance of the Commissioner stated the case and referred the following question for the opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in holding that a…

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