Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Year in which deductible - Assessment year 1976-77- Assessee claimed deduction on account of liability towards maintenance of railway siding for period from 1-11-1963 to 11-12-1973 -ITO rejected claim on ground that assessee should have provided for said liability in relevant accounting years - Whether in view of fact that railways sent a bill only in relevant accounting period and also because this was not a statutory liability, assessee was entitled to debit said amount against current year's profit, and was, therefore, entitled for deduction - Held, yes FACTS For the assessment year 1976-77, the assessee claimed deduction on account of liability towards railway maintenance of siding relevant to the period from 1-11-1963 to 11-12-1973. The ITO, however, rejected the claim on the grounds that the assessee should have provided for this liability in the relevant accounting years in accordance with the mercantile method of accounting followed by it and that the assesses had not shown any contingent liability in this regard although the liability was ascertained and known. On appeal, the Commissioner (Appeals) allowed the entire claim of the assessee on the ground that the liability was ascertained for the first time and communicated to the assessee in May 1975. On revenue's appeal, the Tribunal restored the order of the ITO and held that the liability to pay interest, maintenance charges and depreciation accrued in the earlier years and it was known and ascertained liability though it could not be quantified accurately. On reference: HELD There was no doubt that the claim of the railways was in respect of siding charges, interest and maintenance for the period from 1-11-1963 to 11-12-1973. This, however, was not a statutory liability. The railways sent a bill in the relevant accounting period. Having received this bill, the assessee was entitled to debit the amount against the current year's profit. Hence, the Tribunal was not justified in disallowing the assessee's claim. JUDGMENT Sen, J.-The Tribunal has referred the following question of law to this Court under section 256(1) of the Income-tax…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492