Law: Income Tax Act, 1961

Section: 256

Income-tax-----Reference---Business expenditure ---Abkari contractor---Liability to pay kist and interest---No funding regarding system of accounting adopted by assessee---Question whether liability to pay kist and interest is deductible is a question of law fit to be referred. Reference---Question regarding scope of decision of High Court cannot be referred. C.I.T. v. Babulal Narottamdas (1976) 105 ITR 721 (Bom.); Issac v. Assistant Excise Commissioner (1984) KLT 88 and Kedarnath Jute Mfg. Co. Ltd. v. C.I.T. (1971) 82 ITR 363 (SC) ref. JUDGMENT K.S. PARIPOORNAN, J.--The Revenue is the petitioner herein. The respondent/assessee is a firm. It is an abkari contractor. The matter relates to the assessment year 1982-83. Amounts of Rs. 13,65,487 and Rs.1,14,321 were debited in the profit and loss account, being the kist payable and the interest thereon, respectively, for the assessment year 1982-83. The full amount of kist was not paid by the assessee. There were litigations regarding the amount of kist, interest and the process of recovery proceedings. The matter came up before this Court in Issac v. Assistant Excise Commissioner (1984) KLT 88. The Income-tax Officer disallowed the amount of kist and interest mentioned above and added back the same to the total income of the assessee. In appeal, the Commissioner of Income-tax (Appeals) held that at least the sums of Rs. 6,83,250 and Rs. 1,12,990 towards kist and interest would be admissible deductions. In further appeal, by the respondent/assessee, the Appellate Tribunal held that the entire amount of Rs.14,79,808 would be allowed as deduction. Thereafter, the Revenue filed an application under section 256(1) of the Income-tax Act for referring the questions of law formulated in para. 7 of the original petition, for the decision of this Court. It was declined by the Appellate Tribunal by its order dated April 30, 1987. Thereafter, the Revenue has filed this original petition, under section 256(2) of the Act, praying that the Appellate Tribunal may be directed to refer the questions of law formulated in para. 7 of the original petition for the decision of this Court. The questions are as follows: "(1) Whether, on…

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