Law:

Section:

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment year 1974-75 - By interim order of High Court, Government of India was restrained from giving effect to impugned notification of 1972 fixing a lower price of levy sugar on condition that assessee should furnish bank guarantee in respect of difference between price fixed by Government and price at which sugar was actually paid - Assessee was, accordingly, allowed to charge higher price on sale of levy sugar - Assessee claimed that in view of provisions of section 3 of Levy Sugar Price Equalisation Fund Act, 1976, excess amount was to be transferred to Levy Sugar Price Equalisation Fund with interest from date of realization to date of transfer and, therefore, amount so collected did not belong to assessee, it further claimed deduction of interest payable on said amount - Whether since right to collect/realize extra levy sugar price was on account of interim order passed by High Court, which was hedged with certain conditions, amount of excess levy sugar price was not taxable in hands of assessee - Held, yes Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Year in which deductible - Whether in view of facts stated under heading 'Income - Accrual of' , since liability accrued only after commencement of 1976 Act, i.e., 1-4-1976, and not before that date, amount of interest which assessee was liable to pay on excess realization of sugar price to said fund could not be said to have accrued during relevant previous year ending on 30-9-1973 relating to assessment year 1974-75 and, therefore, could not be allowed as deduction - Held, yes FACTS The assessee, a public limited company, was engaged in the manufacture and sale of crystal sugar. The Government of India vide its notification, dated 15-6-1972 fixed the price of levy sugar at Rs. 138.87 per quintal. The assessee felt that the price fixed was low, and, therefore, filed a writ petition before the High Court wherein an interim order was passed on 27-7-1972 whereby the Government of India was restrained from giving effect to the impugned notification on the condition that the assessee furnished bank guarantee in respect of the…

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