Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Year in which deductible - Assessment year 1994-95 - Whether where liability was pending in adjudication by way of appeal in Supreme Court and till point of time same was not finally adjudicated, liability in question would remain a contingent liability - Held, yes Section 80HH, read with section 80-I, of the Income-tax Act, 1961 - Deductions - Profits and gains from hotels or industrial undertakings, etc., in backward areas - Assessment year 1994-95 - Whether once provision envisages a particular situation, viz., deemed sale at market value, it is not possible to state that Assessing Officer cannot substitute his opinion - Held, yes - Industrial division of appellant transferred its entire goods to main division and recorded consideration for such transfer in its accounts - Assessing Officer recomputed profits of division for purpose of arriving at figure which should be permitted as deduction under sections 80HH and 80-I when he noticed that appellant had debited entire indirect expenses like commission to selling agents, publicity and medical literature expenses, etc., in its books without allocating same to its industrial division, which increased profits of said division putting appellant in a position to claim higher deduction under those sections - Whether Assessing Officer was justified - Held, yes Section 80HHC, read with section 28, of the Income-tax Act, 1961 - Deductions - Exporters - Assessment year 1994-95 - Whether once sums or receipts of nature specified in sub-clause (1) of clause (baa) of Explanation to section 80HHC are included while computing profits and gains of business, such sums or receipts are to be reduced to extent of 90 per cent from profits of business - Held, yes FACTS The appellant/assessee was a limited company manufacturing phar-maceutical products through its five different divisions. In its return, the appellant claimed deduction relating to liability towards ONGC for the gas supplied by it to the assessee and also interest thereon. The Assessing Officer disallowed the claim on the ground that same was a contingent liability which was pending adjudication…

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