Calcutta High Court
Sutna Stone And Lime Co. Ltd. vs Commissioner Of Income-Tax on 11 September, 1989
Equivalent citations: [1991]192ITR478(CAL)
Author: S.C. Sen
Bench: Suhas Chandra Sen
JUDGMENT S.C. Sen, J.
1. The Tribunal has referred the following question of law to this court under Section 256(1) of the Income-tax Act, 1961 ("the Act") :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the entire sum of Rs. 2,06,953 being the interest, maintenance charge and depreciation payable to the Central Railway was not an admissible deduction in computing the total income for the assessment year 1976-77 ?"
2. The assessment year involved is 1976-77 for which the year of account is the year ending on December 31, 1975.
3. The facts found by the Tribunal are as under :
The assessee is a resident company carrying on business of raising limestone and manufacturing lime from the mines in the State of M. P. The assessment year is 1976-77 for which the accounting year ended on December 31, 1975. In the assessment year, the assessee claimed deduction of Rs. 2,06,953 on account of liability towards maintenance of railway siding relevant to the period November 1, 1963, to December 11, 1973. However, the claim was rejected by the Income-tax Officer for the reason that the assessee should have provided for this liability in the various accounting years in accordance with the mercantile method of accounting followed by it and the assessee has not shown any contingent liability in this regard although the liability was ascertained and known. Hence, he rejected the claim and added back the amount as income of the assessee.
4. When the assessee took the matter in appeal before the Commissioner (Appeals), he was of the opinion that the liability was ascertained for the first time and communicated to the assessee by the Railway authorities in its bill dated May 5, 1975, which was received by the assessee in May, 1975, which fell within the accounting year relevant to the assessment year 1976-77. Therefore, he allowed the entire claim of the assessee.
5. The Revenue filed an appeal before the Tribunal. After considering the various contentions urged on behalf of the parties and also relevant extracts of the arguments and the railway rules as also various case laws, the Tribunal came to the conclusion that the liability to pay interest, maintenance charges and depreciation accrued in the earlier years and it was a known and ascertained liability though it could not be quantified accurately. Therefore, it held that the order of the Commissioner (Appeals) allowing the claim was not justified but, at the same time, it held that the liability which related to a part of the accounting year relevant for the assessment year 1976-77 should be allowed as a deduction.
6. There is no doubt that the claim of the railways was in respect of siding charges, interest and maintenance for the period November 1, 1963 to December 11, 1973. This, however, is 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 profits.
7. In that view of the matter, the question is answered in the negative and in favour of the assessee.
8. There will be no order as to costs.
Bhagabati Prasad Banerjee, J.
9. I agree.