COMMISSIONER OF INCOME TAX Vs. SWADESHI MINING AND MANUFACTURING CO LTD

JUDGEMENT

(1.) The assessee is a public limited company. The company owns a sugar mill at Gorakhpur in the State of Uttar Pradesh. It produces sugar in its mill. It sells and also exports sugar. It has adopted the mercantile system of accounting. The assessment year in both these references, under Section 66(2) of the Indian Income-tax Act, 1922, is 1961-62. The relevant previous year ended on October 31, 1960.

(2.) The facts stated by the Appellate Tribunal in Income-tax Reference No, 231 of 1971 are briefly as follows : The Sugarcane (Control) Order, 1955, hereinafter referred to as the Control Order, was amended on September 23, 1958 (sic). Since the additional price payable by the company to the sellers of sugarcanes, who were the growers of sugarcanes, was not determined under Clause 3A(1) of the Control Order, the company made a provision for payment of Rs. 1,40,000 as additional price payable to them with regard to the purchases made by the company from 1st November, 1959, to 31st October, 1960. Accordingly, Rs. 1,40,000 was debited by the company in its profit and loss account for the year ended on October 31, 1960, as provisions for contingencies. Thereafter, on December 28, 1964, Rs. 1,13,371 was determined to be payable by the company to the sellers for the aforesaid period as additional price by the authorities appointed under the Control Order. While the first appeal filed by the company from the assessment order was pending, Rs. 1,13,371 was reduced to Rs. 18,895 on April 11, 1967, by the authority concerned in terms of second proviso to Clause 3A(1) of the Control Order by allowing the pending representations made by the company in that behalf.

(3.) In, the assessment proceedings, the company claimed Rs. 1,40,000 or in the alternative Rs. 1,13,371 as deduction. The Income-tax Officer rejected the said claim on the ground that the liability of the company to pay the additional price did not arise in the accounting year. The Appellate Assistant Commissioner has sustained the said disallowance in the appeal filed by the company, but the Appellate Tribunal, on further appeal by the company, has set aside the order of the Appellate Assistant Commissioner with a direction to the department to look into the matter afresh and to decide the issue on the basis of the observations made by the Tribunal in its appellate order.