H.N.Seth, J. - (1.) In respect of assessee's assessment for the year 1967-68, the Income-tax Appellate Tribunal, Allahabad, has, at the instance of the Commissioner of Income-tax, stated the case and referred the following question for the opinion of this court: " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in holding that a provision of Rs. 16,00,876 towards excise duty liability was an admissible deduction during the year under consideration ? "
(2.) Briefly stated the facts giving rise to the present reference are that for the assessment year 1967-68, the accounting period of the assessee ended on 30th June, 1966. The assessee which was a public limited company and which carried on the business of manufacture and sale of synthetic materials had made a provision of Rs. 16,00,876 for payment of excise duty on polymer chips. It, however, disputed the liability for payment of this duty in a writ petition filed before the Delhi High Court. That writ petition was decided in favour of the assessee on 23rd August, 1970. However, the Excise Dept. went up in appeal before the Supreme Court which was pending at the time of making of the assessment of the assessee for the year 1967-68. The ITO was of the opinion that as it had been decided by the Delhi High Court that the assessee was not liable to pay the excise duty, no deduction in respect of the provision made by the assessee for payment thereof could be allowed in computing its taxable income. Aggrieved, the assessee went up in appeal before the AAC, and claimed that as the excise authorities, despite the decision of the Delhi High Court, were insisting that excise duty for which the provision had been made by the assessee, was payable and had taken the matter up in appeal before the Supreme Court, the assessee was entitled to claim the deduction in respect of the said provision in the assessment year in question. The AAC relying upon a decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT ]1971] 82 ITR 363, accepted the plea of the assessee. He, accordingly, allowed the appeal filed by the assessee.
(3.) The Department then took up the matter in appeal before the Income-tax Appellate Tribunal and contended that in view of the decision of the Delhi High Court there was no liability of the assessee to pay the excise duty in respect of which it was claiming deduction and it further contended that the fact that the Excise Dept. had questioned the decision of the Delhi High Court by means of an appeal to the Supreme Court was irrelevant. The Income-tax Appellate Tribunal repelled the plea of the Department and affirmed the order passed by the AAC. At the instance of the Department, the Tribunal has stated the case and referred the aforementioned question for opinion of this court.;