R.K.Agrawal J. - (1.) The Income-tax Appellate Tribunal, Delhi, has referred the following questions of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for opinion to this court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the liability of Rs. 5,81,534 for the export duty was allowable as a deduction in the year in question ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the assessee's claim for investment allowance on the ground that the products manufactured by the assessee was not hit by item No. 1 of the Eleventh Schedule to the Income-tax Act ?"
(2.) Briefly stated, the facts giving rise to the present reference are as follows : The reference relates to the assessment year 1980-81. The respondent is a public limited company and is engaged in the business of manufacture and sale of rectified spirit and Indian made foreign liquor. During the assessment year in question, it claimed deduction of Rs. 5,81,534 relating to export duty while computing the income. It has realised the export duty on the Indian made foreign liquor from the customers. However, no payment was made on the ground that the matter was pending before the Supreme Court and stay order was granted restraining the authorities from realising the amount of export duty from the respondent. It was claimed that the amount was not taxable as income and in case it is held to be taxable as forming part of the trading receipt, deduction should be allowed of the equal amount because it is a statutory liability as it is following the mercantile system of accounting. The Income-tax Officer has rejected the claim on the ground that it can be allowed as deduction in the year in which it is paid over to the Government.
(3.) The respondent also claimed allowance of investment allowance on the investment made in plant and machinery. The Inspecting Assistant Commissioner (Assessment) disallowed the assessee's claim of investment allowance on the ground that the industry is covered by the entry at item No. 1 in the list enumerated in the Eleventh Schedule. Item No. 1 of the said Schedule relates to "beer, wine and other alcoholic spirits". In appeal, the Commissioner of Income-tax (Appeals) deleted the addition of Rs. 5,81,534 towards export duty on the ground that it is a statutory liability and the respondent is entitled to claim deduction as it is following the mercantile system of accounting. He further held that there is a separate plant for manufacture of rectified spirit and, therefore, the respondent is entitled to claim investment allowance in respect of such plant and machinery. The Revenue's appeal before the Tribunal has failed.;