Satish Chandra, J. - (1.) THE assessee is a company which carries on the business of manufacture and sale of sugar. For the assessment years 1960-61 and 1961-62 in one of its revised returns the assessee claimed a deduction of Rs. 1,00,000 in each year as deferred cane price under the price-linking formula envisaged by Section 3A of the Sugarcane Control Order, 1955. This claim was rejected by the Income-tax Officer on the ground that the liability had not accrued and that the assessee, though he was maintaining accounts on the mercantile system, had not made entries in its profit and loss account showing this liability. This view was upheld in appeal. THE Tribunal took the same view in second appeal. At the instance of the assessee the following question of law has been referred for the opinion of this court: "Whether, on the facts and in the circumstances of the case and on a true and proper interpretation of the Sugarcane Control Order, 1955, and orders made thereunder, the liability for additional sugarcane price under the price-linking formula was incurred by the assessee-company in the relevant previous year ?"
(2.) DURING the pendency of the appeal before the Appellate Assistant Commissioner, the chairman, Sugarcane (Additional) Price Fixation Authority passed an order on 28th December, 1964, quantifying the liability of the assessee to pay the additional price at Rs. 6,07.280 for the assessment year 1960-61 and Rs. 9,95,285 for the assessment year 1961-62. Consequently, before the Appellate Assistant Commissioner the assessee claimed a deduction of additional sum of Rs. 5,07,280 for the first, and an additional sum of Rs. 8,95,285 for the subsequent year. The Appellate Assistant Commissioner permitted the assessee to amend his claim accordingly, He, however, rejected it on the ground mentioned above. The crucial question which requires consideration is whether the liability for the additional sugarcane price accrued during the assessment years in question in which the sugarcane was admittedly purchased by the assessee-company. In Commissioner of Income-tax v. Janki Sugar Mills Co. Ltd. [1972] 84 ITR 348, 350 (All) a Division Bench of this court construed the provisions of the Sugarcane Control Order and held I "It appears from the record before us that the minimum price had been fixed under paragraph 3(1) of the Sugarcane Control Order and all that was necessary then was to compute the additional price payable by virtue of paragraph 3(3A) of the Order......Clause (3A) imposes a personal liability upon the producer of sugar to pay to the sugarcane grower or the growers' co-operative society from whom he purchased his sugarcane an amount in addition to the price fixed under paragraph 3(1) of the Control Order. It is a liability which arises as soon as the sugarcane has been purchased and the minimum price fixed in respect of such purchase under the Control Order. The liability does not depend upon any other circumstance for its accrual. No order of the Cane Commissioner or other authority is necessary. As soon as the purchase is effected and the minimum price is fixed no further condition needs to be satisfied before the liability arises."
(3.) IN Kundan Sugar Mills v. Commissioner of INcome-tax [1977] 106 ITR 704 (All), another Division Bench held that the liability created under Clause (3 A) is an accrued liability and was not a contingent liability. These are direct authorities on the point that under the Sugarcane Control Order the liability in respect of the additional cane price accrues as soon as the sugarcane is purchased and the minimum price therefor has been fixed. In the present case it is not disputed that both these events happened during the previous years relevant to the assessment years in question. Thus, it is clear that the assessee incurred the liability to pay the additional cane price during the relevant assessment years. It was in no sense of the term a contingent liability.;