- (1.) WE have heard learned Counsel for the assessee and learned Counsel for the Income -tax Department.
(2.) THE following four questions have been referred in this case, two at the instance of the assessee and two at the instance of the Department: At the instance of the assessee: 1. Whether, on the facts and in the circumstances of the case and in accordance with law, the Tribunal was justified in rejecting the assessee's claim for deduction in respect of a sum of Rs. 7,93,793 being the compensation payable to M/s. M.W. Hardy and Co., New York? 2. Whether, on the facts and in the circumstances of the case and in accordance with the provisions of law, the Tribunal was right in holding that relief under Section 80HHA of the Income -tax Act, 1961, was to be computed after adjusting the loss of the 'head office set' against the profit of the branch? At the instance of the Revenue: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that cash compensatory support and profits on sale of import entitlements forms part of the eligible profits for the purpose of computation of deductions under Sections 80HHA and 80 -I of the Income -tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in confirming the Commissioner of Income -tax (Appeals) finding that duty drawback amounting to Rs. 2,51,448 can be termed as profits derived from industrial undertaking and is accordingly required to be taken into account for the purpose of computing the deduction under Sections 80HHA and 80 -I of the Income -tax Act, 1961? So far as the first question is concerned, the answer to the same depends upon the words of Section 37, which are that expenditure 'laid out or expended' will allow to be deducted in computing the income chargeable under the head 'Profits and gains of business or profession'. It is quite plain that the said words, which have been underlined above, mean expenditure, which has been actually incurred or spent. Learned Counsel for the assessee has placed reliance upon certain decisions, which according to him, have stretched those words to include a liability of the assessee, which liability has been incurred, even though not discharged during the relevant year.
(3.) EVEN assuming for the sake of argument that those decisions lay down such a proposition as suggested, it is quite clear that the liability, which is contemplated to have been incurred should not be a contingent liability, that is to say it should not be contingent upon the happening or not happening of future events.;