Ajit K. Sengupta, J. - (1.) IN this reference under Section 256(1) of the INcome-tax Act, 1961, for the assessment year 1982-83, two questions have been referred to this court, one at the instance of the Revenue and the other at the instance of the assessee. The question which has been referred at the instance of the Revenue is as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that where there were losses from an industrial undertaking the deduction allowable under Section 80J(1) of the INcome-tax Act, 1961, was permissible for being carried forward and set off against the profits in respect of the following assessment year ?" It appears that this question is now concluded by the decision of this court in the case of CIT v. M. A. Paper and Card Board Factory Pvt. Ltd. [1986] 160 ITR 877. Following the said decision we answer this question in the affirmative and in favour of the assessee.
(2.) THE question referred at the instance of the assessee is as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the liability of Rs. 3,35,140 arising out of breach of contract and quantified by the award after the end of the previous year, during the pendency of the litigation was not an allowable deduction in the assessment year 1982-83 ?" THE facts relating to this question are that the previous year of the assessee ended on October 26, 1981, relevant to the assessment year 1982-83, Because of breach of a certain contract for supply of goods, litigation ensued between the assessee on the one hand and the Director-General of Supplies and Disposals ( for brevity "the DGSD") on the other. During the pendency of the litigation before the Calcutta High Court, reference was made to the arbitrator who made an award on March 8, 1982, against the assessee for Rs. 3,35,140. THE award, inter alia, mentioned, "the parties are authorised to take steps for filing of the award in the court". THE stand of the assessee before the Income-tax Officer was that though the award was made by the arbitrator after the end of the previous year, the audit of the assessee-company was finalised on April 20, 1982, that is to say, after the date of the award. It was also the stand of the assessee that the liability was allowable since it was quantified during the pendency of the assessment proceedings. THE Income-tax Officer accepted the claim and allowed deduction of Rs. 3,35,140 from the income of the assessee. The Commissioner of Income-tax, however, passed an order dated March 27, 1985, under Section 263 of the Income-tax Act directing the Income-tax Officer to withdraw the deduction which he held to have been wrongly allowed by the latter to the prejudice of the Revenue's interests. The assessee came in appeal before the Tribunal. The Tribunal upheld the order of the Commissioner of Income-tax passed under Section 263 of the Income-tax Act, 1961.
(3.) THE admitted facts are that the arbitrator in terms of the contract made an award on March 8, 1982, against the assessee for the sum of Rs. 3,35440. THE assessee did not furnish any further evidence as to whether the said award became final and whether the said award was accepted by the parties. In other words, there is no evidence that the disputes were settled in terms of the said award given on March 8, 1982. THE fact remains that the award was not filed and no decree in terms of the award was passed. An award of the arbitrator even when filed in court, if no decree is passed on the basis of such award, such award has no enforceability or validity. It is not effective. It cannot extinguish or pass any title or interest. Unless the award became enforceable in terms of the decree passed by the court, it cannot be said that the disputes had been finally settled. THE court can specify or modify or remit an award for fresh consideration and it cannot be taken for granted that the court may always pass a decree on the terms of the award. In our view, therefore, there was no legally enforceable settlement arrived at by and between the parties. Even assuming that the award was binding upon the parties as published by the arbitrator, it crystallised only after the close of the accounting year. In our view, therefore, the Tribunal was justified in holding that the liability in question was not an allowable deduction in the assessment year 1982-83. We, therefore, answer the question referred at the instance of the assessee in the affirmative and in favour of the Revenue. There will be no order as to costs. Bhagabati Prasad Banerjee, J. ;