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of <h1>High Court clarifies trading loss deductions, directs Tribunal reexamination</h1> <h3>Eastern Assam Tea Co. Limited Versus Commissioner Of Income-Tax</h3> Eastern Assam Tea Co. Limited Versus Commissioner Of Income-Tax - [1989] 180 ITR 411, 83 CTR 57, 48 TAXMANN 284 Issues:1. Allowability of sum paid to handling agent as trading loss.2. Judicial admissibility of specific ground regarding additional cost of cereals.3. Timing of allowance for liability related to sum paid to handling agent.Analysis:The High Court of Calcutta addressed the issues arising from the Tribunal's reference under the Income-tax Act, 1961 for the assessment year 1975-76. The case involved a company, part of the Warren Tea Group, which paid a sum to a handling agent for the supply of foodgrains to tea estate workers. Disputes arose when the handling agent allegedly breached trust and stopped the agreed supply. The company initiated legal action against the handling agent, leading to civil and criminal litigations. The Income-tax Officer initially deemed the claimed loss premature due to pending litigations. The Commissioner of Income Tax (Appeals) held that as the agreement was terminated in 1974 and the civil suit filed in a subsequent year, the loss was not incurred in 1974. The Tribunal, however, found no proof of the claimed loss in the relevant year.Dr. Pal, representing the company, argued that the expenditure was incurred for the company's business purpose, regardless of the handling agent's claims. The Court agreed with Dr. Pal, emphasizing that if the expenditure was for feeding workers, it should be allowed as wholly and exclusively incurred for business purposes. The Court directed the Tribunal to reexamine the case to determine the allowance of the expenditure in the relevant accounting year.In conclusion, the High Court declined to answer the questions referred and remitted the case to the Tribunal for a fresh decision. The Tribunal was instructed to reevaluate the case, consider evidence, and make decisions in accordance with the law. Both judges, SUHAS CHANDRA SEN and BHAGABATI PRASAD BANERJEE, concurred with this decision.
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