2013 (12) TMI 611 - HC - Income Tax

High Court upholds deduction for interest on excess levy price and additional cane price liabilities.

The Allahabad High Court ruled in favor of the assessee in a case concerning deductions related to interest on excess levy price and liability towards ... Interest on excess levy price - Held that:- Following Commissioner of Income Tax, Lucknow vs. Dhampur Sugar Mills etc. Dhampur [2004 (8) TMI 44 - ALLAHABAD High Court] - The interest payable for the assessment years in question accrued during the previous year relevant to the assessment in question as provided under the provisions of the Levy Sugar Price Equalization Fund Act, 1976 - There was statutory liability of payment of interest every year - Decided in favour of assessee. Liability towards the additional cane price - Held that:- Following Commissioner of Income Tax, Lucknow vs. M/s Dhampur Sugar Mills Ltd. Dhampur [2005 (4) TMI 548 - ALLAHABAD HIGH COURT] - No disallownace can be made on this ground - Decided in favour of assessee. Issues:1. Deduction on account of interest on excess levy price.2. Accrual of liability for deduction during relevant years.3. Deduction on account of liability towards additional cane price.Issue 1: Deduction on account of interest on excess levy price:The Department challenged the Tribunal's decision allowing the assessee's claim for deduction on interest on excess levy price. The Tribunal upheld the order of the CIT(A) stating it was an ascertained liability. The Department questioned if such liability accrued during the relevant years and was allowable. The High Court referred to a previous case involving similar facts and ruled in favor of the assessee. The Court emphasized that the interest payable for the relevant assessment years accrued during the previous year as per the Levy Sugar Price Equalization Fund Act, establishing a statutory liability for annual interest payment.Issue 2: Accrual of liability for deduction during relevant years:The Court addressed the accrual of liability for deduction during the relevant years under consideration. The Tribunal's decision to allow the deduction was supported by a previous case law that established the interest on excess levy sugar price as an allowable deduction. Both parties agreed on the applicability of the previous decision, leading the Court to rule in favor of the assessee and against the Revenue. The Court emphasized the statutory nature of the liability and the consistent interpretation of the law in similar cases.Issue 3: Deduction on account of liability towards additional cane price:The third issue pertained to the deduction on account of liability towards additional cane price. The Department disputed the deduction of interest on the additional cane price, arguing it was a contingent liability until the assessee failed in appeal. The Court referred to a previous judgment and noted that the Tribunal had not made any decision on this issue in the past. The Court directed the Assessing Officer to follow the principles laid down in previous cases for the allowance of the deduction. Ultimately, the Court found in favor of the assessee, dismissing the Department's appeal at the admission stage.This judgment by the Allahabad High Court addressed the Department's appeal under Section 260-A of the Income Tax Act, 1961 against the Tribunal's decision on deductions related to interest on excess levy price and liability towards additional cane price for the assessment year 1991-92. The Court relied on previous cases to establish the legality and accrual of the liabilities in question, ultimately ruling in favor of the assessee and dismissing the Department's appeal.