Court confirms deduction under Income Tax Act based on law, not accounting entries. Revenue appeal dismissed.

The High Court upheld the Tribunal's decision in two tax appeals, confirming the deduction of liability by the Assessing Officer under the Income Tax Act. The Court emphasized that the entitlement to a deduction is based on the law, not the assessee's accounting entries, citing a previous Apex Court decision. The appeal filed by the revenue was dismissed as the Court found in favor of the assessee's right to claim deduction even without a corresponding entry in the books of accounts.

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Issues:
- Challenge to the judgment and order of the Income Tax Appellate Tribunal by the appellant-revenue in two separate tax appeals.
- Dismissal of the appeal filed by the revenue by the Tribunal in both cases.
- Question of law regarding deduction of liability by the Assessing Officer.
- Interpretation of the provision for deduction under the Income Tax Act.
- Comparison with a previous Apex Court decision in Kendarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-Tax (Central), Calcutta.

Analysis:
1. The High Court of Gujarat heard two tax appeals where the appellant-revenue challenged the judgments and orders of the Income Tax Appellate Tribunal. The Tribunal had dismissed the appeals filed by the revenue in both cases, leading to a common judgment due to identical facts and legal issues.

2. The appeals revolved around the deduction of liability by the Assessing Officer under the Income Tax Act. In one case, the Assessing Officer determined the total income of the assessee after making an addition to the declared total loss. The Commissioner of Income Tax (Appeals) partly allowed the appeal filed by the assessee, leading to the revenue's appeal before the Tribunal.

3. The substantial question of law formulated by the Court focused on whether the Tribunal was correct in confirming the order of the Commissioner of Income-tax (Appeals) directing the Assessing Officer to allow the deduction of the liability, despite no provision or payment made by the assessee during the relevant year.

4. The appellant-revenue argued that the Tribunal erred in dismissing their appeal and not properly appreciating the material on record. However, the respondents' advocate cited the precedent set by the Apex Court in Kendarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-Tax (Central), Calcutta, supporting the assessee's right to claim deduction even without a corresponding entry in the books of accounts.

5. After hearing both parties and reviewing the Apex Court decision, the High Court concluded that the issue was already settled in favor of the assessee. The Court emphasized that the entitlement to a deduction depends on the law, not the assessee's accounting entries. Therefore, the Court dismissed the appeal, holding that the Tribunal was correct in confirming the order of the Commissioner of Income-tax (Appeals) regarding the deduction of the liability.

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