Land Buyers Entitled to Immediate Repayment Deduction under Novel Scheme

The High Court held that the liability to repay buyers of land under a "Money Back Novel Scheme" arose at the time of the contract, allowing the entire repayment amount to be claimed as expenditure in the year of Fixed Deposit Receipt. The court rejected the Tribunal's interpretation that the payment was only postponed, emphasizing that the liability was immediate. The decision favored the assessee, permitting the deduction in the year of Fixed Deposit Receipt.

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Issues:
1. Whether the entire amount of repayment is liable to be deducted in computing income in the year of receipt itselfRs.
2. Whether only 1/5th of the amount can be claimed as a deduction in each of the five yearsRs.

Analysis:
1. The appellant introduced a "Money Back Novel Scheme" where buyers of land were assured repayment of the entire land cost after five years. The Assessing Officer spread the repayment liability over five years. The Commissioner of Income Tax (Appeals) found that the liability arose at the time of the contract and allowed the entire amount as expenditure. However, the Tribunal relied on a different case law and reversed the decision. The High Court held that the liability arose at the time of the contract, and the expenditure could be claimed in the year of Fixed Deposit Receipt.

2. The Commissioner of Income Tax (Appeals) found that the liability was incurred immediately, but the payment was postponed until after five years. The Tribunal wrongly interpreted the case law cited and held that the Fixed Deposit should have been in the name of the buyer of the plot. The High Court disagreed, stating that the liability arose at the time of the contract, and the payment was only postponed. The court held that the decision in favor of the assessee, allowing the expenditure in the year of Fixed Deposit Receipt.

3. The High Court concluded that the liability to repay the buyers of the plots arose at the time of the contract, and the payment was postponed until after five years. The court found that the Fixed Deposit created by the assessee was to ensure repayment to the buyers and that the liability was immediate. The court allowed the Tax Case Appeal, holding that the expenditure could be claimed in the year of Fixed Deposit Receipt.

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