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Issues: (i) Whether the amount credited as refundable customs duty on export sales was deductible as an ascertained liability in the relevant assessment year; (ii) whether weighted deduction under section 35B could be restricted to 75% of the salary of employees engaged exclusively in export business; (iii) whether the direction to recompute interest under section 215 after giving effect to the appellate order was justified.
Issue (i): Whether the amount credited as refundable customs duty on export sales was deductible as an ascertained liability in the relevant assessment year.
Analysis: The customs duty component formed part of the sale price received from the foreign buyer and, on the facts, no refund claim had been made by the importer during the year. The assessee's unilateral credit to a refund account did not create an enforceable liability. The amount was therefore in the nature of a trading receipt, with deduction becoming relevant only when the duty was actually paid to the Government or refunded to the customer.
Conclusion: The claim for deduction was not allowable in the relevant year and the disallowance was sustained.
Issue (ii): Whether weighted deduction under section 35B could be restricted to 75% of the salary of employees engaged exclusively in export business.
Analysis: The appellate authority followed the Special Bench guidance on allocation of export-related salary expenditure and directed allowance of only 75% of the relevant salary. No factual or legal basis was shown to disturb that approach.
Conclusion: The restriction to 75% was upheld.
Issue (iii): Whether the direction to recompute interest under section 215 after giving effect to the appellate order was justified.
Analysis: Chargeability of interest depended on the final computation of income after appeal, and the assessee's relief, if any, was to follow consequentially from that recomputation. The matter was left to be worked out by the assessing authority.
Conclusion: The direction for recomputation of interest was upheld.
Final Conclusion: The appeal succeeded only to the limited extent that consequential relief was to follow from recomputation, but the principal additions and restrictions challenged by the assessee were maintained.
Ratio Decidendi: A liability cannot be deducted on the basis of a unilateral accounting entry where no enforceable claim has arisen during the year, and a sum received as part of sale price retains the character of trading receipt until an actual refund or discharge occurs.
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