Statutory diversion at source upheld for molasses storage fund contributions, making the amount an allowable liability.

The assessee's statutory contribution to the molasses storage fund under Section 18A of the U.P. Sheera Niyantran Adhiniyam, 1964 was treated as an allowable statutory liability because the amount had to be credited to a separate account and could be used only under the control of the statutory authority. As the assessee had no control or power to apply the funds for its own purposes, the contribution was held to be diverted at source and not part of the assessee's disposable income. The Tribunal followed its earlier view on the same issue and accepted the assessee's claim.

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Issues: Whether the amount provided towards contribution to the molasses storage fund under Section 18A of U.P. Sheera Niyantran Adhiniyam, 1964 was allowable as a statutory liability and whether it resulted in diversion of income at source.

Analysis: The assessee was statutorily required to contribute specified amounts to the molasses storage fund. The amount had to be kept in a separate account and its utilisation remained under the control of the statutory authority appointed under the enactment. The assessee had no control or power to utilise or spend the funds, so the amount was not part of the assessee's disposable income. The Tribunal followed its earlier view on an identical issue.

Conclusion: The contribution was an allowable statutory liability and constituted diversion of income at source. The assessee succeeded on the issue.

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