1992 (7) TMI 35

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....1) of the income-tax Act, 1961, at the instance of the Revenue, the following question has been referred by the Tribunal to this court for its opinion for the assessment year 1972-73: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the claim of the assessee-company for deduction of Rs. 3,16,061 on account of demand made by the Di....

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....rporation Ltd. at an enhanced rate. The extra expenditure involved as a result of what was described by the Director-General of Supplies and Disposals as repurchase amounted to Rs. 3,16,061 which was demanded from the assessee-company by a letter of the Director-General of Supplies and Disposals dated January 13, 1971. This was not accepted by the assessee-company and the matter was, therefore, re....

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....isputed contractual liability could be allowed only when the same is settled. According to the Revenue, since arbitration proceedings were still pending, the claim of the assessee-company for deduction of Rs. 3,16,061 as business loss was clearly premature. The Tribunal, however, held and observed that the demand of Rs. 3,16,061 made against the assessee-company by the Director-General of Suppl....

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....ence. The prima facie merits of the claim of the Director General of Supplies and Disposals have no bearing on the issue whether the liability pending adjudication could be an accrued liability. While describing the claim as not flimsy and frivolous, the Tribunal only refers to a chance of the claim turning out as a liability in the final outcome of the arbitration. In CIT v. Roberts McLean and....