TaxTMI 
TaxTMI 
1990 (11) TMI 107
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....n requisition and thereby setting aside the order of the Commissioner of Income-tax passed under section 263 of the Income-tax Act, 1961 ?" The assessee is a limited company engaged in manufacture and sale of jute articles, especially gunny bags. The assessment year concerned is 1973-74. During the relevant previous year, an order was served upon the assessee under rule 114(2) of the Defence of India Rules, 1971, issued by the Director-General of Supplies and Disposals, Calcutta, calling upon the assessee to supply 7,110 bales of jute bags during the period November, 1971, to September, 1972. The supply was to be made at a notified price which was lower than the market price. As against 7,110 bales ordered to be supplied, the assessee ma....
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....e Supreme Court that even a non-voluntary sale, like the present one, does amount to a sale. But sale there must be for the assessee to claim the resulting loss as a deduction. Without a sale, there is no loss. As a fact, in the relevant previous year, sale was only of 3,405 bales and not of 7,110 bales. The Tribunal has taken the view that since the requisition order created a liability to supply, the loss arose on the date the said order was served upon the assessee, because the assessee was maintaining its accounts on the mercantile basis. It is the correctness of this view that is in question before us. Learned standing counsel for the Revenue argues, and with a good amount of justification, that it may be that the order served upon the....
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....y a part of the price was paid to him during the relevant previous year. The assessee was maintaining the mercantile system of accounting. Though he received only a part of the sale price, he entered on the credit side the full sale price. Similarly, on the debit side, he debited the entire estimated expenditure required for development of the land, though, as a matter of fact, he had not spent all that amount during the relevant previous year, but only a part thereof. The question was whether he was entitled to deduction of the entire estimated expenditure or only of that amount which he had actually spent during the relevant previous year. Having regard to the system of accounting and the method of entries on the credit side and the debit....
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.... The matter was carried in appeal. The Appellate Assistant Commissioner held that the loss to be allowed is not Rs. 53,310, but only Rs. 49,516. The latter figure was worked out on the basis of the price actually fixed by the Government in the following year. This was confirmed in appeal by the Tribunal whereupon the matter was brought to this court by way of reference. This court approved the reasoning of the Tribunal in the following words (at p. 787) : "Now, having regard to the circumstance that the assessee was bound in law to comply with the demand made on July 17, 1958, a liability to supply the sugar demanded must be taken in reality to have arisen in law on that date. The assessee could not refuse to supply the sugar, and it may....