2021 (3) TMI 850

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....al was admitted on the following substantial question of law: "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in holding that the provision for wage arrears of Rs. 5.80 crores is an ascertained liability, notwithstanding the fact that the said provision has been accounted on cash basis?" 3.When the appeal was taken up for hearing, Mr.Karthick Ranganathan, learned senior standing counsel appearing for the appellant- Revenue fairly submitted that the question of law involved in the present appeal is covered by the following decisions of the Hon'ble Supreme Court against the Revenue: (i)[2000] 112 Taxman 61 (SC) [Bharat Earth Movers Vs. Commissioner of Income Ta....

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....re parting we would like to observe that when this appeal came up for hearing on 24-3-1999, we felt some difficulty in proceeding to answer the question arising for decision because the orders of the authorities below and of the Tribunal did not indicate how the leave account was operated by the appellants and leave salary provision was made. To appreciate the facts correctly and in that light to settle the law we had directed the Tribunal to frame a supplementary statement of the case based on books of account and other relevant contemporaneous records of the appellant which direction was to be complied with within a period of six months. The hearing was adjourned sine die. After a lapse of sixteen months, the matter was listed be....

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....red by the appellant in discharging a liability which it had already undertaken under the terms of the deeds of sale of the lands in question and was an accrued liability which according to the mercantile system of accounting the appellant was entitled to debit in its books of account for the accounting year as against the receipts of Rs. 43,692-11-9 which represented the sale proceeds of the said lands. Even under section 10(2) of the Income-tax Act, it might possibly be urged that the word "expended" was capable of being interpreted as "expendable" or "to be expended" at least in a case where a liability to incur the said expenses had been actually incurred by the assessee who adopted the mercantile system of accounting and the debit of R....

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....ble for income-tax on a sum of Rs. 14,300 which had not been received by it during the accounting year, it was hardly open to the Revenue to urge that the sum of Rs. 24,809 should not have been allowed as a permissible deduction before arriving at the profits or gains of the appellant which were liable to tax. Consistently enough with this attitude, the Revenue ought to have expressed its willingness to treat only a sum of Rs. 29,392-11-9 as the actual receipt of the appellant during the accounting year and made up the computation of the profits and gains of the appellant's business on that basis. The Revenue, however, did nothing of the sort and insisted upon having its pound of flesh, asking us to delete the whole of the item of Rs. 2....