TaxTMI 
TaxTMI 
2009 (3) TMI 132
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....ee and, therefore, was not allowable in the assessment year 1988-89 ?" 2. The assessment year in question is 1988-89, the relevant accounting period being the year ended on September 30, 1987. Originally assessment was framed, vide order dated October 1, 1990, made under section 143(3) of the Income-tax Act, 1961 (the Act). Subsequently, by an order made under section 263 of the Act, the Commissioner of Income-tax, Baroda, set aside the assessment order holding that the same was erroneous and pre-judicial to the interest of the Revenue on the ground that the Assessing Officer had wrongly allowed deduction of Rs. 7,14,824 on account of damages on the basis of the arbitration award dated May 28, 1987, which had been challenged by the assesse....
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....f of the respondent-authority the learned counsel submitted that though the award was made on May 28, 1987, the same had not attained finality as the assessee had filed an appeal which came to be decided only on March 22, 1989, and, hence, the liability to make payment can be said to have been incurred only in the assessment year 1989-90. It was submitted that this was not a case of statutory liability but a contractual liability and, hence, unless and until it was finally settled, there was no question of allowing such deduction. 5. The basic facts as noted by the Tribunal are: "2. The assessee-company is engaged in the business of manufacturing dal, besan, maida, sooji, etc. The assessment year involved in both the appeals before us is ....
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....enting the differences between the contract price of US dollars 310 per metric tonne and market rate of the goods on the date of default being US dollars 277.41. Further interest was also to be paid at the rate of 9.2 per cent. per annum from August 29, 1986 (date of default) to May 28, 1987 (date of the award). The assessee did not accept the award of arbitration and the Board of Appeal under the GAFTA decided the matter against the assessee." 6. It is not in dispute that the Revenue does not dispute incurring of liability in principle. The dispute primarily is as to in which year has the liability been incurred by the assessee the assessee claiming it to be in the year under consideration, whereas the Revenue claiming the same to be in t....