TaxTMI 
TaxTMI 
1979 (7) TMI 80
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....on are 1969-70 and 1970-71. The respondent-assessee, a registered firm at the relevant period, was engaged in the business of raising coal from a colliery known as West Katras Colliery. As the deductions claimed related to two years, there were two separate proceedings which were heard by the Tribunal in a consolidated manner. The cases were I.T.A. Nos. 744 and 745 (Pat) of 1972-73. The question of law arising out of both these cases and a consolidated statement of the cases has been referred by the Tribunal. It appears that a Wage Board was constituted on August 10, 1962, which submitted its recommendation on December 23, 1966. The Government decided to implement the recommendation of the Wage Board on August 15, 1967. It further appear....
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....s, as it followed the mercantile system of accounting. Aggrieved by the decision of the Tribunal, the CIT asked for a reference to be made under s. 256(1) of the I.T. Act, which has been done by the Tribunal. In support of this reference, it has been urged by the senior standing counsel for the revenue that the Tribunal was not justified in holding that those deductions were admissible deductions inasmuch as those were not accrued or determined liability. According to the learned counsel, it was only a case of contingent liability, which is dependent upon a decision of the Industrial Tribunal for its adjudication. Mercantile system of accounting has been explained to mean " a system which brings into accrued what is due, immediately i....
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....bility for which the assessee rightly made pro- vision by debiting it in its account, has taken the following circumstances into consideration : (a) The Wage Board on December 23, 1966, had recommended the payment of additional wages and the Government had taken a decision to implement it from August 15, 1967. (b) In the auditors' report, it is clearly stated that extra payment of salary and wages have to be made to the workers and according to the Central Wage Board Award the amounts have been mentioned in the books of account, which has been treated as a liability in the balance-sheet. (c) There was a strike notice served by the workers against the assessee for implementation of the Wage Board's recommendation. (d) Certain cor....
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....hat it is beyond its financial capacity to pay in accordance with the recommendation of the Wage Board. However, as I have pointed out above, in the case before us the Tribunal has not come to the conclusion that the liabilities were incurred liability, merely on the ground that there was a recommendation of the Wage Board which has been accepted by the Government. The Tribunal took various other circumstances into consideration and has come to the conclusion that it was an accrued liability. Therefore, those decisions are not of much assistance to the revenue. Reliance was also placed on the case of CIT v. Swadeshi Cotton and Flour Mills Private Ltd. [1964] 53 ITR 134 (SC). In that case, the employees claimed profit bonus for the year 1....