Commissioner of Income Tax vs Kishore Chand Shivcharan Lal

This is an Income Tax reference u/s 256(1) of the Income Tax Act, 1961, in which the following question has been referred to us for our opinion :

"Whether the Tribunal was correct in holding that the claims of the assessee for deduction on account of dues demanded by the Electricity Board for earlier years, which have not yet been fully ascertained and also had been all along disputed by the assessee, could be allowed in the assessment year 1976-77 specially when the assessee observed the mercantile system of accounts and had made no provision in the years of demands ?"

We have carefully perused the appellate order of the Tribunal and find no illegality in the same. The claim of deduction of the petitioner was in respect of dues demanded by the U. P. State Electricity Board. The assessee disputed the amount claimed by the Board and the liability was yet to be ascertained in the relevant assessment year, which is 1976-77.

The Tribunal, in our opinion, has rightly held that the assessee-firm is eligible to claim the amount to the extent, these are ascertained against the assessee''s income pertaining to the relevant assessment year.

We find no error of law in the Tribunal''s order. The question referred is, therefore, decided in the affirmative, i.e., in favour of the assessee and against the Department.