COMMISSIONER OF INCOME TAX vs SAKUR AHMED GAFOOR KHAN.

By the Court - The Income Tax Appellate Tribunal Jaipur Bench, Jaipur (the Tribunal herein) has referred the following question for the opinion of this Court, which is said to arise out of this Court, which is said to arise out of its order dt. 4-9-1975, passed in IT Appeal No. 337/JP/73-74 :

"Whether on the facts and in the circumstances of the case, the ITAT was right in holding that the deficiency of Rs. 5,43,730 from the guaranteed amount of country liquor was allowable as a trading loss in computing the assessees income from business for the asst. yr. 1971-72 ?"

It is not necessary to re-state the facts leading to this reference inasmuch as ld. counsel for the parties submit that it has arisen under identical circumstances with those in the CIT, Rajasthan, Jaipur, v. Shri Chunnilal Tak, Bhilwara D.B. IT. Ref. No. 6/78, decided on 24-5-1985 [since reported in (1986) 53 CTR (Raj) 62]. The question referred to in the CIT v. Shri Chunnilal Taks case (supra) is by and large the same with that which has been referred by the Tribunal in this case.

After considering the relevant clauses of the licence, s. 37(1) of the IT Act, 1961, (No. XLIII of 1961) (for short the Act) and the relevant authorities, it was held by us in the CIT v. Chunnilal Tak (supra), as under :

"In this case, in terms of the licence, the assessee was under an obligation to lift the country liquor of the value of Rs. 80,400 and on its failure to lift the country liquor to that extent, it was under an obligation to make good the deficiency to the Government of Rajasthan. The liability to pay the deficiency was there in the terms of the licence and arose directly from the carrying on of the assessees business. The principles laid down in the authorities cited by the learned counsel for the assessee are attracted. In these circumstances, the Tribunal was right in holding that the difference of Rs. 20,967 between the guarantee amount and the actual purchase of country liquor was allowable as trading loss in the computation of the assessees total income for the asst. yr. 1968-69."

In coming to the aforesaid conclusion, reliance was placed on Additional Commissioner of Income Tax, Gujarat Vs. Rustam Jehangir Vakil Mills Ltd., , Commissioner of Income Tax, Gujarat-III Vs. Tarun Commercial Mills Co. Ltd., , the Additional Commissioner of Income Tax, Gujarat Vs. Arvind Mills Ltd., and Commissioner of Income Tax Vs. Surya Prabha Mills (P.) Ltd., The cases cited on behalf of the revenue viz., Assam Bengal Cement Co. Ltd. Vs. The Commissioner of Income Tax, West Bengal, , BEHARI LAL BENI PARSHAD Vs. COMMISSIONER OF Income Tax, DELHI, AJMER, RAJASTHAN AND MADHYA BHARAT., and N. Peer Sahib Vs. Commissioner of Income Tax, Mysore, were distinguished on facts.

We have considered the relevant provisions of the Rajasthan Excise Act, 1954 and the relevant clauses of the licence granted in favour of the assessee-respondent. The reasons given by us in the CIT v. Chunnilal Tak (supra) are fully applicable to the case on hand. We hold that the Tribunal was right in coming to the conclusion that the deficiency of Rs. 5,43,730 from the guaranteed amount of country liquor was allowable as a trading loss in computing the assessees income from business for the asst. yr. 1971-72.

The question referred by the Tribunal is answered in the affirmative, i.e. in favour of the assessee and against the revenue.

We leave the parties to bear their own costs of this reference.