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Commissioner of Income-tax Vs. Patnaik and Co. (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtOrissa High Court
Decided On
Case NumberSpecial Jurisdiction Case No. 47 of 1978
Judge
Reported in[1983]140ITR204(Orissa)
ActsIncome Tax Act, 1961 - Sections 256(1) and 256(2)
AppellantCommissioner of Income-tax
RespondentPatnaik and Co. (P.) Ltd.
Excerpt:
- motor vehicles act, 1988 [c.a. no. 59/1988]section 173(1) proviso; [d. biswas, amitava roy & i.a.ansari, jj] appeal without statutory deposit but within limitation/or extended period of limitation maintainability - held, if the provision of a statute speaks of entertainment of appeal, it denotes that the appeal cannot be admitted to consideration unless other requirements are complied with. the provision of sub-section (1) of section 173 permits filing of an appeal against an award within 90 days with a rider in the first proviso that such appeal filed cannot be entertained unless the statutory deposit is made. the period of limitation is applicable only to the filing of the appeal and not to the deposit to be made. it, therefore, appears that an appeal filed under section 173 cannot..........to pay interest only in april, 1972, when only the party had filed a suit for execution of the compromise decree or from the date of compromise decree ? 2. whether, on the facts and in the circumstances of the case, the tribunal was legally justified in allowing the claim of interest pertaining to earlier years as an admissible deduction for the assessment year in question ?' 2. the assessee is a private limited company and carries on business as a dealer in motor vehicles and spare parts. the relevant assessment year is 1973-74, with the previous year ending on march 31, 1973. the assessee claimed deduction of interest amounting to rs. 20,441 payable to the orissa state electricity board in terms of a compromise decree dated september 15, 1967. the compromise decree provided.....
Judgment:

1. This is an application of the Revenue under Section 256(2) of the I.T. Act to direct the Appellate Tribunal, Cuttack Bench, to state a case and refer the following two questions for opinion of the court:

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in coming to the conclusion that the assessee became aware of its liability to pay interest only in April, 1972, when only the party had filed a suit for execution of the compromise decree or from the date of compromise decree ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in allowing the claim of interest pertaining to earlier years as an admissible deduction for the assessment year in question ?'

2. The assessee is a private limited company and carries on business as a dealer in motor vehicles and spare parts. The relevant assessment year is 1973-74, with the previous year ending on March 31, 1973. The assessee claimed deduction of interest amounting to Rs. 20,441 payable to the Orissa State Electricity Board in terms of a compromise decree dated September 15, 1967. The compromise decree provided payments to be made in cash in instalments or the decretal dues to be adjusted against the price of the vehicles to be supplied by the assessee in future. In the event of a default in the payment, by either mode, the Board was entitled to levy execution of the decree with interest at 9 per cent. on outstandings calculated from the date of default. The terms of the compromise also stipulated that 10 per cent. of the cost of vehicles to be supplied by the assessee to the Board would be taken by way of adjustment towards the satisfaction of the decree. Execution case was filed on April 11, 1972, and interest on arrears was claimed at Rs. 20,441 covering the financial years 1968-69 to 1971-72. During the year in question, the assessee made a provision for interest for the entire period. The ITO disallowed the payment of interest on the ground that the assessee maintained accounts on mercantile basisand the liablity to pay interest arose in prior years and was not admissible during the year.

3. The AAC did not entertain the claim, but in second appeal, the Tribunal allowed it.

4. Having read the order of the Tribunal, we are of the view that the rending of the Tribunal is essentially one of fact. Admittedly, the liability accrued when there was a default, but the default could not be discovered by the assessee in view of the fact that the terms of compromise stipulated payment of instalments in cash as also by adjustment out of supplies to be made in future of motor vehicles at the stipulated rate of 10 per cent. It is the assessee's case that certain supplies were made, but the adjustment had not been made for years and only when the Board started levying execution, that it was found out that there has been default and, therefore, the interest became payable. Non-provision for the liability of interest in the previous years in the circumstances has rightly been excused by the Tribunal on the basis of factual determination and we do not think, any question of law arises out of the appellate order of the Tribunal. In our opinion, the Tribunal has rightly rejected the prayer to state a case and we, therefore, do not propose to allow the application of the Revenue. The application is accordingly dismissed.


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