Category: Special Leave Petition - An Update

 1.      
Income deemed
to accrue or arise in India – Agent of the assessee in India carried out only
incidental or auxiliary/ preparatory activity under the direction of principal
– will not be considered as independent agent – It is dependent agent –
Remuneration at arm’s length – : SLP Granted 

Director of Income Tax (IT) – II vs. M/s. B4U
International Holdings Limited (2016) S.L.P.(C). No.16285 of 2016; [ (2016) 385
ITR (Statutes) 46]

[ SLP Granted in respect of Director of Income Tax (IT) –
II vs. M/s. B4U International Holdings Limited, [(2015) 374 ITR 453 (Bom)(HC)]

Assessee is a Mauritius based company. The Revenue proceeded
against it on the footing that it is engaged in the business of telecasting of
TV channels such as B4U Music, MCM etc. It is the case of the Revenue
that the income of the assessee from India consisted of collections from time
slots given to advertisers from India through its agents. The assessee claimed
that it did not have any permanent establishment in India and has no tax
liability in India. The AO did not accept this contention of the assessee and
held that affiliated entities of the assessee are basically an extension in
India and constitute a permanent establishment of the assessee within the
meaning of Article 5 of the Double Taxation Avoidance Agreement (DTAA).

The CIT(A) held that the entity in India cannot be treated as
an independent agent of the assessee. Alternatively, and assuming that it could
be treated as such if a dependent agent is paid remuneration at arm’s length,
further proceedings cannot be taxed in India.

The Revenue preferred an appeal to the Tribunal. The Tribunal
having dismissed the Revenue’s appeals, the matter was carried before High
Court. The Revenue urged that Tribunal misapplied and misinterpreted the
decision of the Hon’ble Supreme Court in the case of Director of Income Tax
(International Taxation) vs. Morgan Stanley & Company Inc. (2007) 292 ITR
416. The Revenue submitted that the transfer pricing analysis was not
submitted and mere reliance on a circular of the Revenue / Board would not
suffice. If the transfer pricing analysis did not adequately reflect the
functions performed and the risks assumed by the agent in India, then, there
would be need to attribute profits of the permanent establishment for those
functions/risks. That had not been considered and also submitted that the B4U,
MCM etc. were erroneously assumed to be the agents but not dependent on
the assessee. Alternatively, they have also been erroneously held to be paying
the remuneration at arm’s length. All this has been assumed by the Tribunal
though there was no relevant material. The AO had rightly held that the payment
made towards purchase of films for which no details were submitted as to what
are the costs incurred were treated as royalties. The exhibition and telecast
price were intangible and could not be termed as goods and merchandise in respect of export of advertisement films.

The Hon. High Court noted that the details filed by the
assessee revealed that there is a general permission granted by the Reserve
Bank of India to act as advertisement collecting agents of the assessee. The
permissions were granted to M/s. B4U Multimedia International Limited and M/s.
B4U Broadband Limited. In the computation of income filed along with the
return, the assessee claimed that as it did not have a permanent establishment
in India, it is not liable to tax in India under Article 7 of the DTAA between
India and Mauritius. The argument further was that the agents of the assessee
have marked the ad-time slots of the channels broadcasted by the assessee for
which they have received remuneration on arm’s length basis. Thus, in the light
of the CBDT Circular No.23 of 1969, the income of the assessee is not taxable
in India. The conditions of Circular 23 are fulfilled. Therefore, Explanation
(a) to section 9(1)(i) of the IT Act will have no application.

The Hon. High Court further observed that the Tribunal had
recorded a finding that the assessee carries out the entire activities from
Mauritius and all the contracts were concluded in Mauritius. The only activity
which is carried out in India is incidental or auxiliary / preparatory in
nature which is carried out in a routine manner as per the direction of the
principal without application of mind and hence, B4U is not an dependent agent.
Nearly 4.69% of the total income of B4U India is commission / service income
received from the assessee company and, therefore, also it cannot be termed as
a dependent agent.

The Hon. High Court further observed that the Supreme Court
judgment in the case of Morgan Stanley & Co. (supra) held
that there is no need for attribution of further profits to the permanent
establishment of the foreign company where the transaction between the two was
held to be at arm’s length but this was only provided that the associate
enterprise was remunerated at arm’s length basis taking into account all the
risk taking functions of the multinational enterprise.

Thus the Tribunal, rightly concluded that the judgment of the
Hon’ble Supreme Court in Morgan Stanley & Co. and the principle
therein would apply. Also relied on the Division Bench judgment in the case of Set
Satellite (Singapore) Pte. Ltd. vs. Deputy Director of Income Tax (IT) &
Anr. (2008) 307 ITR 265 on this aspect. The Revenue Appeal was dismissed.

Against the aforesaid Bombay High Court decision the Revenue
filed SLP before Supreme Court, which was granted.

2.       Penalty
u/s. 271(1)(c) – the assessee had agreed to be assessed on 11% of the gross
receipts – on the condition that no inference of concealment of income would be
drawn from such concession – Penalty confirmed by High Court – SLP granted

Kalindee Rail Nirman (Engineers) Ltd vs. CIT-;
S.L.P.(C).No.20662 of 2014. [ (2016) 386 ITR (Statutes) 2]

[CIT vs. Kalindee Rail Nirman Engg. Ltd, [ (2014) 365 ITR
304 (Del)(HC)]

The assessee, a contractor undertaking projects of Indian
Railways on turnkey basis, filed its return of income for the AY 1995-96 on
29.11.1995 declaring a total income of Rs.88,91,700/-. On the basis of the
materials gathered by the income tax authorities in the course of a search
carried out in the assessee’s premises on 14.03.1995 as well as in the premises
of the directors and trusted persons, the AO referred the matter to a special
audit in terms of Section 142(2A) of the Act. The assessee was supplied
photocopies of the seized records. Despite such opportunity, no convincing
reason was given by the assessee to the query of the AO as to why the results
declared by the books of accounts could not be rejected and the profit from the
contracts be not estimated at a rate exceeding 11% of the gross receipts. Not
convinced by the assessee’s explanation to the show-cause notice, the AO
proceeded to estimate the net profit of the assessee at 11% of the gross
receipts from the contracts amounting to Rs.20,30,74,024/-, which came to
Rs.2,23,38,143/-. The AO also found that some income from business activities
was not included in the aforesaid receipts and the profit from such activity
was taken at Rs.13,34,308/-. The total business income was thus taken at
Rs.2,36,72,451/-.

The assessee carried the matter in appeal to the Tribunal
where the income was reduced by adopting the profit rate of 8% on the gross
receipts subject to allowance of depreciation and interest. The separate
addition of Rs.13,34,308/- was deleted.

Penalty proceedings were initiated by the AO for concealment
of income and after rejecting the assessee’s explanation, a minimum penalty of
Rs.24,00,977/- was imposed for concealment of income u/s. 271(1)(c) of the Act.
The CIT (A) deleted the penalty . The revenue’s appeal to the Tribunal was
dismissed,

It is in further appeal
before the High Court the revenue assailed the order of the Tribunal on the
ground that after the judgment of the Supreme Court in the case of MAK Ltd.
Data P. Ltd. vs. CIT, (2013) 358 ITR 593, there is no question of the
assessee offering income “to buy peace” and that in any case the seized
material and the special audit report disclosed several discrepancies, to cover
which a higher estimate of the profits was resorted to. The assessee vehemently
contended that the Tribunal committed no error in upholding the order passed by
the CIT (A) cancelling the penalty. It was contended that it was a mere case of
different estimates of income being adopted by different authorities which
itself would show that there is no merit in the charge of concealment of
income. He also emphasised that the assessee had agreed to be assessed on 11%
of the gross receipts only on the condition that no inference of concealment of
income would be drawn from such concession and in such circumstances, where the
offer was conditional and to buy peace, there can be no levy of penalty for
alleged concealment of income.

The High Court held that the penalty proceedings were
justified. The High Court held that number of discrepancies and irregularities
listed by the special auditor in his report which are reproduced in the
assessment order bear testimony to the fact that the books of accounts
maintained by the assessee were wholly unreliable. If they were so, there can be
no sanctity attached to the figure of gross contract receipts of
Rs.20,30,74,024/- on which the assessee estimated 3% as its income. It is true
that the AO did not enhance the figure of gross receipts but that is not
because he gave a clean chit to the books of accounts allegedly maintained by
the assessee; he could not have given a clean chit in the face of the defects,
discrepancies and irregularities reported by the special auditor. In order to
take care of those discrepancies he resorted to a much higher estimate of the
profits by adopting 11% on the gross contract receipts. In these circumstances,
the mere fact that the estimate was reduced by the Tribunal to 8% would in no
way take away the guilt of the assessee or explain its failure to prove that the
failure to return the correct income did not arise from any fraud or any gross
or wilful neglect on its part. The Court observed that the assessee was taking
a chance sitting on the fence despite the fact that there was a search towards
the close of the relevant accounting year in the course of which incriminating
documents were found. The plea accepted by the Tribunal that the assessee
agreed to be assessed at 11% of the gross receipts only “to buy peace” and
“avoid litigation” cannot be accepted in view of the judgment of the Supreme
Court in MAK Data P. Ltd. (supra). The High Court accordingly
decided against the assessee and in favour of the revenue. 

The Assessee filed SLP before Hon. Supreme Court which was
Granted.

3.       Interest
payable – Non renewal of the deposits, Kishan Vikas Patras etc. Seized
and retained by department even after conclusion of the assessment proceeding –
Revenue must compensate for pecuniary loss due to non renewal – the same is not
payment of interest on interest.

CIT vs Chander Prakash Jain-;S.L.P.(C).No.23467 of 2016.
[(2016) 386 ITR (Statutes) 14]

[CIT vs Chander Prakash, [Writ Tax No. 566 of 2011 dt
:28/04/2015 (All)(HC)]

On 16^th November, 1994, a search u/s. 132 (1) of
the Act, 1961 was conducted at the residential premises of the assessee. Again
on 22^nd November, 1994 a search was made at Bank of the assessee
where some cash along with certificates of investments/deposits worth Rs. 3,45,997/- were seized u/s. 132 (1) (iii) of the Act. An order u/s. 132 (5)
of the Act was passed by the AO for retaining the aforesaid assets on 13^th
March, 1995.

In response to the notice u/s. 148 of the Act return of
income showing an income of Rs. 3,466/- was filed. Assessment order was made
u/s. 143/148 of the Act, income was determined at Rs. 84,959/- under the head
income from other sources and Rs. 16,50,000/- under the head of long term
capital gains. No credit was given to the assessee by the AO for the money
retained u/s. 132 (5) of the Act, 1961. Assessee filed an appeal before the
CIT(A), which was allowed and the demand was reduced to nil. The department
being not satisfied with the order of the appellate authority, filed an appeal
before the Tribunal. The appeal was partly allowed by the Tribunal.

On 18^th January, 2007, an intimation was given by
the AO about the seized money. Assessee also made an application before the
CIT, Meerut for release of the seized assets, with a further prayer that the
assessee be compensated for pecuniary loss due to non renewal of the deposits
and interest u/s. 132B (4) of Act, 1961. Since the said application was not
considered, assessee filed a Writ Petition.

The High Court disposed of the writ petition with a direction
upon AO to decide the application of the assessee within the time permitted by
the High Court. The AO has refused to release the seized assets and to make
payment of the interest as claimed by the assessee. Not being satisfied, the
assessee again approached the Court by filing a writ petition. The High Court
after hearing the learned counsel for the parties recorded that prima facie
there is no justification for seized assets being not released. The High Court
recorded the statement of the department that the department is ready to
release the seized assets and assessee may collect the same. It is not in
dispute that the assets have been released in favour of the assessee, which
include the Kishan Vikas Patras, Indira Vikas Patras, Bank Fixed Deposit
Receipts, etc., these could not be encashed by the assessee as the
maturity date had expired and the value has been transferred to unclaimed
account. However, there is no issue in that regard before this Court as the
department has assured the petitioner to do the needful so that certificates
are encashed.

The dispute between the parties before the High Court is
confined to the payment of interest on the money seized on 22^nd November,
1994 till the date the tax liability of capital gains of Rs. 3,71,653 for the
A.Y. 1992-1993 was adjusted and on the remaining assets till the date they were
released. In the alternative, the assessee has prayed for a direction for
renewal of seized investments in shape of Indira Vikas Patras and Kishan Vikas
Patras and deposits with the banks with interest on the prevailing rates on the
maturity value till the assets were appropriated/released.

It is the case of the assessee that during all these period,
the money would have augmented by nearly four times of its value in the year
1994. The assessee submitted that as per the order of retention u/s. 132 (5) of
Act, 1961, the seized assets comprise of cash, Indira Vikas Patras, Kishan
Vikas Patras etc. of Rs. 3,45,997/-, they were retained against the
liability of Rs. 5,81,133/- treating them as undisclosed income and Rs.
67,038/- against existing liability.

The retention of seized assets beyond the date of regular
assessment is without authority of law. The Revenue has retained the assets for
more than 19 years without authority of law, therefore, the assessee must be
compensated for loss of interest. In the alternative, it is submitted that the
Revenue could have appropriated the seized amount in April, 1996 against the demand
notice dated 29^th March, 1996, no interest u/s. 220 (2) of Act, 1961
could have been levied. The Revenue is liable to pay statutory interest under
Sections 132B (4) and 244A of the Act, 1961. He explained that the Revenue
cannot indirectly keep the money on the plea that there will be a demand and
therefore, the money should be allowed to be kept with the Revenue. It is
further explained that due to failure of the Revenue either to release the
seized assets retained without authority of law/ failure to get the Indira
Vikas Patras, Kishan Vikas Patras etc. renewed on the date of maturity
in the year 1999, the assessee suffered pecuniary loss.

The asssessee has relied upon the judgment of the Apex Court
in the case of Chironjilal Sharma Huf vs. Union of India & Others reported
in (2014) 360 ITR 237 (SC) for the proposition that liability as
per the order of the AO on being overturned by the Tribunal, the assessee
becomes entitled to interest for pre-assessment period also u/s. 132B (4) (b)
of Act, 1961. It has also been explained that interest on post assessment
period is to be dealt with in accordance with Section 240 or Section 244A of
Act, 1961. Reference has also been made to the judgment of the Apex Court in
the case of Sandvik Asia Ltd. vs. Commissioner of Income Tax, Pune &
Others reported in (2006) 2 SCC 508, wherein it has been
held that if a person can be taxed in accordance with law and hence, where
excess amount is collected or any amounts are withheld wrongfully, the revenue
must compensate the assessee and any amount becoming due to the assessee u/s.
240 of the Act, 1961 would encompass interest also.

Revenue disputed the correctness of the stand so taken on
behalf of the assessee. It is submitted that no interest is payable to the
assessee in respect of the assets not sold or converted into money and that the
cash which was seized from the assessee, has already been utilised, hence there
is no cash, is lying unutilised in the P.D. Account. It is further stated that
interest has been charged strictly as per the order of the CIT, therefore, the
relief for refund of the same, as prayed, appears to be misconceived.

The High Court said that, it is not in dispute nor any
explanation from the side of the department as to why these Kishan Vikas Patras,
Indira Vikas Patras, Fixed Deposit Receipts etc. were retained by the
department even after the assessment proceedings had been completed in the year
1996 and as to why the same were not encashed/renewed. According to the Court,
the money invested in the shape of Kishan Vikas Patras, Indira Vikas Patras etc.
continued to be the money available with the Union of India all along. This
money was utilised by the Government for its own purposes, which fact can be
inferred as the Vikas Patras etc. were never encashed. The issue as to
whether the assessee is to suffer in respect of loss of interest on these
Kishan Vikas Patras, Indira Vikas Patras etc. for the inaction on the
part of the department especially when the money lay with the Union of India
itself. According to the Court the facts of this case are more or less
identical to those in the case of Chironjilal Sharma Huf , Sandvik Asia
Ltd. (supras) and Commissioner of Income-Tax vs. Gujarat Fluoro Chemical (2013)
358 ITR 291 (SC). In the case of South Eastern Coalfields Ltd. vs.
State of M.P. & Others reported in (2003) 8 SCC 648,
the Apex Court has laid down as follows: “Once the doctrine of restitution
is attracted, the interest is often a normal relief given in restitution. Such
interest is not controlled by the provisions of the Interest Act of 1839 or
1978.”

Thus it was held that the order of the ACIT refusing to make
payment of interest u/s. 132B of the Act, 1961 on the ground that Kishan Vikas
Patras, Indira Vikas Patras, Fixed Deposit Receipts etc. had not been
encashed, cannot be legally sustained and was quashed. The ACIT was directed to
redetermine the interest in light of the judgment of the Apex Court in the
cases of Chironjilal Sharma Huf, Sandvik Asia Ltd. (Supras) strictly
in accordance with the provisions of the Act.

The Revenue filed SLP before Supreme Court which was
dismissed.

4.       Book
profit – Accounts prepared in accordance with the provisions of part II and III
of Schedule VI to the Companies Act – it was not open to the AO to embark upon
a fresh inquiry in regard to the entries made in the books of account of the
company.: U/s. 115J

IT. vs. M/s J.K.Synthetics Ltd. Kamla Tower, (2016)
S.L.P.No.23617 of 2016 ; [ (2016) 387 ITR(Statutes) 2 ]

CIT. vs. M/s J.K.Synthetics Ltd. Kamla Tower, [ ITA No 451
of 2009 dt :01/10/2015 (All)(HC).]

The assessee is a public limited company engaged in the
manufacture of synthetic yarn and cement. For the AY: 1988-89, the assessee
filed a return declaring a loss. The assessee claimed depreciation after
revaluing its fixed assets. The AO found that as per section 115J of the Act,
net profit shown in the profit & loss account was in accordance with the
provisions of part II and III of Schedule VI to the Companies Act, 1956. The AO
however, was of the opinion that the method of computation of profit & loss
was not in consonance with the provisions of section 350 of the Companies Act,
and, consequently, disallowed the excess depreciation and added that amount in
the profit & loss account.

The AO passed an assessment order u/s. 143(3) of the Act
after making certain additions and disallowances under various heads.

Being aggrieved, the assessee filed an appeal, which was
partly allowed. The matter was taken to the Tribunal. The Tribunal allowed the
appeal against which the Department filed the appeal before High Court.

The assessee’s appeal was accepted by the Tribunal relying
upon the decision of the Supreme Court in the case of Apollo Tyres Ltd.
vs. Commissioner of 3 Income-Tax, (2002) 255 ITR 273 (SC). The Tribunal
held as under: “We have considered the rival submission and the decisions
relied upon by the ld. A.R. Since the Revenue has not brought to our notice any
other decision contrary to the decisions relied upon by the led. Counsel, we
decide this issue in assessee’s favour as covered by the decision of the
Hon’ble Supreme Court in the case of Apollo Tyres Ltd. (supra). This ground of
the assessee is allowed.”

Before the High Court, the Department submitted that since
the profit & loss account was not prepared in accordance with the
provisions of part II and III of Schedule-VI to the Companies Act, the AO was
justified in revising the net profit u/s.115J of the Act.

The Supreme Court in Apollo Tyres (Supra) considered
the question as to whether the AO while assessing a Company for income-tax
u/s.115J of the Income-tax Act could question the correctness of the profit and
loss account prepared by the assessee and certified by the statutory auditors
of the company as having been prepared in accordance with the requirements of
Parts II and III of Schedule VI to the Companies Act. The Supreme Court held
that the AO was bound to rely upon the authentic statement of accounts of the
company and had to accept the authenticity of the accounts with reference to
the provisions of the Companies Act, which obligates the company to maintain
its account in a manner provided by the Companies Act.

The Supreme Court had held that the AO while computing the
income u/s. 115J had only the power of examining whether the books of account
were certified by the authorities under the Companies Act as having been
properly maintained in accordance with the Companies Act. The AO thereafter had
a limited power of making increases or reductions as provided for in the
Explanation to the said Section. The Supreme Court, consequently, held that the
AO did not have the jurisdiction to go behind the net profit shown in the
profit and loss account except to the extent provided in the Explanation to
Section 115J. The said decision was reiterated by the Supreme Court in Malayala
Manorama Co. Ltd. vs. Commissioner of Income-tax, (2008) 300 ITR 251 (SC).

Once the finding has been given, the AO could not go behind
the net profit shown in the profit and loss account except to the extent
provided in the Explanation to section 115J of the Act. The High Court held
that the provision of section 115J does not empower the AO to embark upon a
fresh inquiry in regard to the entries made in the books of account of the
company.

The High Court dismissed the revenue’s appeal.

The Revenue filed SLP before Supreme Court which was
dismissed.

5.       Depreciation
– on the fixed assets acquired by considering the present-day value of gratuity
as well as the leave salary liability – as forming part of the cost of these
assets. – SLP Granted

CIT vs. Hooghly Mills Ltd, S.L.P.No.16674 of 2015; [
(2016) 387 ITR (Statutes) 22]

(Hooghly Mills Ltd vs. CIT [ ITA no. 120 of 2000 ; dt
:09/02/2015(Cal)(HC))

The assessee acquired fixed assets like land, building and
also plant & machinery, for which the price had to be paid partly in cash
and partly by way of taking over the accrued liability in respect of the gratuity
and leave salary payable to the workers. For the purpose of computing the cost
of the assets, only the present-day value of these accrued liabilities was
taken into consideration by the assessee. Tribunal reversed the orders of the
lower authorities and directed the AO to allow the claim of the assessee
towards depreciation on the fixed assets acquired by it by considering the
present-day value of the gratuity as well as the leave salary liability as
forming part of the cost of these assets.

Aggrieved by the order of the Tribunal the Revenue filed an
appeal before High court . Revenue submitted that the question is no longer res
integra since the point has already been decided in favour of the Revenue
by the Supreme Court in the case of the assessee itself in the case of Commissioner
of Income Tax vs. Hooghly Mills Co. Ltd. reported in (2006) 287
ITR 333 (SC) wherein it was held that the expenditure on taking over
the gratuity liability is a capital expenditure, yet no depreciation is
allowable on the same because section 32 of the Income-tax Act states that
depreciation is allowable only in respect of buildings, machinery, plant or
furniture, being tangible assets, and know how patents, copyrights, trade
marks, licences, franchises or other business or commercial rights of similar
nature being intangible assets. The gratuity liability taken over by the
company does not fall under any of those categories specified in section 32. No
depreciation can be claimed in respect of the gratuity liability even if it is
regarded as capital expenditure. The gratuity liability is neither a building
machinery, plant or furniture nor is it an intangible asset of the kind
mentioned in section 32(1)(ii). Had it been a case where the agreement of sale
mentioned the entire sale price without separately mentioning the value of the
land, building or machinery, we would have remitted the matter to the Tribunal
to calculate the separate value of the items mentioned in section 32 and grant
depreciation only on these items. Hence, it was held that no depreciation can
be granted on the gratuity liability taken over by the assessee.

The assessee has submitted that the Apex Court was
considering the matter in the light of the agreement dated 24^th
March, 1988 entered into between the assessee and M/s. Fort Gloster Industries
Ltd. whereas the case before us arose out of an agreement dated 30^th August,
1994 entered into between the assessee and India Jute & Industries Ltd.
Assessee added that the present agreement contained a stipulation which was
conspicuous by its absence in the earlier agreement. The following lines
appearing in clause 2 of the agreement “at or for the price of Rs. 410.-
lakhs only free from all encumbrances and liens and liability save and except
those which have been assumed and taken over by the purchaser as hereinafter
mentioned and subject to the terms and conditions hereinafter appearing.”

Assessee has contended that this stipulation was not there in
the agreement dated 1988. Therefore, the facts and circumstances of the case
are different. The clause 4 of the agreement which shows that money
consideration has also been differently apportioned than what was in the
earlier agreement. Assessee has contended that when the facts and circumstances
are different, the question of the application of the judgment of the Supreme
Court to the case in hand, does not arise.

Assessee further contended that in any case there can be no
denial of the fact that the cost of acquisition of the assets is both money
paid and money promised. Assessee has submitted that neither principle nor law
can assist the revenue in contending that they shall permit depreciation only so
far as the money paid is concerned, but omit to do so with respect to the money
promised. The assets were purchased at a price which is aggregate of the amount
paid and promised. Therefore, the depreciation shall take place of the combined
value of the assets and not in respect of the money paid only. Assessee
submitted that the Hon’ble Apex Court’s attention was not drawn to the fact
that liability on account of gratuity taken over by the purchaser lost the
character of outstanding gratuity and partook the character of consideration in
the hands of the assessee. Once it partook the character of consideration,
there is no reason why the depreciation should not be allowed. The liability on
account of gratuity was in the hands of the seller. The buyer did not enjoy any
service of the employee nor could have been in law liable for payment of any
gratuity to the employees of the seller. The buyer became liable because the
buyer undertook to pay the debt due by the seller. Therefore, the liability is
on account of consideration. Assessee submitted that the case is illustrated by
sub-section 2 of section 43 which provides that paid means, actually paid or
incurred according to the method of accounting. Assessee contended that there
cannot be any dispute that the liability was incurred and it was incurred on
account of acquisition of the assets.

The High Court said that they were bound by the views
expressed by the Apex Court. Therefore, re-consideration, if any, can only be
by Supreme Court and not by the High Court. However the court felt that the
matter needs re-consideration by Supreme Court.

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