Commissioner of Income Tax vs Dalmia Cement (Bharat) Ltd.

Arijit Pasayat, C.J.

Heard at the instance of revenue, following questions have been referred for opinion of this court by the Tribunal, Delhi Bench-C, u/s 256(1) of the Income Tax Act, 1961 :

(1) "(i) Whether on the facts and in the circumstances of the case the Tribunal was correct in law in upholding the finding of the Commissioner (Appeals) in respect of assessment years 1974-75 and 1975-76 that commission paid by the assessed-company to its sole selling agents, M/s Cement Distributors Ltd. was incurred on grounds of commercial expediency and allowable as a deduction?"

"(ii) Whether on the facts and in the circumstances of the case the Tribunal was correct in law in upholding the finding of the Commissioner (Appeals) for the assessment years 1974-75 and 1975-76 that no part of the interest payable by the assessed- company on moneys borrowed for its business was liable to be disallowed u/s 36(1)(iii) of the Income Tax Act, 1961, in relation to certain deposits from buyers and stockists of cement collected and retained by the assessed-company''s sole selling agents M/s Cement Distributors Ltd. ?"

"Whether on the facts and in the circumstances of the case the Tribunal was right in holding that Rs. 5,82,960 on account of local cess and local cess surcharge was allowable as deduction in the assessment year 1975-76 ?"

So far as the two parts of question No. 1 are concerned in view of our decision in IT Ref. 543/83, disposed of on 4-9-2001 [CIT v. Dalmia Cement (P) Ltd. (2002) 174 CTR (DelHI) 188] they are answered in the affirmative in favor of the assessed and against the revenue. So far as the second question is concerned the accounting year is for the period from January 1974 to 31-12-1974. The demand, according to the conclusion arrived at, for payment of local cess and local cess surcharge was raised during the assessment year in question. That being the petition in view of the decision of the Apex Court in The Kedarnath Jute Mfg. Co. Ltd. Vs. The Commissioner of Income Tax, (Central), Calcutta, the amount is deductible in the year in which the demand has arisen. But at the same time if the levy has been held to be unconstitutional, as contended by learned counsel for the revenue, the amount has to be taxed on cessation of liability u/s 41 of the Act. According to learned counsel for the assessed, the amount was offered for levy during the assessment year 1990-91 and has been taxed. This aspect can be verified by the Tribunal while giving effect to our order u/s 260 of the Act. If, in reality, the amount has been brought to tax u/s 41 of the Act, as contended, the deduction pursuant to our decision shall be allowed and otherwise not.

The reference stands disposed of accordingly.

OPEN