Ram Mohan Oil Mills vs Commissioner of Income Tax

N.K. Sud, J.—In pursuance of the directions of this court, the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short "the Tribunal"), has referred the following question of law arising out of its order dated November 12, 1984, relating to the assessment year 1979-80 for the opinion of this court:

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law holding that the liability of market fee claimed in excess of 2 per cent, for the assessment year 1979-80 as finally determined by the hon''ble Supreme Court after the close of the accounting year has been rightly disallowed?

The assessee had claimed a deduction of Rs. 2,01,479.21 in various trading accounts on account of market fee. Out of this, only an amount of Rs. 1,06,097.16 had been paid during the year and the balance amount of Rs. 95,382.05 was shown in the balance-sheet as a liability towards the market fee. The Assessing Officer observed that although during the year under assessment, market fee was enhanced by the State Government to 3 per cent, (vide Ordinance No. 2 of 1978), but the same was challenged before the Supreme Court Kewal Krishan Puri and Others Vs. State of Punjab and Another, and the Supreme Court, vide interim order dated September 25, 1978, had stayed the levy beyond 1.5 per cent. The matter was finally disposed of by the Supreme Court vide order dated July 31, 1979 whereby the levy was upheld to the extent of two per cent, against three per cent. The Tribunal was, therefore, of the view that in view of the interim order dated September 25,1975 passed by the Supreme Court, no liability to pay market fee beyond 1.5 per cent, had accrued during the financial year 1978-79 relevant to the assessment year 1979-80. The liability to pay the excess amount of 0.5 per cent, arose on July 31, 1979, when the Supreme Court decided the matter.

These facts have also been noticed by us in Commissioner of Income Tax Vs. Sohan Lal Kharait Ram, , decided by us on February 8, 2005.

From the aforesaid factual position, it is quite clear that there was no liability to pay market fee beyond 1.5 per cent, during the financial year 1978-79. Thus, it has been rightly held that the assessee was not entitled to claim deduction of Rs. 95,382.05 towards market fee due as on March 31, 1979. Following our order in Commissioner of Income Tax Vs. Sohan Lal Kharait Ram, , we are of the opinion that the Appellate Tribunal was justified in upholding the disallowance of liability or market fee in excess of 1.5 per cent.

In view of the above, the question is answered in the affirmative, i.e., against the assessee and in favour of the Revenue.