JUDGMENT A.P. Misra, J.
1. Heard learned counsel for the Revenue and also learned counsel for the assessee. Learned counsel for the Revenue seeks the following questions to be referred by this court :
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law to hold that it was a clear liability and thus allowable as deduction ?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law to hold that the ratio of the judgment in the case of Kedarnath Jute Manufacturing Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) is applicable in the present case ?"
2. The Tribunal rejected the reference application for the same under Section 256(1) of the Income-tax Act, 1961. Briefly stating the facts giving rise to this application are that the assessee is a public limited company engaged in the manufacture and sale of sugar, vegetable oils, alcohol and confectionery goods through its different units. During the course of assessment proceedings, it was noticed that the assessee-company had, inter alia, claimed deduction of Rs. 14,77,552 towards a contingent liability. It was claimed that the said liability had arisen on account of difference in cane price actually paid by the assessee and the one fixed by the Central Government The assessee, however, did not pay the enhanced price and on a writ petition, succeeded in securing a decision of the High Court, Allahabad, in its favour. The Central Government, in its turn, preferred an appeal before the Supreme Court. Since the assessee-company had not paid the difference in cane price as above and that the matter was still sub judice, the Assessing Officer disallowed the claim of Rs. 14,77,552 with the observations that the deduction on this account shall be allowable only when the matter is finally decided and the assessee actually pays the amount. The above action of the Assessing Officer was also sustained in first appeal before the learned Commissioner of Income-tax (Appeals). The Tribunal, vide its order dated March 30, 1990, confirmed the decision of the first appellate authority and directed to modify the deduction as per decision of the Supreme Court of India as and when received. However, the Tribunal amended this order after the assessee moved a miscellaneous application and held that the liability in question was provided for on the basis of a notification issued by the Ministry of Agriculture and Irrigation and, therefore, is clearly a liability which is allowable. Reliance has been placed on the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. [1971] 82 ITR 363.
3. The contention on behalf of the Revenue is that earlier the Tribunal rightly held that the question of allowing deduction shall be subject to the decision of the Supreme Court which is pending. However, we find that the facts of this case are similar to the facts of the case in CIT v. J. K. Synthetics Ltd. [1983] 143 ITR 771 (All), in which the following observations have been made (at page 773) :
"Having heard learned counsel for the parties, we have no manner of doubt that the order passed by the Tribunal that the case was covered by the principles laid down by the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, is correct and that notwithstanding the decision of the Delhi High Court, the assessee is entitled to claim deduction in respect of the provision for payment of excise duty made by it in the relevant assessment year, inasmuch as the excise department had gone up in appeal to the Supreme Court and was questioning the correctness of that decision and was insisting that the assessee was liable to pay the excise duty. . . .
The company is following the mercantile system of accounting and it can legitimately claim deduction in respect of a business liability even if such liability has not been quantified or paid. In Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, the Supreme Court held that an assessee who follows the mercantile system of accounting can claim deduction under Section 10(2)(xv) in respect of a business liability before it is quantified and even when such liability is being disputed. It has further been held that even if the assessee does not make a provision for such a liability in its books of account, he is still entitled to claim deduction. ..."
4. Since the aforesaid decision covers the points the Revenue seeks to raise, we do not find that any question for reference arises. The present application is accordingly rejected with costs.