COMMISSIONER OF INCOME-TAX VS MOTILAL CHUNNILAL BRANWARILAL
1991 P T D 724
[Rajasthan High Court (India)]
Before S. C. Agrawal and I.S. Israni, JJ
COMMISSIONER OF INCOME-TAX
versus
MOTILAL CHUNNILAL BRANWARILAL
Income-tax Reference No.8 of 1977 decided on 18/02/1986.
Income-tax---
----Loss--Business loss--Licence to sell liquor--Assessee required to take specified quantity of liquor and pay for any shortfall--Amount paid for such shortfall is allowable as business loss.
The assessee-firm carried on business in the purchase and sale of liquor, under a licence issued by the Government of Rajasthan. According to the terms of licence, the assessee was required to lift country liquor from the Government of Rajasthan for specified value and it was also stipulated that if the assessee did not take delivery to that specified value, it would be liable to make good the deficiency to the State Government. During the accounting year relevant to the assessment year 1968-69, the assessee paid Rs.2,04,006 on account of the deficiency and claimed it as a business loss. The Tribunal held that it was allowable. On a reference:
Held, that the liability to pay the deficiency was there in terms of the licence and arose directly from the carrying on of the assessee's business. The difference between the guarantee amount and the actual purchase of the country liquor was allowable as trading loss.
C.I.T. v. Chunnilal Tak (1986) 160 ITR 617 (Raj.) fol.
B. R. Arora for the Commissioner.
R. Mehta for the Assessee.
JUDGMENT
S.C. AGRAWAL, J.---In this reference made by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, hereinafter referred to as the Tribunal the following question has been referred for the opinion of this Court:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs.2,04,006 was an admissible deduction in the computation of the assessee's total income for the assessment year 1968-69?"
This reference relates to the assessment year 1968-69.
The facts briefly stated as mentioned in the statement of the case submitted by the Tribunal are as under:--
Motilal Chunnilal Bhanwarilal, hereinafter referred to as "the assessee" is a firm which carried on business in the purchase and sale of liquor at Bhilwara under a licence issued by the Government of Rajasthan. According to the terms of the licence, the assessee was required to lift country liquor from the Government of Rajasthan of the value of Rs.5,02,020 during the accounting period beginning on April 1, 1967 and ending on March 31, 1968, and it was, also stipulated in the aforesaid licence that if the assessee did not take delivery of the country liquor of the aforesaid value, it would be liable to make good the deficiency to the Government of Rajasthan and that the said Government would have the right to appropriate the security money deposited by the licence-holder against the aforesaid deficiency and further that the said Government may proceed against the movable and immovable properties of the licence-holder and their legal heirs if necessary to recover the shortage. During the aforesaid period of the licence, the assessee took delivery of country liquor of the value of Rs.2,98,014 only, leaving a shortfall of Rs.2,04,006 as a trading loss. The Income-tax Officer rejected the said claim of the assessee on the view that the said loss was not a business loss. The appeal filed by the assessee was rejected by the Appellate Assistant Commissioner who held that the said claim could not be allowed. The Tribunal upheld the claim of the assessee on the view that the said deficiency of Rs.2,04,006 was the trading loss of the assessee. Feeling aggrieved by the aforesaid order of the Tribunal, the Revenue moved an application before the Tribunal for referring the question of law arising from the order of the Tribunal for the opinion of this Court and thereupon the Tribunal has referred the question mentioned above for the opinion of this Court.
We find that this question is wholly covered by the decision of this Court in C.I.T. v. Chunnilal Tak (D.B. Income-tax Reference No-6 of 1978) decided on May 24,1985 (1986) 160 I.T.R. 617 (Raj.). In that case, the following question has been referred for the opinion of this Court (at page 618):
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the difference of Rs.20,967 between the guaranteed amount and the actual purchase of country liquor was allowable as a trading loss in the computation of the assessee's total income for the assessment year 1968-69?"
There also the assessee was a dealer in country liquor and a sum of Rs.20,967 had been allowed as a trading loss on account of the deficiency between the minimum guarantee amount and the actual purchase. This Court held that the liability to pay the deficiency was there in terms of the licence and arose directly from the carrying on of the assessee's business and that the difference between the guarantee amount and the actual purchase of the country liquor was allowable as a trading loss in the computation of the assessee's total income.
In view of the aforesaid decision of this Court, the question referred by the Tribunal must be answered in the affirmative, i.e. in favour of the assessee and against the Revenue, and it is answered accordingly. The parties are left to bear their own costs of this reference.
Z.S./735/TOrder accordingly.