JUDGMENT
Venkataswami, J.
1. The following questions are referred to this court for our decision :
“(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Appellate Assistant Commissioner was justified in allowing a further sum of Rs. 51,700 as a deduction being the theatre rent for ‘Ad-Shorts’ falling beyond the accounting period ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of section 52(2) could not be applied in the assessee’s case even though the fair market value of the property transferred exceeded the sale consideration disclosed by more than 15 per cent. ?
(3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Appellate Assistant Commissioner was justified in allowing a sum of Rs. 2,34,302 as a deduction being the theatre rent for ‘Ad-Shorts’ falling beyond the accounting period ?”
2. The brief facts are the following :
The assessee, who is common in both these cases, was doing business in the name of “Ad-Shorts”. The assessee entered into an arrangement with cinema theatres whereby the theatre owners agreed to screen all advertisement films and slides sent by the assessee. In accordance with this arrangement, the assessee had to pay a sum of Rs. 17,16,055 for the assessment year 1971-72. However, in the assessee’s books, actual payment to the extent of Rs. 5,75,194 was debited and claimed. The assessee wrote to the Income-tax Officer on February 14, 1974, asking for the entire sum. The Income-tax Officer did not deal with this. Therefore, the assessee appealed to the Appellate Assistant Commissioner. The appellate authority, after going through some of the copies of the agreements, was of the view that whatever sums accrued as liability had to be deducted. He found that the total sum accrued as total liability by the assessee was Rs. 6,26,894. The assessee was already allowed a sum of Rs. 5,75,194. He directed the allowance of Rs. 51,700.
3. Aggrieved by the order of the Appellate Assistant Commissioner, the Revenue preferred an appeal to the Tribunal. The Tribunal, after hearing learned counsel on both sides, upheld the order of the Appellate Assistant Commissioner. Hence, the present reference.
4. Question No. 3 is identical to question No. 1, but for a different assessment year, namely, 1972-73.
5. The Tribunal, on this question, has found on facts as follows :
“Having considered the matter, we are of the opinion that the order of the Appellate Assistant Commissioner has to stand. He has taken one agreement which is said to be a standard one for the purposes of arriving at his conclusion. He has allowed whatever payments which fell due before March 31, 1971, as deduction. We agree with the Appellate Assistant Commissioner that the liability having accrued within the accounting year, the assessee is entitled to the deduction. It may be that against this payment, service has yet to be rendered. But, according to the agreement, the payments fell within the period and the liability has been incurred. In this view of the matter, we uphold the direction of the Appellate Assistant Commissioner.”
6. On the facts as found by the Tribunal, the conclusion reached by the Tribunal cannot be faulted. Further, we find that the view of the Tribunal is supported by a decision of the Supreme Court in Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1. However, Mr. Jayaraman, learned senior counsel for the Department, argued that the view taken by the Tribunal requires reconsideration and the view taken by the Assessing Officer alone is right. We find that this question has been answered by the Allahabad High Court in Hindustan Commercial Bank Ltd., In re [1952] 21 ITR 353, as follows (at page 361) :
“Coming now to the three questions mentioned above, we may take up the first question that arose in the assessee’s application for reference, that is, whether the sum of Rs. 89,870 could be spread over a period of twenty years and allowance made at the rate of 1/20th each year. Learned counsel for the Commissioner has frankly admitted that he can find no provision in the Act for spreading out the expenditure over a period of twenty years. If the amount was laid out and expended wholly and exclusively for the purpose of the business and was not in the nature of a capital expenditure, the whole of it was allowable under section 10(2)(xv) of the Act.”
7. Therefore, it is too late in the day to raise such an objection, especially in view of the decision of the Allahabad High Court referred to above. Accordingly, we answer questions Nos. 1 and 3 in the affirmative and against the Revenue.
8. So far as question No. 2 is concerned, it is fairly stated that the decision in K. P. Varghese v. ITO is against the Revenue and, therefore, that question is answered in the affirmative and against the Revenue, with costs. Counsel fee Rs. 500 one set.