Case Law Details
Brief Facts of the Case and Question of Law
Brief Facts
The assessee faced winding up proceeding during which rehabilitation proposals were made. Subsequently, at the request of financial institutions who backed the rehabilitation plant, Hindustan Lever Ltd. (HLL) agreed to participate in the rehabilitation proposal and accordingly a scheme of compromise was drawn. In terms of this arrangement HLL had five nominees on the Board of Directors of the assessee; the promoter had one nominee and financial institutions had three nominees. HLL however decided not to continue with the operations of the company and withdraw from management at the end of the rehabilitation period and handed over the possession of the plant to the financial institution.
An amount i.e Rs.24,30,000/- was raised as a claim by the assessee from HLL as short-payment of processing charges when the latter was managing its affairs in terms of rehabilitation scheme. The AO sought to bring these amounts to tax on the basis that according to the mercantile system the assessee ought to have included these in P & L account.
Question of Law
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