This appeal has been filed by revenue on 7-12-2001 against order of ld. CIT (Appeals)-XXI, New Delhi, dated 29-6-2001 in case of assessee in relation to assessment order under section 143(3) for assessment year 1998-99. 2. main issue raised by revenue in this case is directed against deletion of disallowance of Rs. 1,70,74,000 claimed by assessee as liability payable to M/s. Rajasthan State Road Transport Corporation. Facts of case leading to this ground of appeal briefly are that assessee-company entered on 24-7-1991 into agreement with Rajasthan State Road Transport Corporation (hereinafter called RSRTC), for supply of four coal processed retreading plants and retreading material. assessee made supplies from June, 1991. RSRTC raised tyre failure claim as well as warranty claim in January, 1994 to tune of Rs. 120 lakhs relating to period June, 1991 to May, 1993. Clause X of Agreement provided for arbitration. arbitration award was made on 4-4-1997. award was referred to District Court of Jaipur who upheld award in month of December, 1999. assessee- company moved petition against District Court order before Rajasthan High Court which was pending at time of completion of assessment order under section 143(3) on 18-12-2000. 3. During course of assessment proceedings, assessee argued that liability claimed by RSRTC was contingent and it accrued for first time when arbitration award was made on 4-4-1997. assessee had, therefore, rightly claimed deduction of sum of Rs. 1.7 crores for assessment year 1998-99. Prior to arbitration award, it was unilateral claim of RSRTC not accepted by assessee. In support of these contentions, assessee relied on judgments in CIT v. Bharat Fire Bricks & Pottery Works (P.) Ltd. [1993] 202 ITR 821 (Cal.); CIT v. Ratlam Strawboard (P.) Ltd. [1985] 152 ITR 425 (MP) and CIT v. Roberts Mclean & Co. Ltd. [1978] 111 ITR 489 (Cal.). ld. Assessing Officer held that case law relied upon by assessee supported view to extent that liability did not accrue during period June, 1991 to May, 1993 or in January, 1994 because RSRTC claim was unilateral and not accepted by assessee. There was no quarrel with that proposition. point at issue was whether liability could be said to have accrued in financial year 1997-98 even though arbitrator award was not accepted by assessee and appeal was filed before District Court of Jaipur. There was difference between statutory liability and contractual liability. In case of contractual liability, it accrued only when admitted by debtor or when dispute was finally adjudicated upon. In support of these contentions, ld. Assessing Officer relied upon judgments in CIT v. Phalton Sugar Works Ltd. [1986] 162 ITR 622 (Bom.); CIT v. Oriental Motor Car Co. (P.) Ltd. [1980] 124 ITR 74 (All.) and CIT v. Burlop Commercial (P.) Ltd. [1993] 200 ITR 605 (Cal.). Based on that reasoning, ld. Assessing Officer disallowed assessees claim of deduction of Rs. 1,70,74,000 and added to income shown by assessee. 4. During course of appeal before ld. CIT(A), assessee submitted that under Arbitration Act, 1940, there were two kinds of arbitration, viz., (a) arbitration without intervention of Court and (b) arbitration with intervention of Court. arbitration in case of assessee was of former kind without intervention of Court. same had been rendered in pursuance of clause X of Agreement dated 24-7-1991. arbitrator gave award on 4-4-1997 and, therefore, liability accrued in financial year 1997-98. assessee relied upon judgment of Honble Kerala High Court in case of Asuma Cashew Co. v. CIT [1990] 182 ITR 175. According to assessee, judgment brought out fact that enforceable liability came into existence only when it was fixed by arbitrator. assessee also referred to another judgment of Honble Kerala High Court in case of CIT v. Grand Cashew Corpn. [1990] 182 ITR 216 and referred to observations of Court at page 220, moment amount is adjudicated or admitted it becomes debt. Further, in case of Bharat Fire Bricks & Pottery Works (P.) Ltd. (supra), it was held, It appears to us that only award was delivered by arbitrator, liability of assessee-company was nothing but contingent. Finally, assessee relied upon judgment of Honble Suprente Court in case of Central India Electric Supply Co. Ltd. v. CIT [2001] 247 ITR 54. According to assessee, in that judgment, Honble Supreme Court had held that where arbitration was not with intervention of Court it might be contended that passing of award itself made amount due. Hence, as in case of assessee, arbitrator was appointed on terms of agreement without intervention of Court, liability arose on date of passing of award by arbitrator. 5. assessee argued before ld. CIT(A) that another facet of case was relevance and applicability of use of hindsight. Under this concept, relevant circumstances falling beyond previous year but having taken place up to date of assessment order should be taken into account by Assessing Officer while passing assessment order. As per judgment of Honble M.P. High Court in Trikam Lal v. CIT [1982] 134 ITR 450, certain amount of hindsight was not only logical but also permissible. In case of assessee, arbitrator award dated 4-4-1997 was made rule of Court by District Judge, Jaipur, on 22-11-1999, which was before date of assessment order. assessee also relied upon CBDT Circular No. 9949, dated 25-1-1966 that in balance sheet, provision should be made for all known liabilities and losses even though amount could not be determined with certainty. 6. ld. CIT(A) held view that even though assessee himself did not accept arbitration and moved petition to High Court, nevertheless t h e arbitrators award had been made rule of Court. Thus, disputed liability came to point where arbitration finally settled and determined quantum of liability. That being case, it could be accepted that enforceable liability had come into existence. As quantum of liability had b e e n determined by adjudication, it had become debt, which was ascertainable and quantified. There was also CBDT Circular and hindsight. judgment of Supreme Court in case of Central India Electric Supply Company also supported view. ld. CIT(A), therefore, held that date on which arbitrator gave award was focal point and observation of Supreme Court was that it was possible to contend that passing of award made amount awarded due. On that basis, ld. CIT(A) held view that sum of Rs. 1,70,74,000 awarded by arbitrator was allowable deduction for assessment year 1998-99. Aggrieved, revenue is in appeal before us. 7. During course of hearing before us, ld. Departmental Representative argued that there was vital difference between award finally adjudicating upon claims of parties and award not accepted by debtor. In instant case, assessee had not accepted award and challenged it before District Court, Jaipur and even after having lost before District Judge, Jaipur, assessee had carried out further petition before Rajasthan High Court. Till such time, matter was finally adjudicated upon, liability continued to be contingent. ld. DR argued that it was important to bear in mind that assessee was not merely disputing quantum of liability fixed by arbitrator, assessee was disputing liability altogether. Hence, till such time, matter reached finality, no deduction could be allowed to assessee. In support of these arguments, ld. DR relied upon decisions in Dy. CIT v. Esquire Video Film Services (P.) Ltd. [2000] 74 ITD 57 (Bom.); Thermax Babcock & Wilcox Ltd. v. Dy. CIT [2001] 79 ITD 63 (Pune) (TM) and Dy. CIT v. Aggarwal & Modi Enterprises (Cinema Project) Co. P. Ltd. [2003] 86 ITD 214 (Delhi). ld. DR also relied upon judgment of Honble Allahabad High Court in A.P.S. Cold Storage & Ice Factory v. CIT [1979] 119 ITR 709. 8. ld. Departmental Representative argued that ld. CIT(A) had gone by her personal views and not by any settled legal principles. According to her, it would be reasonable and fair to say that liability quantified and awarded by arbitrator should be considered to have become due on 4-4- 1997. She had not gone by any settled legal principle. In support of his contentions, ld. DR referred to judgments in Bharat Fire Bricks & Pottery Works (P.) Ltd.s case (supra) and Central India Electric Supply Co. Ltd.s case (supra). ld. DR argued that in view of judgment of Honble Delhi High Court in Fazilka Electric Supply Co. Ltd. v. CIT [1983] 143 ITR 551, liability did not accrue till award was made rule of Court. 9. Shri G.N. Gupta, ld. counsel for assessee argued that matter was no longer in hands of assessee once it was referred to arbitrator. award given by arbitrator fastened liability on assessee, which he was legally bound to discharge. It was also settled legal position that if award of arbitrator was confirmed by competent court on later date, assessee was entitled to claim deduction of liability in year of award itself assessee was entitled to claim deduction of liability in year of award itself relying upon rule of hindsight. For this purpose, ld. counsel relied upon judgments in Raza Buland Sugar Co. Ltd. v. CIT [1980] 122 ITR 817 (All.) and 134 ITR 30 (MP) (sic). In instant case, order of District Judge had been placed before Assessing Officer before completion of assessment order and, therefore, fact that arbitrators award was subsequently confirmed by Court was available to Assessing Officer. ld. counsel argued that judgment of Honble Kerala High Court in Asuma Cashew Co.s case (supra) also laid down that material date was date of arbitrators award. 10. ld. counsel kly emphasized various contentions of assessee during course of appeal before ld. CIT(A) and reiterated same before us. same have already been enumerated by us in context of impugned order passed by ld. CIT(A). ld. counsel also argued that case law being relied upon by ld. DR was distinguishable on facts. judgment of Honble Allahabad High Court in A.P.S. Cold Storage & Ice Factorys case (supra) related to case where matter was referred to arbitration after intervention of Court. In case of assessee, matter was referred to arbitration by virtue of agreement itself. 11. We have carefully considered rival submissions. There is no dispute as to facts of case. dispute before us relates to whether any liability had accrued against assessee and if so year of accrual. case of assessee is that arbitration award had fastened certain liability on assessee. assessee also claims to derive support from fact that in subsequent year, arbitration award was upheld by District Judge. According to assessee that subsequent event should be treated as strengthening assessees claim of deduction on basis of arbitrators award given during financial year under consideration. case of Department is that till date assessment order was made by Assessing Officer, assessee had not admitted liability and assessees petition against order of District Judge before Honble High Court was pending. 12. We would begin with case law relied upon by ld. counsel for assessee. assessee has heavily relied upon judgments of Honble Kerala High Court in cases of Asuma Cashew Co. (supra) and Grand Cashew Corpn. (supra). issue in those two cases was whether assessee is entitled to claim deduction of expenditure in year in which arbitrators award was given even though liability pertained to earlier year. Honble Kerala High Court found that it was not case where quantum of damages alone was referred to arbitrator, but it was case where very question as to whether assessee was liable to pay damages was referred to arbitration. Therefore, liability of assessee to pay damages accrued only on passing of award by arbitrator and not on date of breach of contract. In case of Grand Cashew Corpn. (supra), Honble Kerala High Court held that enforceable liability would spring into existence only when it was determined either by private negotiations or determined by arbitrators under awards passed by them or by Court. As in that case, no decree had been passed by Court, Honble Kerala High Court further held that award, even if it was not made decree of Court had its existence in law. We find that in both those cases, question that is before us did not arise for consideration of Honble High Court, i.e., whether assessee can claim deduction on basis of arbitrators award in year in which award is given in spite of fact that assessee has not accepted arbitration award and matter is sub-judice. In fact, in case of Grand Cashew Corpn. (supra) , Honble High Court was seized of question as to whether liability accrued or arose by passing of award even though decree had not been passed. Honble High Court did not consider question as to whether assessee can claim deduction even if he disputes award before Higher Court. Another judgment relied upon by ld. counsel for assessee in Roberts Mclean & Co. Ltd.s case (supra) also relates to question whether liability arose in year of award or in earlier year when transactions took place. question of accrual or otherwise of award under challenge in Higher Court was not considered by Honble Calcutta High Court in that case. 13. In case of Bharat Fire Bricks & Pottery Works (P.) Ltd. (supra), Honble Calcutta High Court held that since dispute had been referred to arbitration in accordance with terms of contract, until award was delivered by arbitrator, liability of assessee-company was only contingent liability. Obviously that judgment also relates to prior period. question of award having been disputed in Higher Court and matter being sub-judice, has not been considered in that judgment. 14. There is considerable assistance to case of assessee from judgment of Honble Supreme Court in case of Central India Electric Supply Co. (supra). In that case, Department sought to assess amount awarded to assessee by Umpire who gave his award on October 7,1968 whereupon decree was passed by District Judge on 16th September, 1969 in terms of that award, in assessment year 1970-71. assessee sought to defend assessment in his hands for assessment year 1970-71 on ground that award passed by District Judge was subject-matter of further litigation in appeal before High Court. Honble Supreme Court observed at page 62: fact that judgment and decree of civil court passed on award was pending cosideration in appeal before High Court is also not good ground to contend that price was not due till litigation with regard to award was over. We have no doubt that in law money payable under decree becomes due for payment on date of passing of decree and nonetheless it is so even if decree is appealed against and there is likelihood of decree being set aside, modified or confirmed in appeal. 15. ld. DR has relied heavily on decision of Honble Allahabad High Court and Delhi High Court in cases of A.P.S. Cold Storages & Ice Factory (supra) and Fazilka Electric Supply Co. Ltd. (supra). Relying on these two judgments, ld. DR argued that award of arbitrator has no force or validity until it is made rule of Court. ld. DR pointed out that, in instant case, arbitration award became rule of Court on 22-11-1999 and, therefore, in any case, assessees claim of deduction in assessment year 1998-99 was not tenable. ld. DR also argued that until dispute reached finality, liability based on contractual obligation could not be said to have been crystallized. For that purpose, he has relied on Tribunal decisions in Esquire Video Film & Services (P.) Ltd.s case (supra) and Thermax Bebcock & Wilcox Ltd.s case (supra). He also relied upon judgments referred to by ld. Assessing Officer in Oriental Motor Car Co. (P.) Ltd.s case (supra) and Phalton Sugar Works Ltd.s case (supra). 16. On consideration of matter, we find that fact that assessee had filed petition before Honble High Court and same was pending as on date of assessment order has to be ignored. There is clear authority of Honble Supreme Court in case of Central India Electric Supply Co.Ltd. (supra) and we have quoted relevant passage in earlier part of this order. major question still remains as to whether liability accrued against assessee on date of arbitrators award or on date when arbitrators award was made rule of Court. ld. counsel for assessee has sought to defend his case in this behalf on twin grounds. First, according to ld. counsel, distinction is required to be drawn between appointment of arbitrator by virtue of terms of contract and appointment of arbitrator by intervention of Court. According to ld. counsel, in former case, liability accrues moment arbitrators award is given whereas date of decree was crucial date in later category of cases, i.e., where matter is referred to arbitration by intervention of Court. Secondly, ld. counsel for assessee has propagated theory of hindsight. 17. In support of contention that in case where arbitrator is appointed in terms of contract and not by intervention of Court, date on which arbitration award is given amount awarded becomes debt due, ld. counsel has relied upon couple of Courts pronouncements. first case is of Allahabad High Court in case of Raza Buland Sugar Co. Ltd. (supra). In that case, assessee retained sum of Rs. 2,04,273 from out of purchase price of sugarcane payable by it under sugarcane control orders. amount was retained by way of provision for low recovery of sugar. assessee retained amount at rate of 2 annas per maund. Subsequently, it transpired that assessee was entitled to retain by way of rebate sum at rate of anna 1 per maund only. balance was actually paid. On these facts, Honble High Court held that assessee was entitled to claim deduction of quantified amount alone since liability was quantified during pendency of assessment proceedings. On consideration, we find that this judgment is not of much help to assessee because it relates to quantum judgment is not of much help to assessee because it relates to quantum of deduction and not year of deduction. Secondly, controversy of award not having been made rule of Court is not present in that case. 18. second decision relied upon by ld. counsel for assessee is Trikam Lals case (supra). In that case, assessee was short supplied bales of cloth during period 1-6-1944 to 31-8-1944. Subsequently, by compromise assessee received from supplier sum of Rs. 24,000 on 10-9-1962, in full and final settlement of decretal amount. assessee claimed that receipt pertained to period 1944 to 1947 when there was no income-tax in force in Ujjain. Honble M.P. High Court held that in case of claims for unliquidated damages, right to receive amount accrued on date, decree was passed in favour of assessee. Therefore, sum of Rs. 24,000 was assessable in assessment year 1962-63. Here again, we find hardly any assistance to case of assessee. facts of case are in altogether different zone and issues before Honble High Court were also quite different. 19. third case relied upon by ld. counsel is again Asuma Cashew Co.s case (supra). In that case, Honble Kerala High Court held that liability to pay unliquidated damages would arise or be crystallized by private negotiation or by arbitrator or by Court. We do not see much assistance to case of assessee from these observations. question before us is, what is material year, year in which award is given or year in which award is made rule of Court. 20. During course of hearing before us, ld. counsel for assessee placed considerable reliance on following observations in judgment of Honble Supreme Court in case of Central India Electric Supply Co. Ltd. (supra) at page 62: In this case, as has been explained by detailed narration of facts of arbitration case in civil court and first appeal in this Court, arbitration through umpire took place through intervention of Court. application under section 8 of Arbitration Act was made to civil court for appointment of umpire because arbitrators nominated by parties had failed to agree on name of umpire. civil court allowed that application and appointed Shri B.P. Sinha, former Chief Justice of India as umpire in case. dispute was referred to him by Court and umpire after making award submitted same in Court for passing decree in terms thereof. After award was filed in Court, it was made rule of Court, after deciding objection under section 30 of Arbitration Act, raised by Board. When award is passed and is filed in court, award as such is not enforceable and amount awarded therein does not become recoverable till civil Court puts its seal on it and makes rule by passing decree in terms thereof. award when filed in Court is liable to be confirmed, remitted for reconsideration or set aside, under provisions of Act. Where arbitration is not with intervention of Court, it may be contended that passing of award itself makes amount awarded due. facts of this case, therefore, distinguish case of Sheshappa Hegde [1984] 150 ITR 164 (Kar.), on which k reliance has been placed by assessee. In instant case, umpire, by his award resolved dispute of difference of price and quantified price, but it did not become due for payment soon after passing of award. award was filed in Court and price became due for payment only when decree in terms of award came to be passed. 21. As against various authorities relied upon by ld. counsel for assessee in support of his contention that in his case, it is date of arbitrators award and not date on which award is made rule of Court that is material, ld. DR has kly relied upon judgment of Honble Allahabad High Court in A.P.S. Cold Storage & Ice Factorys case (supra) and Fazilka Electric Supply Co., Ltd.s case (supra). In latter judgment, Honble Delhi High Court have at pages 558 and 559 observed as under: award of arbitrator that is not filed in Court and made rule of Court has no force or validity. It has no effective value and it cannot create, extinguish or pass any title or interest. Nobody can rely on such award by way of attack or defence in any proceeding whatsoever. Indeed, in such case, parties are not barred even from filing suit on original cause of action. No party can be prejudiced or benefited by mere existence of such award. It may be that effect can be given to award if both parties consent to abide by its terms. But effect can be given to award if both parties consent to abide by its terms. But that will be on ground that parties have by mutual agreement settled dispute between themselves and perhaps in that situation liability can be said to have been admitted and so to have accrued when award is given. But where proceedings are taken under section 15 of Arbitration Act, position is different. In such case, until proceedings in Court conclude, award as such is unenforceable. Moreover, when award is filed into Court and decree on its terms sought, it is open to Court to consider it in all its aspects. Court can set aside, modify or remit award for fresh consideration and it cannot be taken for granted that Court will make decree on its terms. We are, therefore, of opinion that assessee did not get enforceable right (which is what is material for purposes of accrual) until award had been made rule of court. This is also view taken by Allahabad High Court in A.P.S. Cold Storage & Ice Factory v. CIT [1979] 119 ITR 709. We uphold view taken by Tribunal on this point. [Emphasis supplied] 22. On consideration of matter, we do not see in passage relied upon by ld. counsel for assessee in judgment of Honble Supreme Court in case of Central India Electric Supply Co. Ltd. (supra), authority to effect that in every case where arbitration is not with intervention of Court, significant date is date on which arbitration award is made and not date on which award is made rule of Court. Honble Supreme Court have only stated that where arbitration is not with intervention of Court, it may be contended that passing of award itself makes amount awarded due. language employed is it may be contended. Thus, Honble Supreme Court has not put their seal on argument and merely pointed out possibility of there being contention. As against this, judgment of Honble Delhi High Court in case of Fazilka Electric Supply Co. Ltd. (supra), is unequivocal that material date is date on which award is made rule of Court in every case where award is filed in Court and decree on its term sought. 23. In instant case, RSRTC by various letters during 1993 addressed to assessee asked assessee to indemnify losses incurred by RSRTC. Certain further correspondence ensued and thereafter RSRTC invoked clause X of Agreement dated 24-7-1991 that envisaged that in case of dispute between parties, matter would be referred to Chairman, RSRTC and decision of arbitrator would be final and binding upon parties. Vide order dated 25-11-1993, Managing Director, RSRTC appointed Principal Secretary (Home Department) to Government of Rajasthan, Jaipur, as arbitrator in place of Chairman, RSRTC. arbitrator passed his award on 4-4-1997 and presented award before District Judge, Jaipur on 24-5- 1997. assessee filed objections before District Judge, Jaipur under provisions of sections 30 and 33 of Arbitration Act. After hearing objections of parties, District Judge, Jaipur, by his decision dated 22-11-1999, made arbitration award dated 4-4-1997 rule of Court and decreed certain amounts in favour of RSRTC. assessee, however, did not accept decision of District Judge and filed further petition before High Court. On these facts, it is difficult to accept that it is date of arbitration award and not date on which arbitration award was made rule of Court that should be taken into consideration. In our view, since award was referred to District Judge, assessees case is covered by judgment of Honble Delhi High Court in case of Fazilka Electric Supply Co. Ltd. (supra). 24. During course of hearing before us, ld. counsel for assessee has placed considerable reliance on doctrine of hindsight. In our considered opinion, said doctrine has no application here. In case where any liability or receipt has accrued but not quantified, it is settled legal position that assessment is to be made on basis of date of accrual in case where mercantile system of accounting is applicable. accrual of liability or income is not postponed for want of quantification. In such cases, Courts have held that if at time of assessment or appellate proceedings, quantified amount becomes known; same should be made part of relevant assessment. In instant case, we are not concerned with quantification of liability but accrual of liability itself. doctrine of hindsight cannot affect date of accrual of liability or as case may be income. accrual refers to right to receive or liability to pay. These are legal rights or obligations that cannot be affected by doctrine of hindsight. In this context, we see considerable force in argument of learned DR also that assessee was, in instant case, disputing liability itself and not merely quantum thereof. 25. In view of discussion in foregoing paragraphs, we are of view that ld. CIT(A) erred in allowing assessee deduction of sum of Rs. 1,70,74,000 which liability did not accrue in assessment year 1998-99. We, therefore, set aside impugned order of ld. CIT(A) on this point and restore assessment order as originally made by Assessing Officer. 26. Second ground in this appeal is directed against deletion of addition of Rs. 3,37,254 relating to prior period expenses. assessee claimed prior period expenses to tune of Rs. 8,01,950 crystallized during financial year 1997-98 only. assessee, inter alia, claimed that it had settled claims of two parties during financial year 1997-98 for sum of Rs. 2,11,895. ld. Assessing Officer did not accept this contention for want of documentary evidence. Secondly, for same reasons, ld. Assessing Officer did not accept assessees claim of deduction on settlement of account of Bhubaneswar party amounting to Rs. 1,25,359. On assessees appeal, ld. CIT(A) held that there was considerable correspondence amongst parties and deduction claimed by assessee could be correlated to claims of non-receipt of material raised by parties. ld. CIT(A) was satisfied that expenditure crystallized in year under consideration. She, therefore, allowed assessed deduction for sum of Rs. 3,37,254. During course of hearing before us, ld. DR argued that ld. CIT(A) had not given any detailed reasons. We find that ld. CIT(A) has categorically stated that she had gone through internal documents and vouchers which were part of regular books of account of assessee. All details were in natural sequence and logical order. ld. CIT(A) has further stated that she had perused several correspondence exchanged between parties and assessee and same were co-relatable to accounts maintained regarding issue. She was also convinced about verification, inspection report and satisfaction of company. In view of these specific assertions of ld. CIT(A), we are not inclined to interfere in impugned order in this behalf, particularly when there is no specific material brought on record by Assessing Officer in first is no specific material brought on record by Assessing Officer in first instance while disallowing assessees claim. This ground of appeal is, therefore, rejected. 27. Ground of appeal No. 3 is directed against deletion of interest charged under sections 234A, 234B and 234C of Act. On perusal of assessment order, we find that there is categorical finding of ld. Assessing Officer that interest should be charged under section 234B. words 234A and 234C were scored out by Assessing Officer before signing assessment order. It appears that in copy forwarded to assessee, striking out of other provisions was not made. It is, therefore, clear that ground of appeal raised by assessee and allowing of same by ld. CIT(A) is based upon misunderstanding that had arisen on account of clerical mistake in assessees copy. However, in original copy of order, there is no mistake. We, therefore, uphold order of Assessing Officer levying interest under section 234B. 28. In result, this appeal filed by revenue is partly allowed. *** DEPUTY COMMISSIONER OF INCOME TAX v. INDAG RUBBER LTD.