JUDGMENT R.R. Misra, J. - This reference made by the Tribunal relates to the assessment year 1965-66. The assessee-company manufactured sugar and also ran a distillery during the assessment year in question. The accounting year of the assessee ended on 30-9-1964. The method of accounting was the mercantile one. This reference arises out of a consolidated order passed by the Tribunal in two cross-appeals, one filed by the assessee and the other filed by the department. The Tribunal has referred the following questions of law for the opinion of this Court: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee was not entitled to the deduction of Rs. 71,395 as a trading loss arising from the fabrication in purchase. 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee was not entitled to the deduction of Rs. 19,199 as trading loss arising from the investment in U.P. State Development Loan for the assessment year 1965-66? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the sum of Rs. 36,745payable by the assessee-company as interest u/s 3(3) of the U.P. Sugarcane (Purchase) Tax Act, 1961 was not an allowable deduction u/s 37(1) and/or section 28 of the income tax Act, 1961? 4. Whether, on the facts and in the circumstances of the case, the sum of Rs. 3,572 paid as interest u/s 220(2) of the income tax Act, 1961 was an allowable deduction u/s 37(1) and/or section 28 of the income tax Act, 1961? 5. Whether, on the facts and in the circumstances of the case and having regard to the second proviso to rule 5 of the income tax Rules, 1962, the Tribunal was right in holding that the extra shift depreciation allowance for double and triple shift working in case of the assessee's factory was not to be calculated at 100 per cent of the normal depreciation allowance for the relevant previous year even though it worked triple shift during all the working season of that year? 2. 2. We shall now deal with each of the above questions one by one and refer to the relevant facts in regard to the same, the findings arrived at by the authorities below and our opinion on the said questions. 3. Question No. 1 relates to the claim of the assessee to a deduction of Rs. 71,395 as a trading loss arising from the fabricated purchase. The relevant facts with regard to this question are as follows: The assessee-company used to purchase sugarcane from different Cooperative Cane Unions, one of which was the Co-operative Cane Development Union Ltd., Muzaffarnagar (the society). The society had a number of centres including one at Bhopa where its members, who were the cane growers, brought sugarcane which used to be weighed at the mills weighbridge. During the period of normal purchases, the mills used to send indents to the society according to their requirements along with their basis. The society distributed parchis (also called purzis) among its members belonging to the area within the circle of a purchasing centre and the dates on which they were required to carry sugarcane to a particular centre was specified in these purzis. Towards the close of the crushing season, when the supply of sugarcane declined and before the purchasing centres were closed, Bhopa centre was declared 'Free' by the mills after three days' prior intimation to the society. During the period of free purchase, the society had to depute a clerk to the centre for issuing parchies to the farmers who brought their cane cart loads to the centre between 8 A.M. and sun-set time. It was the duty of the society to announce the beginning of the period of free purchase by proclamation in the villages concerned, Sarvasri Som Dutt and Sant Ram were the weighment clerks on behalf of the mills and Shri Shaymlal had been deputed for the purpose of checking and supervision since 21-2-1964 at the Bhopa Centre. These three officials of the mills were duly licensed by the Collector, Muzaffarnagar, as weighment clerks. Sarvasri Jai Prakash and Sardar Singh were the weighment and Purzi clerks on behalf of the society. These three officials of the mills were duly licensed by the Collector, Muzaffarnagar, as weighment clerks. Sarvasri Jai Prakash and Sardar Singh were the weighment and Purzi clerks on behalf of the society. After the cart loaded with sugarcane had been placed at the weighbridge of the centre and the mills clerk had examined the society's purzi in which the name of the farmer and the date of delivery of sugarcane were entered, the said clerk ascertained from the peon if the cart had been properly placed and if he replied in the affirmative, the clerk entered the name of the farmer, the name of the cart driver, the serial number of the society's parchi in the receipt (called the parchi) of which five copies were prepared. After the cart had been weighed, its weight was entered in the said parchi. The copies were delivered to the farmer of the driver of the cart, one was handed over to the society's clerk and the 4th was sent to the mills. The empty cart used to be weighed and its weight was also entered in the said parchi. The rate and price of the sugarcane were also entered therein. After the above formalities were carried out, the cane used to be loaded by the loading and unloading contractors of the mills and sent to the factory premises. The said parchis used to be made the basis of the liability of the company for payment of the sugarcane price and the price mentioned therein was the one which could be recovered from the society by the fanner or his authorised agent. The society in turn could recover the amount from the mills on the basis of the said parchis. In the first week of March 1964 the appellant assessee-company got the information that the mills staff had fled the Bhopa Centre. This led to enquiries and ultimately it was found that parchis to the extent of 9181 quintals and 4 kgs. of sugarcane valued at Rs. 71,395 were fabricated by the mills staff in collusion with the society's staff and some of the farmers/their agents. The said three employees of the mills and two employees of the society were tried by the Addl. Session Judge, Muzaffarnagar, under sections 120B, 407 and 420/511 of the Indian Penal Code. 1860. of sugarcane valued at Rs. 71,395 were fabricated by the mills staff in collusion with the society's staff and some of the farmers/their agents. The said three employees of the mills and two employees of the society were tried by the Addl. Session Judge, Muzaffarnagar, under sections 120B, 407 and 420/511 of the Indian Penal Code. 1860. Except for Shri Shaymlal all the other four accused were held guilty u/s 120B and 420/511 and sentenced to two years' RI each. Their sentences were, however, set aside by the High Court of Judicature at Allahabad on the ground that the prosecution failed to prove that the parchis in question were really fictitious parchis and were not genuine. The society submitted bill No. 54 for cane supplied on 3-3-1964 for Rs. 82,415.22 and the appellant-company vide voucher No. 4894 dated 30-5-1964 credited a sum of Rs. 11,019.83 to the said society's account and Rs. 71,395 to the 'cane price under dispute' account. The corresponding debit was given to the 'cane price account' and the entire amount including the disputed amount of Rs. 71,395 was claimed in the profit and loss account as deduction. 4. It is not in dispute that the above claim was ultimately settled on 30-9-1964, i.e., much beyond the close of accounting period, at a figure of Rs. 58,391.41 and not Rs. 71,395.38 as worked out and claimed by the assessee during the year in dispute. In substance, the claim of the assessee was that since the Sugarcane Society on 3-3-1964 submitted a bill covering a claim of Rs. 71,395.38 as price of sugarcane recoverable against the bogus 'parchis'. the assessee who was adopting 'mercantile system of accounting' had claimed that it was entitled to a deduction of the aforesaid amount of Rs. 71,395 during the year in dispute. The AAC had on the above facts taken the view that since the bill was submitted on 3-3-1964 by the Sugarcane Society to the assessee-company, the assessee was entitled to a deduction of the amount in the year in dispute irrespective of the fact that later on it had debited the loss to the 'Cane price' account on 30-9-1964 by corresponding credit to the 'Cane price under dispute' account. Thus, the first appellate authority had concluded that the said loss accrued to the assessee before the end of the accounting period in question. Thus, the first appellate authority had concluded that the said loss accrued to the assessee before the end of the accounting period in question. On further appeal, the Tribunal has reversed the said view in view of the fact that the assessee disputed the said claim of the sugarcane society in toto and the provision of Rs. 71,395 made on 30-9-1964 was not an ascertained liability in the year in dispute. Thus, on the facts of the case, the Tribunal concluded that the sum of Rs. 71,395 was not an accrued or ascertained liability during the year in dispute. The question, therefore, that arises is, at what point of time the liability in question to pay by the assessee arose, whether on 30-3-1964 as claimed by the assessee or later on 30-9-1964 when the claim was finally settled and that too at lesser amount. In arriving at this conclusion it took into consideration one more vital fact that the assessee was all along disputing the entire amount during the year in dispute and no liability had crystallised during the year in dispute. 5. Shri Bharat Ji Agarwal, learned counsel appearing for the assessee, had in support of his submission relied upon the latest decision of the Andhra Pradesh High Court in the case of Commissioner of Income Tax Vs. Investigation and Security Service (India) P. Ltd., (1990) 182 ITR 358 . The said decision, in our opinion, is clearly distinguishable inasmuch as the dispute in that case was regarding a statutory liability under the Employees 'State Insurance Act, 1948 pending in the Court. In our case, however, it is not a case of statutory liability. This authority, therefore, is of no help to the learned counsel for the assessee. The other decision relied upon by the learned counsel for the assessee is of our own Court in the case of CIT v. Hahabir Jute Mills (P.) Ltd. 1991 UPTC 372. On a perusal of this case it is clear that in this case the liability was not in dispute. The question that arose for decision was whether the sale was voluntary or not. In this situation it was held that the sale was not voluntary one. In the present case, the transaction, no doubt, amounted to a sale. Thus, this authority is also of no avail to the learned counsel for the assessee. 6. The question that arose for decision was whether the sale was voluntary or not. In this situation it was held that the sale was not voluntary one. In the present case, the transaction, no doubt, amounted to a sale. Thus, this authority is also of no avail to the learned counsel for the assessee. 6. The learned standing counsel appearing for the department has, however, brought to our notice a decision of our own Court in the case of Commissioner of Income Tax Vs. Oriental Motor Car Co. (P.) Ltd., (1980) 16 CTR 140 . In this case the assessee was a dealer in tractors, etc. The assessee had supplied certain tractors to the Public Works Department in the year in dispute. Its principal had made a claim against the assessee for the payment of infringement commission. This was contested by the assessee and ultimately after the close of the assessment year in question the assessee had agreed to pay the amount. It was held that although the assessee was adopting mercantile system of accounting and the liability was of contractual nature, yet it was crystallized only when the assessee agreed to make payment and not earlier. Therefore, the amount so paid by the assessee was allowed as deduction only at the point of time when the assessee had agreed to make payment. Applying the ratio of the said case to our case, we find that in the present case also the liability was of contractual nature and the assessee was disputing the entire claim made against him during the year in dispute, although the Sugarcane Society had presented the bills in that regard as early as on 3-3-1964 but ultimately the dispute was settled on 30-9-1964. much after the date of close of the accounting period of the assessment year in dispute. This decision, therefore, in our opinion fully covers the controversy involved before us. In view of the same, applying the ratio of the case of Oriental Motor Car Co. (P.) Ltd. (supra) we hold that the liability of the assessee in the present case was crystallised only when the dispute was finally settled on 30-9-1964, i.e., much after the date of close of the accounting period of the assessment year in dispute of the assessee. Therefore, the deduction of Rs. (P.) Ltd. (supra) we hold that the liability of the assessee in the present case was crystallised only when the dispute was finally settled on 30-9-1964, i.e., much after the date of close of the accounting period of the assessment year in dispute of the assessee. Therefore, the deduction of Rs. 71,395 could not be allowed in the assessment year in dispute and the Tribunal was right in law in taking the same view. 7. The question No. 1, therefore, is answered in the affirmative and against the assessee by holding that the Tribunal was right in law in holding that the assessee is not entitled to the deduction of Rs. 71,395as trading loss in the assessment year in dispute. 8. Coming to question No. 2 regarding the claim of deduction of Rs. 19,199 as trading loss arising from the investment in U.P. State Development Loan for the assessment year in dispute, we find that the facts relevant to the same are that, admittedly, the assessee was carrying on business as manufacturer of sugar and was not a dealer in securities. At the instance of the District authorities it had to purchase certain U.P. Government securities and for want of funds later on it had to resell the said securities and thereby it incurred the loss in question. The AAC on the said facts took the view that the loss in question was incidental and was intimately related to the carrying on of the assessee-company's business and, accordingly, deleted the said amount of Rs. 19,199. On further appeal, the Tribunal had reversed the said view of the first appellate authority holding as follows: ... It was shown that there was no direct nexus between the assessee's investment in the U.P. Government securities and the benefits derived by the assessee-company in the running of its business... The loss, occasioned by the assessee-company's desire to please the District authorities, was not incidental to the carrying on of its business and hence, it cannot be allowed as a business expenditure. After hearing the learned counsel for the parties, we find that in such a situation a Division Bench of this Court in the case of CIT v. S.B. Sugar Mills 1990 All. Tax Judgment 830 has held that in similar circumstances the claim of the assessee was allowable as business expenditure. After hearing the learned counsel for the parties, we find that in such a situation a Division Bench of this Court in the case of CIT v. S.B. Sugar Mills 1990 All. Tax Judgment 830 has held that in similar circumstances the claim of the assessee was allowable as business expenditure. In the said case, also the business carried on by the assessee-firm J.B. Sugar Mills related to manufacture and sale of crystal sugar and during the year in dispute a claim arising out of a loss occasioned by sale of Government securities was made. In the said case, the plea of the assessee was that though it was not engaged in dealing in the Government securities, yet it was obliged to purchase them with a view to satisfy the Government officials with whom they have to deal every day in connection with their business. On a reference, this plea, that the Government securities were purchased as a matter of business expediency, was accepted by this Court in the said case. It was held that the assessee was entitled to the aforesaid deduction as claimed by it. The said decision in turn is based on a decision of the Supreme Court on the identical question in the case of Patnaik & Co. Ltd. v. CIT [1986] 161 ITR 3651. In the case before the Supreme Court, the assessee was engaged in automobile and spare parts business. It had subscribed to certain Government loans and ultimately suffered a loss. It was held that the loss was to be allowed as a matter of business expediency. In view of the aforesaid decision of the Division Bench in the case of S.B. Sugar Mills (supra), which in turn is based on a decision of the Supreme Court in the case of Patnaik & Co. Ltd. (supra), question No. 2 is answered in the negative and in favour of the assessee holding that the assessee was entitled to a deduction of Rs. 19,199 as trading loss arising from the investment in the U.P. Government securities. 9. Regarding question No. 3 which relates to a sum of Rs. 36,745 payable by the assessee-company as interest u/s 3(3) of the U.P. Sugarcane (Purchase) Tax Act, 1961, the learned counsel for the parties concede that in view of the decision of the Supreme Court in the case of Mahalaxmi Sugar Mills Co. Vs. 9. Regarding question No. 3 which relates to a sum of Rs. 36,745 payable by the assessee-company as interest u/s 3(3) of the U.P. Sugarcane (Purchase) Tax Act, 1961, the learned counsel for the parties concede that in view of the decision of the Supreme Court in the case of Mahalaxmi Sugar Mills Co. Vs. Commissioner of Income Tax , Delhi, AIR 1980 SC 754 which in turn has been followed by a Bench of five Judges of this Court in the case of Triveni Engg. Works Ltd. v. CIT [1983] 144 ITR 734 2 (FB), the said question has got to be answered in the negative and in favour of the assessee by holding that the assessee was entitled to the said deduction. 10. As regards the question No. 4 which relates to a sum of Rs. 3,572paid as interest u/s 220(2) of the income tax Act, 1961 for delayed payment of income tax dues, in view of two decisions in the cases of Commissioner of Income Tax Vs. Oriental Carpet Manufacturers (India) P. Ltd., (1974) 1 ILR (P&H) 312 and Dhampur Sugar Mills Ltd. v. CIT 1991 UPTC 93 the said payment cannot be said to be incidental to the assessee's business. This question has, therefore, got to be answered in the negative by saying that the said amount paid as interest is not allowable as deduction u/s 37(1) and/or section 28 of the income tax Act, 11. The last question, i.e., question No. 5 that survives for consideration is as to whether having regard to the second proviso to rule 5 of the income tax Rules, 1962, the Tribunal was right in holding that the extra shift depreciation allowance for double and triple shift working in case of the assessee's company/factory was not to be calculated at100 per cent of the normal depreciation allowance for the relevant previous year. We find that this question also is concluded by a decision of a Full Bench of this Court in the case of Dhampur Sugar Mills Ltd. Vs. Commissioner of Income Tax, (1980) 126 ITR 648 . The said case also related to the assessment year 1964-65. The assessee in the said case was also a sugar factory, which had worked triple shift for 105 days. It claimed100 per cent of the normal depreciation allowance for the triple shift. Commissioner of Income Tax, (1980) 126 ITR 648 . The said case also related to the assessment year 1964-65. The assessee in the said case was also a sugar factory, which had worked triple shift for 105 days. It claimed100 per cent of the normal depreciation allowance for the triple shift. The ITO allowed the extra shift allowance to the extent of 105 days to 300 of the normal depreciation allowance. This view was upheld in the appeal by both the appellate authorities as well as by this Court. 12. In view of the said authority, therefore, the last question No. 5 has got to be answered in the affirmative by holding that for the extra shift depreciation allowance for double and triple shift working in the case of the assessee's factory, is not to be calculated at 100 per cent of the normal depreciation allowance but for the proportionate period for which the assessee's factory had worked for the triple shift. 13. All the above questions referred to above are, therefore, answered as indicated above. Since the assessee has largely succeeded in the present reference, the assessee is entitled to the cost of Rs. 300 from the department.