Full Judgment Text
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PETITIONER:
M/S HAJI LAL MOHD. BIRI WORKS
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX, LUCKNOW II
DATE OF JUDGMENT: 19/02/1997
BENCH:
S.C. AGRAWAL, G.B. PATTANAIK
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
This appeal by the assessee arise out of a reference
made by the Income Tax Appellate Tribunal (hereinafter
referred to as "the Tribunal’) to the Allahabad High Court
wherein two question were referred for opinion. Both the
questions have been answered against the assessee and in
favour of the Revenue. In the present appeal we are only
concerned with question no. 2 which is in the following
terms:
"Whether on the facts and in the
circumstances of the case the
payment of Sales Tax composition
fee of Rs. 1,91,887/- was an
allowable expenditure for the
assessment year 1968-69?"
The matter relates to the assessment year 1968-69. The
assessee deals in the business of manufacture an sale of
biris. By notification publish in the U.P. Gazette dated
December 14, 1957 it was prescribed that no sales tax was
payable with effect from December 14, 1957 in respect of
biris provided that the additional central excise duties
leviable thereon from the close of business on December 13,
1957 had been paid. By another notification published in the
same Gazette it was provided that no tax under the General
Sale tax was payable by any dealer registered under Section
7, (3) of the Central sales Tax and having his place of
business in U.P. in respect of the sales made by it of biris
in the course of inter-state trade and provided they were
sales to a dealer who had moved business outside U.P. The
assessee claimed that it was not liable to pay and sale tax
on sales effected from December 14, 1957. But the Sales Tax
Department took the view that sales tax was leviable for the
period from December 14, 1957 to June 30, 1958. The matter
was raised by the biri manufacturing Association of
Allahabad before the Government of Utter Pradesh praying
that the Government may pass orders for exemption of sales
tax on biris for the period from December 14, 1957 to June
30, 1958. The assessee also made an application for stay of
recovery of the tax and such recovery was stayed. On June
10, 1959 the assessment was made for the period from April
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1, 1957 to March 31, 1958 and assessment for the period from
April 1, 1958 to March 31, 1959 was made on February 12,
1963. An amount of Rs. 1,14,357/- was determined as payable
on sale of biris for the period from December 14, 1957 (to
March 31, 1958 and a sum of Rs. 81,994/- was found payable
for the period from April 1, 1958 to June 30, 1958. The
total mount of tax come to Rs, 1,96,351/-. The stay against
recovery of sales tax that was granted in the years 1959 was
vacated on October 16, 1967. Thereafter the assessee paid a
sum of Rs. 1,96,887/- out of the aforesaid tax liability of
Rs. 1,96,351/-. The assessee claimed deduction of the amount
tax paid in the assessment year 1968-69 on the ground that
the actual payment was made in previous year relevant to
that assessment year. The said claim was not allowed by the
Income Tax Officer as well as the Appellate Assistant
Commissioner and the Tribunal. The question aforementioned
was referred by the Tribunal to the High Court which has
been answered against the assessee by the High Court.
Placing reliance on the decision of this court in
Kedarnath Jute Mfg. Con Ltd. v. Commissioner of Income Tax
(Central), Calcutta, (1971) 82 ITR 363, the High Court has
held that since the assessee was following the mercantile
system of accounting the case was governed by the said
decision and the assessee would not claim deduction of the
tax liability which accrued in the year 1957-58 in the
assessment year 1968-69.
Shri Rajiv Datta, the learned counsel for the appellant
assessee, has submitted that since the tax was actually paid
in the previously year relevant to the assessment year 1968-
69, the High Court was in error in not permitting deduction
of tax in the assessment year 1968-69 and has placed
reliance on the observations of this Court in Chowringhee
Sales Bureau P. Ltd. V. Commissioner of Income Tax, West
Bengal, (1973) 87 ITR 542, wherein, in the context of sales
tax liability, this Court has held that the amount received
on account of sales tax on good sold has to be treated as
trading receipt in the year in which it was received on
account of sales tax on goods sold has to be treated as
trading receipt in the year in which it was received and it
has been observed that the assessee would be entitled to
claim deduction of the amount as and when it pays to the
State Government. The said decision in Chowringhee Sale
Bureau P. Ltd. (supra) was also relied upon by the assessee
before the High Court and it was distinguished by the High
Court by pointing out that it did not relate to an assessee
following the mercantile system of accounting. Since then
the matter has been considered by this Court in the recent
judgment in Commissioner of Income Tax V. Kalinga Tubes
Ltd. (1996) 218 ITR 164, wherein, following mercantile
system of accounting, in case of sales tax payable by the
assessee the liablility to pay sale tax would accrue the
moment the dealer made sales which are subject to sales tax
and, at that stage, the obligation to pay the sales tax
arises and the raising of the dispute in this connection
before the higher authorities would be irrelevant. The
preset case is thus fully covered by the aforesaid decision
of this Court.
We, therefore, do not find ay merit in the appeal and
the same is accordingly dismissed. But in the circumstances
there will not order as to costs.