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Commissioner of Income-tax Vs. Deora Pu Cabncon Mfg. Co. Pvt. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 26 of 1983
Reported in(1985)47CTR(MP)324; [1985]152ITR654(MP)
AppellantCommissioner of Income-tax
RespondentDeora Pu Cabncon Mfg. Co. Pvt. Ltd.
Excerpt:
- madhya pradesh nagar tatha gram nivesh adhiniyam (23 of 1973)section 50(4) proviso (as inserted by act of 2004): [dipak misra, krishna kumar lahoti & rajendra menon, jj] preparation of town development scheme proviso prescribing time limit held, object of amendment is to remove hardship caused to citizens and to provide time limit to consider objections and suggestion and to provide a deeming clause so that the authority would act in quite promptitude. proviso unequivocal, categorical and unambiguous and does not permit any other kind of construction but a singular one. section 50 (4) proviso (as inserted by act of 2004): [dipak misra, krishn kumar lahoti & rajendra menon, jj] preparation of town development scheme held, proviso is not retrospective. scheme already finalised will..........assesssee has been maintaining accounts on the mercantiles basis and, therefore, even though the sales tax liability has been quantified in the subsequent years by the appellate authority, even then the same has to be included in the assessment year 1974-75 and in support of his submission he placed reliance on the decision in kerdarnath jute m/g. co. ltd. v. cit : [1971]82itr363(sc) as also the subsequent decisions in cit v. united india woollen mills [1981] 132 itr 457 cit v. karim and sons : [1982]133itr515(ker) and haji lal mohd. biri works v. cit : [1982]134itr718(all) where it has been consistently held that in the case of a mercantile system of accounts, even though the tax liability may have been quantified subsequently, the same having been challenged in an appeal, the same.....
Judgment:

MULYE J. - The Income-tax Appellate Tribunal, Indore Bench, Indore, at the isntance of the Revenue has made this reference under s. 256(1) of the I.T. Act, 1961, to this court to answer the following question of law :

'Whether, on the fact and in the circumstances of the case, the Tribunal was correct in law in allowing the sum of Rs. 3,258 being sales tax for the assessment year 1973-74 ?'

We may point out at the outset that the learned counsel for the Revenue has submitted an application to the effect that due to typing error in the question referred assessment year as 1973-74, has been wrongly typed wheresas the correct assessment year is 1974-75. Thus, it being merely a typing error, we have allowed the same and the following correct question has to be read as under :

'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in allowing the sum of Rs. 3,258 being sales tax for the assessment year 1974-75 ?'

The facts giving rise to this reference, as per the statement of the case received from the Tribunal, material for the decision of the question referred to may be sated in brief, thus : The repondent-assessee is a private limited company engaged in the manufacture of aluminium conductors, winging wires, armatures, etc. On the scrutiny of the accounts for the assessment year 1977-78, the IAC (Assessment) noted that the assessee-company in the sales tax account had made the payment of Rs. 2,129 plus Rs. 3,258 as sales tax relating to the earlier year, i.e., for the assessment year 1971-72 and 1974-75, respectively. When asked to explain the same, it was stated that the demand for these sums was quantified during the it was stated that the demand for these sums was quantified during the assessment year 1977-78, after the appeal decision and, hence, the sales tax of earlier year had been changed to this year. But the IAC (Assessment) was not convinced with the plea of the assessee and observed that the assessee-company was maintaining accounts of mercantile basis and, there-fore, even the sales tax payable but not paid relating to this year had also been charged to the profit and loss account. according to him, by any principle of accounting any businessmen could not have both systems of accounting, i.e., mercantile system of accounting and cash system of accounting for one account, as here in this case for sales tax account, for ascertaining the correct taxable liability under the I.T. Act.

Thus, relying on the decision of the Supreme Court in Kdearnath Jule Mfg. Co. Ltd. v. CIT : [1971]82ITR363(SC) the IAC (Assessment) held that the liability of sales tax relating to one year is to be charged for that particular year even if the tax is disputed in appeal. In the result, he added back the sum of Rs. 2,129 and Rs. 3,258 to the income of the assessee. In appeal, the CIT (Appeals), so far as the claim of sales tax is concerned, allowed the sum of Rs. 2,129 as according to him the demand in respect of the above amount directly resulted from the passing of the sales tax order.

The assessee took up the appeal to the Income-tax Appellate Tribunal, Indore Bench. Regarding the sum of Rs. 3,258 being the liability towards sales tax, the Tribunal held that the amount was quantified in the previous year relating to the assessment year 1977-78. Therefore, the sum was allowable in computing the income for this assessment. For the reasons thus stated, the Tribunal allowed the appeal of the assessee regarding this sum also. It is in these circumstances that at the instance of the Revenue this reference has come up.

At the hearing of this reference, none appeared on behalf of the assessee though SPC was issued.

We have heard the learned counsel for the Revenue who submitted that the Tribunal has committed an error in holding that the liability for the sales tax arose during the accounting year relevant to the assessment year 1977-78 and was, therfore, deductible for 1977-78. He, therefore, submitted that the assesssee has been maintaining accounts on the mercantiles basis and, therefore, even though the sales tax liability has been quantified in the subsequent years by the Appellate authority, even then the same has to be included in the assessment year 1974-75 and in support of his submission he placed reliance on the decision in Kerdarnath Jute M/g. Co. Ltd. v. CIT : [1971]82ITR363(SC) as also the subsequent decisions in CIT v. United India Woollen Mills [1981] 132 ITR 457 CIT v. Karim and Sons : [1982]133ITR515(Ker) and Haji Lal Mohd. Biri works v. CIT : [1982]134ITR718(All) where it has been consistently held that in the case of a mercantile system of accounts, even though the tax liability may have been quantified subsequently, the same having been challenged in an appeal, the same has to be taken into consideration in the relevant assessment year in which the tax liability arose. placed reliance on a Division Bench decision of this court in M.C.C. No. 178 of 1983 decide on November 28, 1984, CIT v. Ratlam Straw Board Pvt. Ltd. : [1985]152ITR425(MP) , where a similar question arose.

In the result, the question has to be answered in favour of the Revenue and against the assessee. Our answer to the question, therefore, is that :

On the facts and in the circumstances of the case, the Tribunal was not correct in law in allowing the sum of Rs. 3,258 being sales tax for the assesseement year 1974-75.

The reference is answered accordingly with no order as to costs.


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