Per Shri S. K. Chander, Accountant Member - The only ground raised in this appeal by the assessee disputes the action of the AAC who held the amount of Rs. 23,723 on account of sales tax refunds as taxable as per section 41(1) of the Income-tax Act, 1961 (the Act). The assessment year involved is 1976-77 for which the relevant previous year ended on 31-3-1976.
2. The assessee is a doctor running a medical clinic at Palampur, Distt. Kangra (HP). He had been assessed to tax since past so many years. Since the assessee was registered under the H. P. Sales Tax Act, 1968, and he was considered a dealer of medicines also, he was required to pay sales tax and he paid the same in a sum of Rs. 27,731 right from the assessment years 1968-69 to 1975-76. However, the assessee under the Sales Tax Act, disputed the levy of sales tax contending that he is only medical practitioner and not a dealer in medicines and he was lucky enough to succeed in respect of his contentions and a sum of Rs. 27,731 was refunded to him during the accounting year ended 31-3-1976 which is relevant to the assessment year under consideration. The ITO subjected the said amount to tax under section 41(1).
3. When the issue travelled before the AAC, he, however, allowed a relief of Rs. 4,009 deducting the said amount out of the sum of Rs. 27,731 as the sum of Rs. 4,009 was refunded back by the assessee to various parties. In other words, the AAC sustained the levy of income-tax on a sum of Rs. 23,723. It is this levy which is in dispute.
4. The learned counsel for the assessee vehemently the action of the AAC and submitted that the assessee has been filing his returns of income no doubt in which the amount of sales tax paid was claimed as deduction but he was assessed on best judgment basis on the estimated income up to the assessment year 1974-75. According to him, as such, the amount of deduction on account of sales tax payments cannot be said to have been actually allowed and, therefore, he argued at length that the question of taxing the same under section 41(1) should not arise.
He relied on Jagatnarain Durga Prasad v. CIT  76 ITR 214 (All.) and Ikrahnandi Coal Co. v. CIT  69 ITR 488 (Cal.).
5. After taking into consideration the rival submissions and going through the paper book filed by the assessee comprising of a chart, assessment year-wise showing amount of sales tax claimed by the assessee, income returned and income estimated by the ITO besides the detailed copies of profit and loss account and the assessment orders for all the years since 1969-70, we are of the view that action of the AAC does not call for any interference. There is no dispute about the fact that in all the profit and loss accounts pertaining to the assessment year 1969-70 to 1975-76 the assessee had no the debit side of the respective profit and loss account claimed sales tax amounts which in all amounts to Rs. 27,734. This is also a fact that the none of the assessments has been framed as best judgment assessment or by application of rates of tax or by restoring to estimate of gross receipts from the medical professions. No doubt, income returned has been enhanced by the ITO year after year but all the assessments are framed under section 143(3) of the Act and the ITO in all the years up to 1975-76 took into consideration the net income disclosed by the assessee for all the earlier years as per profit and loss account in which undisputably the amount of sales tax was claimed as deduction.
Once we find it as a fact that the amount of sales tax was claimed by the assessee in respective profit and loss account and allowed as such actually by the revenue, the assessee cannot get out of the mischief of section 41(1). The reliance of the assessees counsel is not only misplaced but, on the other hand, those cases support the contention of the revenue. When we look into the Supreme Court decision in the case of Tirunelveli Motor Bus Service Co. (P.) Ltd. v. CIT  78 ITR 55, in that case the fact found by the Tribunal was that "there was nothing on record to indicate that in estimating the income for 1950-51 the ITO had made any allowance in respect of bonus and that unless the department was able to identify any particular item as having been already allowed as a deduction in an earlier assessment conclusively, section 10(2A) of the Indian Income-tax Act, 1922 (the 1922 Act) was not available for recoupment". However, on reference the High Court held that the sum was assessable under section 10(2A) but on appeal the High Court who held that section 10(2A) was not attracted. It is apparent it was so held by their Lordships because there was nothing on record to indicate that the ITO had made any allowance in respect of bonus. In the instant case, it is not so. The deduction regarding sales tax payment has been claimed by the assessee and allowed by the ITO for all the earlier years as he framed the respective assessments on the basis of the said profit and loss account. The reliance of the learned authorised a representative for the assessee on the Madhya Pradesh High Court judgment in the case of Naubatram Nandram v. CIT  86 ITR 805 is again misplaced because in that case the income-tax authorities calculated profits on the basis of estimated sales as the figures disclosing sales in timber for each year given by the assessee were not accepted. In that case, in the computation of profit there was never any occasion for the making of any allowance or deduction in the assessment for any year. Apparently, facts of the instant case are quite different. Their Lordships in the case of Naubatram Nadram (supra) held. "Section 10(2A) envisages an actual deduction and not a notional one and, insofar as there was no actual allowance or deduction in the assessment for any year in question, the section could have no application." In the instant case, there was actual deduction and it was taken into consideration in computation of the income. Therefore, even this case instead of supporting the contention of the assessee supports the contentions of the revenue.
6. We are unable to understand as to how the case of Motilal Ambaidas v. CIT  108 ITR 136 (Guj.) supports the contention of the assessee. As per the said case, their Lordships of the Gujarat High Court went a step further and said that even if entries are not made in the account books, the deductions when sales tax was paid, must be treated as deductions which ought to have been made. In the instant case, even entries regarding deductions were very much there as reflected in the profit and loss account of earlier years and on the basis of these facts it is proved that the deductions in respect of sales tax was allowed in earlier years. The revenues action is also supported by two decisions those of Ikrahnandi Coal Co.s case (supra) and Jagatnarain Durga Prasads case (supra).
7. The argument of the learned counsel for the assessee that said refund should be treated the income of the years to which they pertain is just mentioned to be rejected. The contention of the learned counsel for the assessee that the order of the appellate authority regarding refund of sales tax is further carried by the sales tax department in appeal cannot some to the rescue of the assessee in the instant case because the assessee had not only already obtained the order of refund but pocketed the refund itself. Since the sales tax for earlier years was allowed to be deducted by the revenue, the sum of Rs. 23,723 after taking into consideration the refunds made to the dealers by the assessee was rightly held as taxable by the AAC.8. For the reasons given by the AAC in his order and in vies of our discussions above, we confirm the action of the AAC.