High Court allows deduction for sales tax liability despite non-remittance in dispute; upholds right to claim tele typesetter deductions.

The High Court ruled in favor of the assessee, allowing the deduction for sales tax liability despite non-remittance due to a dispute with the tax department. The Court also upheld the assessee's right to claim deductions for a tele typesetter owned and used exclusively for its business, even though tapes from the machine were utilized by an associate concern. The Court emphasized that ownership and investment in the machine solely belonged to the assessee, entitling it to full benefits under the relevant sections of the law.

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Issues involved:
1. Whether the assessee is entitled to claim deduction for sales tax liability due to a dispute with the tax department.
2. Whether certain deductions related to a tele typesetter owned by the assessee but installed at its associate concern should be restricted.

Issue 1 - Sales Tax Liability:
The High Court held that the assessee is entitled to claim deduction for the liability of sales tax, even if the amount collected for payment had not been remitted to the Government due to a dispute. This decision was based on the Supreme Court ruling in the case of Jonnalla Narashimha Rao and Co. v. CIT [1993] 200 ITR 588, which allowed deductions for taxes in the year the liability arose, prior to the introduction of section 43B(a) which permits deductions only in the year of payment. The liability for sales tax existed, and the assessee was entitled to deduct it while computing income for the relevant year.

Issue 2 - Deductions for Tele Typesetter:
Regarding the tele typesetter owned by the assessee but used at its associate concern, the Court analyzed the provisions of section 38(2) of the Act. It was emphasized that deductions under various sections should be restricted if the asset is not exclusively used for business purposes. However, the Court found that the machine was used exclusively for the assessee's business, even though tapes from the machine were also used by the associate concern. The Court highlighted that the investment and ownership of the machine were solely with the assessee, entitling it to claim full benefits under the relevant sections.

In conclusion, the Court ruled in favor of the assessee on both issues, allowing the deductions for sales tax liability and rejecting the Revenue's proposal to restrict deductions related to the tele typesetter.

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