Export deduction in purchase tax computation applies to cotton exported within six months; disallowance was legally incorrect.

Under the Punjab General Sales Tax Act, 1948, the computation of taxable turnover is separate from the liability to purchase tax, and deductions specifically allowed by section 5(2)(a) must be applied in that computation. Where cotton purchased for purchase tax purposes is exported out of India within six months of purchase, section 5(2)(a)(vi) permits deduction of the purchase price from taxable turnover. The earlier Supreme Court ruling relied on did not exclude that deduction for cotton subject to purchase tax. On that basis, the assessment orders refusing the deduction were legally erroneous.

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Issues: Whether, while assessing purchase tax on cotton under the Punjab General Sales Tax Act, 1948, deduction of the purchase price is allowable under section 5(2)(a)(vi) when the cotton is exported out of India within six months of purchase.

Analysis: The scheme of section 5 distinguishes between the liability to purchase tax under section 5(3) and the computation of taxable turnover under section 5(2). The taxable turnover is determined only after giving the deductions specifically permitted by section 5(2)(a), including deduction for goods purchased and sold within six months in the course of export out of the territory of India. The earlier Supreme Court decision relied upon did not decide that such deduction is unavailable in the case of cotton subjected to purchase tax. Therefore, where the Assessing Authority finds that the purchased cotton was exported within the stipulated period, the purchase value of that cotton must be deducted in computing taxable turnover.

Conclusion: The deduction under section 5(2)(a)(vi) was allowable, and the assessment orders disallowing it were erroneous in law.

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