Sales tax exemption conditioned on income-tax treatment of ceased liability, with revised assessment on compliance.

Sales tax exemption under the notification could be granted for restaurant sales, but only on the assessee furnishing an affidavit undertaking to offer the corresponding ceased liability as income under section 41 of the Income-tax Act. The court treated this undertaking as a proper safeguard because the sales tax liability had earlier been claimed as a deduction in income-tax assessments. On compliance, the assessment was to be revised to exclude the relevant sales from sales tax.

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Issues: Whether the petitioner was entitled to have restaurant sales excluded from sales tax assessment under the exemption notification, on condition that the corresponding liability allowed in income-tax assessment would be offered as income under section 41 of the Income-tax Act.

Analysis: The petitioner had claimed deduction in income-tax assessments in respect of sales tax liability provisioned in the books for earlier years. The liability, if treated as having ceased because of the grant of exemption, would be taxable as income under section 41 of the Income-tax Act. The Court held that this safeguard made it proper to require the petitioner to furnish an affidavit undertaking to offer such liability as income in the relevant income-tax assessments. On compliance, the sales covered by the notification were to be exempted in the sales tax assessment.

Conclusion: The petitioner was granted relief subject to filing the required affidavit, and the assessment was directed to be revised to exclude the relevant sales from tax.

Final Conclusion: The writ petition succeeded to the extent of securing exemption from sales tax assessment, but only after the petitioner complied with the undertaking regarding treatment of the corresponding liability under income-tax law.

Ratio Decidendi: Where a sales tax liability is allowed as a deduction in income-tax assessment, the grant of sales tax exemption may be conditioned on the assessee offering the ceased liability as income under section 41 of the Income-tax Act.

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