Conditional sales tax exemption upheld where liability could later be taxed as cessation income under income-tax law

A conditional sales tax exemption for parcel restaurant sales depended on an affidavit confirming that tax had not been collected and the liability had not been claimed as an income-tax deduction. The petitioner had treated the disputed amount as a provision in income-tax proceedings, and its undertaking to offer the amount to tax if the liability ceased was accepted as sufficient compliance with the object of the exemption conditions. Strict insistence on the original affidavit form was not allowed to defeat the substantive benefit, and the assessing authority was directed to revise the assessment and grant the exemption for the relevant period.

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Issues: Whether the petitioner was entitled to exemption from sales tax on parcel restaurant sales for the relevant period despite not initially filing the full affidavit required by the Government notification, and whether the assessment could be revised on the basis that the disputed sales tax liability had been claimed as a deduction in income-tax proceedings but would be offered to tax as a liability ceasing.

Analysis: The exemption scheme under the Government order and the appended notifications required hotelers with turnover above the prescribed limit to file an affidavit that they had not collected tax and had not claimed the sales tax liability as a deduction in income-tax proceedings. The Court accepted that the petitioner had, in the prevailing uncertainty, made a provision and claimed the liability in income-tax, but the statutory safeguard under section 41 of the Income-tax Act, 1961 permitted taxation of any liability that subsequently ceased. On that basis, the petitioner's undertaking to offer the amount as income under section 41 was treated as sufficient compliance with the object of the exemption conditions.

Conclusion: The petitioner was entitled to the benefit of the exemption, and the assessing authority was directed to revise the assessment and exempt the relevant sales for the period 1st April, 1982 to 2nd February, 1983 upon filing of the affidavit.

Final Conclusion: The writ petition succeeded with directions to grant the sales tax exemption subject to the petitioner's undertaking regarding treatment of the corresponding amount under income-tax law.

Ratio Decidendi: Where the object of a conditional exemption is satisfied and the corresponding liability can be brought to tax under section 41 of the Income-tax Act, 1961 as a liability ceasing, strict insistence on the original affidavit form will not defeat the substantive benefit of the exemption.

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