Statutory bar under Section 14(2) prevents purchaser being held liable for prior-period excess profits tax despite contract clause.

Section 14(2) of the Excess Profits Tax Act operates as a statutory bar to recovery of excess profits tax for the earlier accounting period, and a purchaser's contractual undertaking limited to the subsequent accounting period and liabilities shown up to that later balance sheet cannot be used to impose liability for the prior period. The legal principle applied is that private contracts cannot enlarge statutory liability where the statute itself precludes recovery; accordingly the purchaser is not chargeable for the tax assessed for the earlier chargeable period.

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Issues: Whether Section 14(2) of the Excess Profits Tax Act is a bar to recovery of the excess profits tax assessed for the accounting period 1 May 1944 to 30 April 1945 from the purchaser.

Analysis: The issue turns on the statutory effect of Section 14(2) of the Excess Profits Tax Act and the scope of the contractual clause relied upon by the purchaser. The agreement clause under which the purchaser undertook to pay taxes was expressly confined to the accounting period beginning 1 May 1945 and ending 30 April 1946 and liabilities appearing from the balance sheet up to 30 April 1946. The tax demand in question relates to an earlier chargeable period ending 30 April 1945. A contract between the parties cannot be used by tax authorities to enlarge statutory liability where the statute itself bars recovery from the purchaser for that earlier period. The purchaser did not undertake liability for the relevant period in the agreement, and the taxation authorities cannot take advantage of the private contractual provision to override the statutory bar.

Conclusion: Section 14(2) of the Excess Profits Tax Act bars recovery of the excess profits tax assessed for the period 1 May 1944 to 30 April 1945 from the purchaser; the purchaser is not chargeable for that excess profits tax (decision in favour of the assessee).

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