1981 (1) TMI 42 - HC - Income Tax

Court denies claimed fire loss & sales tax exemption due to lack of evidence. Revenue prevails.

The court upheld the decision to disallow the claimed loss by fire of Rs. 20,795 as the assessee failed to provide evidence. Additionally, the exemption ... Business Expenditure, Loss Issues involved: The judgment addresses two main issues: 1. Disallowance of a sum of Rs. 20,795 on account of loss by fire, and 2. Allowability of the payment of sales tax composition fee of Rs. 1,91,887 for the assessment year 1968-69.Issue 1 - Disallowance of Loss by Fire:The assessee's shop was set on fire during communal disturbance, resulting in a claimed loss of Rs. 20,795. The Income Tax authorities disallowed this claim as the assessee failed to prove the loss. The assessee argued that the account books were destroyed in the fire, but there was no evidence to support this claim. The Appellate Tribunal refused to accept the statement as there was no proof. The court upheld the decision, stating that the authorities did not err in disallowing the claim.Issue 2 - Allowability of Sales Tax Composition Fee:The assessee, engaged in the business of biri manufacture and sale, claimed exemption for a sales tax composition fee of Rs. 1,91,887 paid in the assessment year 1968-69. The tax department held that the liability for payment of tax occurred when the sales took place, not when the payment was made. The assessee argued that since the tax recovery was stayed until 1967 and the payment was made in 1968-69, the exemption should be allowed. However, the court cited precedents and held that under the mercantile system of accounting, the liability to pay sales tax arises when the sale occurs, regardless of when the payment is made. The claim for exemption of Rs. 1,91,887 was deemed not allowable for the assessment year 1968-69.In conclusion, both issues were decided against the assessee in favor of the revenue. No costs were awarded in this case.