Tax adjusted under an exemption scheme can count as payment for statutory set-off under the U.P. Trade Tax Act.

Under section 4-BB of the U.P. Trade Tax Act, tax paid on raw material used in manufacture of notified goods qualifies for set-off, and payment need not be confined to physical cash remittance where the statute does not prescribe a specific mode. Tax adjusted against a selling dealer's eligibility certificate under section 4-A was treated as tax duly accounted for in the revenue records and therefore as payment for set-off purposes. The Allahabad HC held that the assessee was entitled to the statutory benefit, and rejection of the claim was not sustainable.

---

---

Issues: Whether the assessee was entitled to set-off under section 4-BB of the U.P. Trade Tax Act on purchase of raw material from a dealer enjoying exemption under section 4-A of the Act, where tax was adjusted against the dealer's eligibility certificate and not physically tendered.

Analysis: Section 4-BB grants deduction of tax paid on raw material or packing material used in manufacture of notified goods. The decisive question was whether payment of tax must be by actual cash remittance or whether adjustment against the exemption entitlement of the selling dealer would also satisfy the requirement. The Court noted that the scheme of section 4-A permits assessment of tax and corresponding adjustment against the eligibility certificate, so that tax is effectively accounted for in the revenue records even without physical payment. Since the statute did not restrict payment to a particular mode, tax discharged by adjustment was treated as payment for the purposes of section 4-BB.

Conclusion: The assessee was entitled to the benefit of set-off under section 4-BB, and the rejection of the claim was not sustainable.

Final Conclusion: The revisions succeeded and the legal question was answered in favour of the assessee, affirming availability of the statutory set-off where tax liability was discharged through adjustment under the exemption mechanism.

Ratio Decidendi: Where a taxing statute does not prescribe a specific mode of payment, tax assessed and adjusted against an eligibility certificate under an exemption scheme constitutes payment of tax for the purpose of claiming set-off.

---