Entry tax deduction under income tax law upheld where tax was actually paid and sales tax treatment could not justify disallowance.

Entry tax actually paid was treated as allowable as a deduction under the Income-tax Act, and the separate treatment of that levy under sales tax law did not justify disallowance in income-tax assessment. The Madras High Court followed an earlier Division Bench decision binding on the Revenue and held that the assessee's deduction could not be denied merely because the tax was adjusted differently under sales tax law. The disallowance of entry tax debited to the profit and loss account was therefore not sustainable, and the Revenue's challenge failed.

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Issues: Whether the disallowance of entry tax debited to the profit and loss account was rightly deleted and whether the Revenue's appeal against that deletion was maintainable.

Analysis: The dispute turned on the allowability of entry tax paid by the assessee as a deduction, which had already been decided by a prior Division Bench against the Revenue. Following that binding decision, the treatment of entry tax under the sales tax law could not control its deduction under the Income-tax Act, and the deduction was held allowable where the tax had in fact been paid.

Conclusion: The question was answered against the Revenue and in favour of the assessee; the disallowance was not sustainable.

Ratio Decidendi: Entry tax actually paid is allowable as a deduction under the Income-tax Act, and its adjustment under sales tax law does not justify disallowance under income tax law.

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