Assessee's appeal allowed as provision for purchase tax not liability; contingency deposit not applicable.

The appeal by an assessee firm regarding the disallowance of a provision for purchase tax payable to the Coffee Board for the assessment year 1986-87 was allowed. The Tribunal held that the provision for purchase tax was not a tax liability on the assessee but on the Coffee Board. Additionally, the contingency deposit imposed by the Coffee Board was deemed not applicable to the assessee under section 43B of the Income-tax Act as the tax liability was on the Board, not on subsequent sales.

---

---

Issues:
1. Disallowance of provision for purchase tax payable to the Coffee Board.
2. Nature of the contingency deposit imposed by the Coffee Board - tax or part of purchase price.

Detailed Analysis:

1. The judgment pertains to an appeal by an assessee firm regarding the disallowance of a provision for purchase tax payable to the Coffee Board for the assessment year 1986-87. The assessee, engaged in the business of coffee seeds and products, debited an amount for provision of purchase tax, contending it was a liability. The Assessing Officer disallowed the claim, which was upheld by the first appellate authority. The assessee objected, stating no purchase tax was payable by them, only by the Coffee Board. The Tribunal reviewed the case based on the Supreme Court's decision in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, emphasizing the liability arose during the year, making it an allowable claim. The Tribunal found the authorities erred in disallowing the claim, as the provision was not a tax liability on the assessee.

2. The second issue revolved around the nature of the contingency deposit imposed by the Coffee Board. The Board devised a scheme to collect purchase tax it disputed, aiming to safeguard against potential liabilities. The scheme involved collecting a contingency deposit from pool sale dealers, refundable if the Supreme Court ruled in favor of the Board. The assessee objected to the levy of the deposit, leading to a dispute with the Board. The Assessing Officer disallowed the provision, citing section 43B of the Income-tax Act. The Tribunal analyzed the scheme and determined it was not a tax on the assessee but on the Coffee Board, as the taxable event and incidence of tax were on the Board, not on subsequent sales. Consequently, the Tribunal concluded that the provision of section 43B did not apply to the assessee in this case.

---