Purchase tax provision deduction fails where a year-long exemption leaves no enforceable liability at year-end

An exemption notification covering the full accounting year extinguished any enforceable purchase tax liability at year-end, so a provision made in mercantile accounts for that tax was not deductible. Prior monthly payments and earlier administrative views did not create an allowable liability where the exemption operated throughout the year. The purchase tax provision was therefore disallowed, and the Revenue's position prevailed.

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Issues: Whether the assessee was entitled to deduction of the provision made in respect of purchase tax liability for the relevant accounting year.

Analysis: The assessee had debited the profit and loss account towards provision for purchase tax, but an exemption notification issued during the accounting year covered the purchases for the whole year. On the expiry of the accounting year, there was no subsisting liability to purchase tax in law, and the fact that provisional monthly payments had been made did not create an allowable liability where the exemption operated throughout the year. The earlier assessment and the initial view of the sales tax authorities did not alter the legal position, since the dispute turned on the existence of liability and not merely on evidence or timing.

Conclusion: The deduction was not allowable and the disallowance was upheld in favour of the Revenue.

Final Conclusion: The departmental appeal succeeded, and the assessee's claim for deduction of the purchase tax provision failed.

Ratio Decidendi: Where an exemption notification covers the relevant accounting year, no enforceable liability to the tax exists at year-end, and a provision made in mercantile accounts for such tax is not deductible.

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