1980 (2) TMI 152

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....s 2,14,019 10,913 Payments 2,02,637 10,118 Excess collections 11,382 795 He, further, observed that the sales-tax and the sales-tax surcharge collected but not paid before the end of the previous year should added as trading receipts. It this view, he made an addition of Rs. 12,177. On appeal, before the CIT (A) it was contended on behalf of the assessee that the assessee was following mercantile system of accounting and the liability of sales-tax collected should have been allowed as deduction. The CIT (A) observed that though the assessee was following the mercantile system of accounting in respect of its other transactions, the assessee was following the cash system of accounting in respect of sales-tax collect....

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....e not actually collected, credit was taken for the same. He further pointed out that in the balance-sheet the sales-tax liability of Rs. 26,750.15 and the surcharge liability of Rs. 795.07 were taken to liabilities side under the head "sundry creditors." On behalf of the Revenue, the learned departmental representative relied upon the order of the lower authorities and on the ruling of the Madras High Court in E.A. E.T. Sunderaraj vs. CIT(1). In reply, the learned counsel for the assessee referred to the ruling of the Calcutta High Court in CIT vs. Ashoka Cement Ltd.(3), and submitted that liability towards sales-tax arose the moment the sales took place and that when the assessee followed the mercantile system of accounting the liability t....

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....nth of the financial year the sales-tax liability in respect of an assessee, who had opted to pay the sales-tax on monthly basis, would be paid in the months succeeding the relevant financial year. All the same the liability to sales-tax accrued on the dates when the sales were effected. In the balance-sheet as at the end of the accounting period the assessee has taken the sales-tax collections in excess as a liability Merely because some amount of sales-tax and surcharge collected were paid after the end of the accounting year for the reasons set forth above, it cannot be said that the assessee was following the cash system of accounting for sales-tax. We are, therefore, of the opinion that the assessee has been following the same method o....