TaxTMI 
TaxTMI 
2005 (10) TMI 56
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....ue. (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that for the assessment year 1982-83 the assessee was entitled to a deduction of Rs. 84,95,504 in respect of the hotel receipt tax?" The facts: This reference relates to the amount collected under the provisions of the Hotel Receipts Tax Act, 1980 (the "HRT Act") which received the assent of the hon'ble President of India on December 9, 1980. This Act levied hotel receipt tax (HRT) at 15 per cent, of the chargeable receipts with effect from February 1, 1981. The assessee is engaged in the business of running a chain of 5 star hotels. The assessee had collected hotel receipts tax in the sum of Rs. 14,55,241 during the period February 1, 1981, to March 31, 1982. The present reference relates to the period April 1, 1981, to March 31, 1982, which was the relevant accounting year. During this period, the hotel receipts tax collection was in the sum of Rs. 84,95,503. The assessee did not pay the hotel receipts tax collected and payable under the Hotel Receipts Tax Act but chose to challenge the constitutional validity of the said legislation before the hon'ble Supreme ....
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....ggrieved by the aforesaid order of the Commissioner of Income-tax (Appeals), an appeal was carried to the Tribunal. The Tribunal vide its order dated February 6, 1987, held that the hotel receipts tax collected by the assessee was not subject to diversion by overriding title; the obligation to pay could not be discharged out of other receipts also. The same is, therefore, in the nature of trading receipts. As regards the corresponding deduction, it was held that a liability had definitely arisen during the accounting year, the moment the taxable event, i.e., receipt of room rent, took place. The liability was directed to be allowed as deduction. As pointed out hereinabove, the apex court on May 2, 1989, upheld the constitutional validity of the Hotel Receipts Tax Act in the decision rendered in the case of Elel Hotels and Investments Ltd. v. Union of India [1989] 178 ITR 140 (SC), as a result thereof, the assessee discharged its liability during the year ended March 31, 1990, and March 1991. The decision of the Supreme Court has resulted in the Hotel Receipts Tax Act being valid right from the day on which it received the assent of the President of India along with various provi....
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....e-company had manufactured and sold steel tubes. During the previous year relevant to the assessment year 1962-63, the assessee was held liable to pay sales tax under the Central Sales Tax Act. The Sales Tax Officer completed the assessment in respect of the assessment year 1962-63 on March 31, 1966, and demanded an additional amount of Rs. 11,02,698. The assessee unsuccessfully carried appeal before the first appellate authority and then filed second appeal before the Sales Tax Tribunal. The Tribunal vide its order dated May 28, 1970, reduced the additional sales tax to Rs. 2,22,161. On the basis of the above order of the Tribunal, the respondent-assessee in its income-tax return claimed deduction of the said amount as business expenditure in the assessment year 1971-72. The Income-tax Officer disallowed the said deduction. This was upheld by the Income-tax Tribunal. However, the High Court on reference held that the assessee was entitled to the deduction in the assessment year 1971-72. On appeal, the Supreme Court held that the liability to pay the Central Sales Tax arose or accrued on the basis of the mercantile system of accounting followed by the assessee during the previou....
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....king this view, the Division Bench has relied upon the judgment of the Madras High Court in the case of Pope the King Match Factory v. CIT [1963] 50 ITR 495. A similar view was taken by the Madras High Court which was approved by the apex court as laying down the correct law. Learned senior counsel for the petitioner based on the above precedents submits that notwithstanding the fact that the dispute having been raised as regards the amount to be paid by way of hotel receipts tax or failure to make entries in the books of account is of no significance. If the statutory liability arises in a particular relevant year then the assessee maintaining the books of account on mercantile system is entitled to claim deduction in the year in which the liability arises notwithstanding the fact that he has taken steps to dispute his liability, and, ultimately failed or omitted to make entries in the books of account. In the above premises, according to the learned senior counsel, the first question has to be answered in the affirmative, i.e., in favour of the Revenue and the second question needs to be answered in the negative, i.e., in favour of the assessee and against the Revenue. P....