TaxTMI 
TaxTMI 
2004 (12) TMI 51
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....m April 2, 1983 for the assessment years 1980-81 and 1981-82? 3. Whether, on the facts and circumstances of the case, the assessee is entitled to the deduction of the sales tax liability of Rs. 28,41,461 based on the demand pursuant to the completion of the assessment on February 18, 1980, under the Central sales tax while computing its income liable to tax for the assessment year 1981-82?" The assessee is a company and the previous years relevant to the assessment years in question, ended on June 30, 1979, and June 30, 1980, respectively. For the assessment years in question, the assessee claimed the deduction of certain interest on the ground that it is payable on the deposits accepted by the company under the Companies (Acceptance of Deposits) Rules, 1975. The Assessment Officer, however, applying the provisions of section 40A(8) of the Income-tax Act, disallowed the claim. At the time of hearing, it is represented by counsel appearing for the respective parties that the first question referred, is covered by a decision of this court in the assessee's own case in R.C. No. 44 of 1988, dated July 31, 1997, relating to the assessment years 1977-78 and 1978-79. This court while a....
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....el and Co. v. CIT [1974] 97 ITR 152, while confirming disallowance of the deduction. Hence, the reference. At the time of hearing, learned counsel for the assessee contended that though the sales tax liability pertains to the period 1976-77, the assessee was not aware of the liability as there was no demand from the sales tax department till 1980. Till the demand notice was served, there was no occasion for the assessee either to make entries in the books of account or to make a claim for deduction at any earlier point of time. Learned counsel also contended that the ratio laid down by the apex court in the case of Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363 may not be applicable. In view of the peculiar facts of the case, it is contended that by the time the demand notice was served on the assessee, the assessment for the period 1976-77 must have been completed long back, and, therefore, there was no possibility for the assessee to make a claim in that assessment year. Therefore, the assessee claimed the deduction only when it was served with a demand, which in fact was an unexpected demand by the assessee. Learned counsel for the assessee relied upon the following d....
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....as received on February 25,1964, relevant for the assessment year 1964-65. Therefore, the assessee claimed deduction of the said demanded sales tax liability as a deduction in that assessment year. The departmental authorities negatived the claim on the ground that the liability relates to the earlier years. But, however, the Tribunal by a majority view, allowed the claim. On a reference, the Delhi High Court upheld the majority view of the Tribunal. A perusal of the facts referred to the said decision, it is not clear as to the method of accounting that was being followed by the assessee therein. Further, the Delhi High Court upheld the view of the Tribunal, which held that a claim as contemplated in Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363 (SC) can be made where there was a demand before completion of the assessment for the relevant assessment year. But, however, if a demand had been raised so, after 10 years, it would not be possible for making a claim for deduction for the relevant assessment year. As by that time, the assessment may not be pending and in such circumstances, the claim has to be made only in the year in which a demand of liability was served on th....
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....ch the sales had taken place. However, on appeal, the Appellate Assistant Commissioner accepted the claim of the assessee, on the ground that the liability in respect of the sales tax for the year 1957-58 arose only on August 31, 1972. The Revenue's appeal before the Appellate Tribunal was dismissed. Hence, the reference to the High Court. The High Court while answering the said reference, took into account the peculiar facts, as there was no liability according to the assessee, which was even accepted by the High Court. But, subsequently, the Act was amended retrospectively creating the liability. Under those circumstances, there was no possibility of anticipating the liability as well as making a claim for deduction. The Madras High Court after referring the decision of the Supreme Court in Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363 observed: "The question as to in which year the sales tax liability should be allowed to be deducted cannot in all cases be decided upon a general proposition of law. The present case is a clear illustration that there may be exceptions to the rule that even though a liability statutorily arose in the year in which the sales were made,....
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....vered by the assessment year 1978-79. The Calcutta High Court had expressed its opinion on the premise that the liability created was not a normal liability of paying sales tax, but an additional sales tax liability which was raised at a later point than the point of sale. Therefore, it answered the question referred to the High Court in favour of the assessee. Coming to the decision of the apex court in Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363, where the sales were effected during the previous year ending December 31, 1954, relevant for the assessment year 1955-56. The assessee filed its return of income on January 13, 1956, without making any claim for deduction. But, the demand notice was served on November 21, 1957. Therefore, it filed a revised return on November 9, 1959, claiming deduction of the above demanded sales tax amount. The Income-tax Officer completed the assessment on March 11, 1960, holding that the assessee was not entitled to claim deduction of the sales tax amount inasmuch as it had denied its liability to pay that amount and had made no provision in its books with regard to the said liability, even though the assessee was following the mercanti....